AST Contracts Terms - A Simple Guide

Many of us will, at some stage in our lifetime, print and sign on the dotted lines of an assured shorthold tenancy agreement (AST). An AST is the single most common type of tenancy on offer when renting from a private landlord or through a letting agency. It is almost always the case that the tenancy agreement is an AST if:

-           The landlord and tenant do not share the property.

-           Your annual rent is less than £100,000.

It highlights both tenant and landlord rights and responsibilities before, during and after the tenancy.

Given the significant legal commitment undertaken by both parties, it is essential for everyone involved to understand the key terminology frequently used in AST agreements. With that in mind, we’ve put together this breakdown of terms to help both tenants and landlords better understand the AST.

What is a Break Clause?

A break clause is a provision in a tenancy agreement that permits the landlord, the tenant (or both) to terminate the contract early. It will specify from when in the tenancy its conditions apply (i.e any time after 12 months following commencement of the tenancy). A minimum of 2 months’ notice must be served before either vacating or taking back possession of the property (depending on which party is serving notice). Formal notice must be served in writing, unless the agreement otherwise states that email is acceptable.  An example of the precise wording we would use here at Home Made goes something like this:

This agreement may be terminated by either party by giving to the other at least two calendar months’ notice in writing to be effective at any time after six months from the commencement date of this agreement. For the avoidance of doubt, such notice may be served by either party at any time after four months from the commencement date of this agreement, and the earliest date of vacation or date of recovery of possession will be six months from the commencement date of this agreement.

In an AST, the landlord has no guaranteed right to regain possession of the property prior to 6 months into the tenancy. Any break clause set for earlier than this will be unenforceable even if it is included in the text of the contract. In practice, this means that the earliest point in a tenancy at which a landlord can serve notice is 4 months after the start date of the agreement.

What is First Schedule?

The first schedule refers specifically to clauses that have been individually negotiated between the landlord and the tenant. These are bespoke clauses unique to each tenancy agreement, and typically reflect arrangements beyond the remit of statutory rights and obligations. For instance, a landlord has no legal obligation to provide tenants with new furniture prior to commencement of the tenancy. However, a tenant might request that the landlord replace the sofa as a condition of their entering into the tenancy agreement. If the landlord agrees, this can be formalised in an additional clause in the First Schedule. An example clause might read something like this:

The tenant has requested, and the landlord has agreed, that a new sofa shall be provided for the main living room prior to commencement of the tenancy. The sofa shall be provided at the landlord’s expense.

It is essential that all clauses in the First Schedule are both fair and enforceable. The Unfair Terms in Consumer Contracts Regulations 1999 protects consumers (tenants, in this case) from contract clauses that do not meet the standard criteria for fairness by rendering such clauses unenforceable. An unfair additional clause would be something which attempts to deny a tenant a statutory right, or that interferes unreasonably with their quiet enjoyment of the property.

What is an Inventory check/Schedule of Condition?

The inventory, also referred to as a schedule of condition, is a detailed report describing:

-          All items, fixtures and fittings and their state of repair.

-          The condition of the property more generally.

A schedule of condition will be taken at the beginning and end of a tenancy. Its primary purpose is to allow comparisons to be made between the original state of the property and its condition at the end of a tenancy, and thus form the basis for any negotiations regarding the return of the deposit. It ensures that tenants cannot be charged for any damage for which they are not responsible, and likewise protects the landlord should they wish to make reasonable deductions to cover remedial work required to repair damage to the property caused by tenants. We strongly recommend that landlords outsource the schedule of condition to an independent third-party supplier. In the event of disputes over deductions to the deposit, reports submitted by a neutral third party will carry more weight with the adjudicators directed to review the evidence by the relevant deposit protection scheme.

What does Sublet mean?

Subletting is when an existing tenant leases part, or all, of a property to someone else during the unexpired term of their tenancy agreement. In practice, subletting can take on many forms. It can look like anything from a tenant renting out their room to tourists for a couple of weeks while they’re away from home for work, to a full-scale professional operation wherein properties are rented by an individual for the sole purpose of subletting to many more occupiers to turn a large profit. Whatever the circumstances, permission is almost always required from landlords prior to subletting, and many AST agreements prohibit it entirely. This is because subletting increases the risk of damage to the property, often has serious insurance implications for landlords, and it may even invalidate the terms of the mortgage on the property.

At Home Made, our standard tenancy agreement always strictly forbids tenants from subletting their rented accommodation. We actively monitor our landlords’ properties to ensure that they aren’t being marketed for sublet, and if we discover that tenants have violated the terms of their agreement then appropriate further steps will be taken as necessary.

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Jess Brookes

Operations Associate at Home Made