When Should a Common Law Tenancy Agreement Be Used?

A Common Law Tenancy is one that falls outside the statutory regimes and is instead governed by the common law.

A Common Law Tenancy Agreement comes into play in several distinct scenarios, each characterised by conditions that fall outside the scope of traditional AST or AT agreements:

1. High-Value Rentals: When the annual rent for a property exceeds £100,000, the tenancy cannot be classified as an AST or AT. Neither can it be classified as AST or AT when no rent is payable, or a low rent of less than £250 is payable. In such cases, a Common Law Tenancy Agreement is the appropriate legal framework. This situation often arises in luxury property markets, where the rent surpasses the statutory threshold, thereby excluding the tenancy from the statutory protections of the Housing Acts.
2. Corporate Tenancies: In situations where a company or organisation, rather than an individual, leases a property, the agreement cannot be classified under AST or AT because of the exclusions listed in Schedule 2 to the HA 1988. So, the grant of a residential tenancy to a company is usually done using a common law tenancy. This might be used where a company rents a property for the use of an employee who is working away from their usual location.
3. Resident Landlord Arrangements: When a landlord resides in the same property as the tenant, such as in a house share or when letting out a room in their own home, the tenancy does not fall under AST or AT regulations. Instead, the Common Law Tenancy Agreement, often referred to as a lodger agreement in these contexts, is utilised. This agreement ensures that both parties have clear terms governing the shared living arrangement.
4. Shared Accommodations with High Combined Rent: In properties where the combined rent of all tenants exceeds £100,000 per year, the tenancy cannot be an AST or AT. This situation is common in shared houses or Houses in Multiple Occupancy (HMOs) where several tenants contribute to a high total rent. The Common Law Tenancy Agreement is essential in these cases, providing a framework that accommodates the unique financial and living arrangements of multiple tenants.

Key Characteristics of a Common Law Tenancy Agreement

A Common Law Tenancy Agreement is distinct from other tenancy types, characterised by several important features:

• Flexibility in Terms: Unlike the more rigid statutory frameworks of ASTs and ATs, a Common Law Tenancy Agreement allows landlords and tenants to tailor the terms of the lease to their specific needs. This flexibility is crucial in scenarios involving high-value properties or corporate lettings, where standard agreements may not suffice.
• Absence of Statutory Deposit Protection: In contrast to ASTs, where deposits must be protected under a government-approved tenancy deposit scheme, deposits under a Common Law Tenancy are not subject to this requirement. This can simplify the rental process, though it also requires careful consideration by both parties to ensure fair handling of the deposit.
• Security of Tenure: Common Law Tenancies do not provide the same level of statutory security of tenure that tenants enjoy under ASTs or ATs. At the end of the tenancy term, the landlord is entitled to possession of the property without needing to issue a Section 21 notice, as would be required under an AST.
• Legal Framework: Governed by common law principles and contract law, the rights and obligations in a Common Law Tenancy are primarily defined by the terms set out in the agreement itself, rather than by statutory mandates. This means that the exact wording of the tenancy agreement is of utmost importance, as it dictates the legal responsibilities of both parties.
• Eviction Procedures: While landlords in a Common Law Tenancy are entitled to reclaim possession at the end of the tenancy, they must still obtain a court order if the tenant refuses to vacate. The Protection from Eviction Act 1977 ensures that tenants cannot be forcibly removed without due legal process, offering a basic level of protection.

When Not to Use a Common Law Tenancy Agreement

A Common Law Tenancy Agreement should not be used in situations where the tenancy falls comfortably within the scope of an AST or AT. Specifically, it is unsuitable when:

• The property is let to an individual as their principal residence and the rent is within the statutory thresholds for ASTs or ATs.
• The tenancy is not for a high-value property or is not let to a company or under a resident landlord arrangement.

This Common Law Tenancy Agreement is in Microsoft Word format, written in plain English, easy to use and edit.