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Main types of tenancy

There are two main types of private sector residential tenancy. 

• Assured Shorthold Tenancy - This is the most common type of tenancy.  It is usual for there to be a fixed term but this is not essential.  If there is no fixed term or the fixed term is less than 6 months, the landlord still cannot recover possession until six months from the start of the tenancy.  Subject to that, if the correct notice is served at the correct time then the landlord can recover possession even if the tenant has not breached the terms of the agreement.
• Assured Tenancy - This is a tenancy which is capable of running for many years and which will give the tenant security of tenure.  The ways in which a landlord can recover possession from an assured tenant who refuses to leave are limited.  This type of tenancy is rarely created.  A tenant with a assured tenancy is often called a "sitting tenant".

Nowadays, a tenancy will nearly always be an assured shorthold tenancy unless special steps are taken to create an assured tenancy.

Main distinctions

The important distinction between the two types of tenancy is security of tenure.

• With an assured shorthold tenancy the tenant has little security once any fixed term of the tenancy has ended.  After six months the landlord can recover possession on two months' notice provided that any fixed term has ended.  If the landlord allows the tenant to stay on after any fixed term expires, he can still obtain possession by giving two months' notice.
• With an assured tenancy, the tenant gets security of tenure.  Unless certain specified grounds apply, the tenant can remain in the property indefinitely.

Exceptions

Every tenancy in the private sector created since 1989 will be one or other of these tenancies, unless:-

• It is a business or holiday let;
• No rent, a very high or a very low rent is charged; or
• The landlord is a “resident landlord”.  This is where landlord shares accommodation with the tenant.

These types of letting are not subject to the rules applicable to assured tenancies and assured shorthold tenancies and different rules apply.

The following tenancies cannot be assured shorthold tenancies:-

• A tenancy replacing an earlier assured tenancy with the same tenant.
• An assured tenancy to which the tenant has succeeded on the death of a previously regulated (i.e. pre-1989) tenant.
• An assured tenancy following a secure tenancy where a tenancy has become a private tenancy from a public sector landlord; and
• An assured tenancy arising automatically when a long leasehold tenancy expires.

There are also still some private sector tenancies which result from earlier legislation and do not fit into any of the categories discussed above.  Normally these tenancies give the tenant security of tenure.

Best form of tenancy

It is nearly always advantageous to let under an assured shorthold tenancy because recovering possession is easier. Where property is bought specifically to let, the mortgage lender will almost invariably insist on the property only being let on an assured shorthold tenancy.

Note that where an assured shorthold tenancy is granted with a fixed term of less than 6 months, the landlord cannot recover possession during the first six months even though the fixed term has ended.

If you purchase a property occupied by an existing assured tenant, you cannot then create an assured shorthold tenancy just by getting the tenant to sign a new agreement.   The tenancy will remain an assured tenancy and the tenant will therefore have security of tenure.  However it is possible for the landlord and tenant to adopt a special procedure by which both agree that a new assured shorthold tenancy will replace an assured tenancy.  Of course the tenant is unlikely to agree to do this but in some circumstances, he might.  An example would be a case where the landlord agreed to make a payment to "buy out" the assured tenancy rights.

Buying property already let

If a landlord buys a property with a tenant in it, he must investigate the status of the tenant carefully.  It will be important to know whether or not the tenancy is an assured shorthold tenancy, an assured tenancy or some other type of tenancy.

Note that:-

• It was not possible to create an assured shorthold tenancy before 15th January 1989.
• Until 27 February 1997 in order to create an assured shorthold tenancy the landlord had to serve a special notice on the tenant before granting the tenancy.  If this was not done the tenancy will be an assured tenancy and the tenant will have security of tenure.  Note that this special notice was abolished in 1997 and as already explained a tenancy is now an assured shorthold tenancy unless a special arrangement is made.

If proper care is not taken to investigate the position when buying property with a tenant in it, the landlord may inadvertently end up with a sitting tenant and a property worth less than he paid for it.