In Scotland a tenancy agreement is often referred to as a lease. A lease provides what is legally known as a ‘real right’. This means that the lease bestows rights to the tenant that are inherent in law and are much stronger than a contract.
As a result the tenant may have stronger rights to live in the property than the owner’s right to use or sell the property. It should therefore be remembered that the tenants will have rights in addition to the ones set out in any written tenancy agreement. However, there are types of lease that provide a balance between the tenant’s right to occupy and the landlords right to repossess his property.
The tenancy agreement should clearly define the terms of the lease that the owner wishes to dictate and also comply with current legislation. It should be remembered that the landlord, by providing the property as a let, could be construed as being legally defined as a business and the tenant a consumer.
As a result any unfair terms in the lease may be struck out by a court, although all other written terms will remain in place. This will only pose a problem if you are in a dispute with your tenant which is to be resolved through the courts and you are relying on a term that could be unfair.
The most commonly used lease in Scotland is the Short Assured Tenancy (which, it should be noted, is completely different from the English Short Assured Tenancy)
The Short Assured Tenancy
The beauty of a Short Assured Tenancy is that the Landlords can regain possession of the property if they wish to do so. However, the technicalities behind a Short Assured Tenancy are very complex and it is essential that they are complied with.
- For there to be a Short Assured Tenancy the lease must be for a minimum of 6 months. There have been various court cases determining what constitutes six months and it is now good practise for leases to be for what the lay man would construe to be six months and one day. Our leases renew monthly after the first six month term thereby allowing the landlord to evict after the first six months and eliminating the cost of resigning fees once the initial term has finished.
- The property must be the main residence of the tenant and there should be no business use in the property.
- The Tenancy Agreement must be between individuals and therefore you cannot have a Short Assured Tenancy between a Landlord and a Company.
- The tenants must have access to all rooms in the property.
- BEFORE the lease is signed each tenant must sign a form called an AT5. This must be in the format dictated by law and the tenant must be given a signed copy. A copy should also be retained by the Landlord or their agent. Each copy must include the date and time that the document was signed and each signature must be witnessed. This is so that it can be clearly proved in court that the AT5 was implemented before the lease was signed. The AT5 is also signed by the Landlord and Agent who, through this document, are advising the tenant that the lease will be a Short Assured Tenancy and therefore the Landlord will have the rights that apply to that type of lease or tenancy agreement.
- The tenancy agreement should clearly define the terms of the tenancy. Our lease has been developed over a number of years to ensure that the property is well maintained throughout the tenancy. However if you have any unusual requirements’ we would be happy to include them in the lease prepared for your property as long as they pass the reasonableness test.
An HMO is a type of Short Assured Tenancy. HMO’s or Houses in multiple occupation have to comply with additional legislation and are applicable where three or more unrelated people live in the same property. A special license needs to be obtained from the local council and the property needs to comply with more stringent safety legislation. The lease documentation must also comply with the council’s requirements.
The Assured Tenancy
An Assured Tenancy gives the tenant the right to occupy the property indefinitely unless there is a serious breach of the terms of the tenancy agreement by the tenant or they choose to leave.
As a result this type of tenancy agreement may seriously devalue your property as it may only be sold with a tenant in situ. Any incorrectly constituted Short Assured Tenancy will revert to an Assured Tenancy.
Occupancy Agreements are appropriate where the owner lives in the property. They can dictate areas where the tenant will not be allowed access. So where a resident landlord wishes to retain specific parts of the property for his own use he is able to detail this in the agreement.
As the landlord is resident then he is using the property as his home and the tenant does not have rights in the same way as the other Tenancy Agreements detailed above.
There are instances where a Company may wish to procure a tenancy and install its employees. However this removes the control from the Landlord. As a let with a company cannot be a Short Assured Tenancy then there is also a risk that it would be difficult to repossess the property.
There would need to be a tenancy agreement between the landlord and the company who would then set up a separate agreement with the tenant. Both of the above tenancy agreements would be Assured Tenancies. Although the company could evict when the tenant no longer works for them it would be at the discretion of the court if they would allow the eviction to proceed. In addition you would be relying on the Company to carry out the eviction as the agreement would be between the company and the tenant.
In the event that the company goes into liquidation without evicting the tenant,the landlord would be exposed to further risk as they would not have a contract with the tenant. In light of this we always recommend that the tenants sign a Short Assured Tenancy with the landlord but that the company acts as guarantor for the duration of the lease and most companies will agree to this when the technicalities are explained to them.
Holiday lets do not generally bestow occupancy rights on the tenant. However, if your tenant wants a lease shorter than 6 months it is inadvisable to sign them up on a holiday let, as if there is a dispute and the tenant wants to stay then the matter will revert to court and the courts will look at whether the tenant was actually on holiday.
If not it is likely that you may have an Assured Tenancy and the tenant may accrue rights you did not intend. Holiday lets are generally for a short term but there is the option to have an off season holiday let if a short holiday let has occurred within a given time frame. The maximum length of an off season holiday let is 8 months and we would recommend legal advice if you wanted to pursue an off season let.
The above is a brief outline of current legislation and how a lease works. We would hope that you would approach us if you require any further information. However, in the event that you do not chose to do so Watt Property Management does not take legal responsibility for Landlords acting on the above information alone.
If any mistakes are made with the documentation and you require to repossess the property or your tenant decides to take the matter to court you may not have the legal rights you expect and may devalue your property considerably by not being able to evict your tenants.
For further information on tenancy agreements:
Call Pauline today on 0131 555 2777 to arrange a free consultation.