Many renters and landlords might think that drafting a rental agreement is as simple as shaking hands and exchanging keys, but there's more to it. Fortunately, the Assured Shorthold Tenancy Agreement, the most common type of rental agreement in England and Wales, is fairly straightforward.

With that said, it still requires careful attention to a number of specific legal details to ensure everything is above board. Skipping these details or getting them wrong can easily lead to disputes down the line.

In this blog post, we’ll break down the essentials of an Assured Shorthold Tenancy Agreement, including what exactly needs to be in it.

What Is a Shorthold Tenancy Agreement?

An Assured Shorthold Tenancy Agreement (“AST”) is the most common type of rental contract used in England and Wales, setting out all of the key terms under which a tenant can occupy a residential property. Introduced by the Housing Act 1988, and updated in 1996, ASTs are most commonly used for renting entire properties from private landlords who do not reside at the location for a specified period, which is most typically 6-12 months.

The idea behind ASTs is to provide the tenant with peace of mind that they can occupy the property fully, with uninterrupted privacy, and to provide the landlord with a straightforward and legally-protected way to reclaim their property at the end of the lease through specified procedures, such as by issuing a Section 21 notice.

Key Features of a Shorthold Tenancy Agreement

Rent

The agreement will clearly state how much the rent is, when it's due (as well as how frequently it is due, for example, weekly or monthly), and how it should be paid. It may also include terms for rent adjustments, which could be linked to market changes or set by a predetermined amount.

Clearly outline responsibilities for utility payments and property upkeep, specifying which minor repairs fall under the tenant’s responsibility and which are handled by the landlord.

Deposit Protection

Deposit protection is one of the most notable features of ASTs, with the deposit amount usually capped at five weeks' rent if the annual rent is less than £50,000, and six weeks' rent if it's £50,000 or more. It’s then a legal requirement for landlords to place these deposits into a government-approved Tenancy Deposit Protection (“TDP”) scheme within 30 days of receiving it from the tenant.

This ensures that the money is safely held and will be returned to the tenant at the end of the tenancy, provided there are no disputes over property condition or unpaid rent. If the landlord fails to comply with the TDP requirements they can face legal action, including being ordered to pay the tenant up to three times the deposit amount.

Landlords should ensure the rental agreement includes a clause specifying how the property should be left so that tenants can receive their full deposit. It’s also wise to include an inventory checklist at the start of the tenancy to avoid disputes over the condition of the property.

Notice Periods

At the end of the shorthold tenancy agreement’s fixed term, which is the initial duration agreed upon in the tenancy (usually six or twelve months), tenants can leave without giving notice as long as they move out by the last day of the term.

However, if tenants wish to stay beyond the fixed term without signing a new fixed-term agreement, the tenancy automatically becomes 'periodic.' This means it rolls on a month-to-month basis if rent is paid monthly, or week-to-week if paid weekly. If the tenant wants to end a periodic tenancy, they’ll need to give notice. The notice period is typically at least one month, matching the rental payment period, and should end on the day before rent is due. This type of notice is often referred to as a “notice to quit.”

If the landlord wants the tenant to move out, whether this be at the end of the fixed term or during a periodic tenancy, they must serve the tenants with a notice. This is commonly known as a Section 21 notice, and it must be served no less than two months before the move-out date. The timing of the landlord's notice must also line up with the rent cycle, meaning the notice period should end on the last day of the rental period.

Termination

We have discussed how to terminate a shorthold tenancy agreement at the end of a fixed term and during a periodic tenancy, but there are a few other options available to tenants and landlords.

Firstly, if either party wishes to move out before the end of the fixed term, it’s important to check whether or not the agreement contains a break clause, which allows either party to end the tenancy early under agreed-upon circumstances. If there is no break clause, other options may be available to end the tenancy early:

• Negotiation: You can always approach the landlord to negotiate an early termination of the lease. If you're a tenant, you might propose a suitable replacement tenant or offer to cover the costs of re-letting the property. Landlords may be receptive to these suggestions, particularly if they can quickly find a new tenant without loss of rental income, or if the state of the market means that they can charge higher rent to a new tenant.
• Assignment: Another possibility is assigning the tenancy to another person. This involves transferring your tenancy rights and obligations to a new tenant, with the landlord's consent. You need the landlord’s permission to do this, but by law, the landlord must have “reasonable” grounds for refusing.
• Subletting: Depending on the terms of your tenancy agreement, you may be able to sublet the property. This means you rent out part or all of the property to another person. However, most tenancy agreements require the landlord's permission before you can sublet, and similar to assignment, the landlord can refuse consent if it’s reasonable for them to do so.