Once your tenant has moved in and settled down, the last thing anyone wants to do is think about ending the tenancy. Most people want to just get on with their lives, their jobs and daily life. But what happens if your circumstances change or the circumstances of your tenant while a fixed term agreement is in place? Where do you stand and where does the tenant stand?
First of all, a fixed-term tenancy is a legal document that explains the rules of living in the property and includes the amount of time you’ve agreed to live there. For example, the amount of time could be at least five years. The landlord decides if this will be renewed.
It is worth taking a second look at the agreement both parties before your tenants moved in. A fixed-term tenancy, in a nutshell, is an agreement between the tenant and the landlord to pay the rent for the entire lease term. However, let’s look a little deeper into a break clause, what it is and how it can affect your circumstances. When you enter into the initial agreement, give yourself some time to read the contract in its entirety before you sign it, and this includes any small print that may have been included. Businesses have to comply with the Consumer Regulations Act 2015, so all agreements are written in fair, legible and prominent language so all parties understand what has been said. If you are unhappy with the terms set out, both parties are well within their rights to negotiate their change. However, while the landlord does not have to change it, neither party should not sign something that they do not feel they can comply with now or further down the line. Because it is a legally binding contract, it will be signed and needs to be adhered to by all concerned.
Now to the ‘break clause’
Committing to a fixed-term agreement may not fit the personal circumstances of tenants and landlords because everybody is different so a break clause can be written into the contract. Bear in mind that these clauses do work both ways. They can permit the tenant to leave the property sooner than the full term (with conditions), but they can also allow the landlord to end the tenancy earlier too. A good break clause should include conditions that work well for both parties and each of their personal circumstances. The point here is to work to the strengths of both parties to get the very best out of the partnership.
The conditions by which a break clause can come into play are the ones everyone involved should keep an eye on. Conditions may include:
- The tenant leaving the property without retaining any responsibility to pay future rent
- The landlord keeping the deposit
- Tthe tenant agreeing to seek a replacement tenant
- The tenant agreeing to pay the costs of advertising for a new tenant
Should you need to apply the break clause in your fixed-term tenancy agreement, there will be a term of notice attached to it. For example, a tenant may not be able to evoke the clause until they have lived in the property for six months and even then, the tenant will also need to contact the landlord informing them of the intention to apply the break clause. This notice is best done in writing and using the post rather than sending by email. Use the recorded delivery postal method too rather than just a stamp. Because these agreements are legally binding contracts, you will need to carry everything out by the letter of the law and not to leave anything to chance.
If you don’t have a break clause in the agreement, tenants cannot simply leave the property and not return. If they do, it is regarded as an abandonment and will still owe the landlord the amount of rent that remains until the end of the agreement date. This also means that, if a tenant has an abandonment tenancy attached to their name and are in arrears with the rent, future landlords are unlikely to view their case favourably. The landlord can also take legal action to claim this rent and can do so up to the time that the tenancy would have ended providing they don’t have another tenant to replace them.
What if your tenants have a joint tenancy?
If multiple people live in the property and one decides to leave without the right to do so, the tenancy will still continue but there are likely to be conditions attached. Conditions could include that the remaining tenants are expected to pay the missing part of the rent, find a replacement tenant and know that there is likely to be a penalty fee attached too.
Landlords should fully equip themselves with the knowledge needed to progress with tenancies and tenants. But of course, nobody can accurately predict what the next year will bring, nor sometimes what the next six months will bring in terms of circumstances. Therefore, it is best to be up front and honest with your tenant/s. Be open and on good terms as this will ease any issues should they ever arise.
It can get complex with the ins and outs of the types of tenancy agreements available, but this is another reason why Property Division is always on hand to advise landlords and investors. Our aim is to provide a news hub for BTL investors and landlords to help build a trusting relationship with their clients. Because a happy client is the best kind you can have.