A large number of Islanders turn to the rental market to meet their housing needs. Many other Islanders have bought residential properties as investments and look to let those properties to generate income. The principal legal mechanism by which residential properties are let is a Residential Tenancy Agreement (“RTA”). Given the importance of this topic to local people we have prepared a collection of short blogs as part of our ‘BCR Law Explains…’ series in which we look at what a RTA is, what protections they provide, how they are created and terminated, and what some of the key areas of potential issues and disputes are.
In this first instalment we look at what a residential tenancy agreement is, how they can be created and some of its key features.
What is a residential tenancy agreement?
An RTA is an agreement which permits one or more people (the tenants) to exclusive occupation of a residential unit as a dwelling, for a specified rent for a period of nine years, or less. The key requirements are: (1) exclusive possession; (2) of a residential unit; (3) for a term; (4) at a rent.
An RTA must be in writing, signed by (or on behalf of) the landlord and the tenant, and sets out the specific details and provisions required in the schedules to the 2011 Law. Although the 2011 Law is clear that an RTA must be in writing, it also makes it clear that an RTA will not fail just because it was made orally, whether partly or wholly. It is, of course, more difficult to establish conclusively the terms of an oral agreement, where recollections of the terms of the agreement may vary.
In order for there to be a lease the tenant must have a right to enjoy exclusive occupation of the property. This means that the tenant has the right to exclude other people (including the landlord) from the property. The tenant is, in effect, exercising the right as if they were the absolute owner of the property.
Landlords may reserve a right of entry in certain circumstances under the terms of the RTA, such as a right, on reasonable notice and at a reasonable time, to enter the property to inspect its condition, or to make repairs. If the essential requirements for a tenancy are not met, the tenant will occupy the property under a licence. Licences do not attract the same statutory protections afforded to an RTA. When considering whether an agreement amounts to an RTA or a licence, the Court will look at the substance of the relationship between landlord and tenant rather than the name that they have given to it.
A landlord cannot avoid the statutory protections provided by the 2011 Law by describing the agreement as a “licence” – if the agreement fulfils the essential requirements of a lease it will be a lease.
A residential unit is a self-contained dwelling which has, as a minimum, the following amenities for the exclusive use of those occupying the unit: a shower or bath; a washbasin; a kitchen; a sleeping space; and a lavatory.
Fixed Term or Periodic Tenancy
An RTA can be granted on a fixed term basis (for example, for a term of one year). It can equally be granted on the basis of a periodic term, which is where the tenancy runs on the basis of a recurrent interval (for example, on a month-by-month basis with no minimum or maximum number of months). In either case, an RTA cannot be granted for a period in excess of nine years (this is because a lease of nine years or more can only be created by a contract passed before the Royal Court).
What an RTA must specify
The 2011 Law states that, as a minimum, an RTA must include certain key information including:
A sufficient description of the property being leased;
The date on which the RTA commences;
The date, or term, by which the RTA will come to an end, or any conditions which, if fulfilled, will bring the tenancy to an end;
The name and address of the landlord and/or their managing agent;
The rent payable and the frequency of the payments;
The name of the person to whom rent must be paid;
The amount of any deposit held and how and when that might be returned;
When rent might be reviewed and the basis of that review; and
An inventory of any movable property which will remain the property of the landlord.
In addition to this, the 2011 Law provides that certain provisions which are automatically included within an RTA, regardless of whether or not the parties include them within the terms of their agreement. Those include terms which:
Permit tenants to remove anything which they have attached to the property, provided they make good any damage;
Prevent a landlord from unreasonably withholding, or delaying the provision of, any consent which the tenant might require before taking action in relation to the property;
Prohibit the inclusion of any terms within the RTA which require the tenant to purchase any fixtures or fittings in respect of the residential unit or paying any premium to the landlord in order to secure the residential unit.
The 2011 Law expressly prohibits the parties from entering an agreement which seeks to circumvent the statutory protections which it provides. In the event that the RTA contains provisions which are inconsistent with the terms of the 2011 Law, such provisions are void and of no effect.
A prospective landlord must give their prospective tenant one working day to consider the terms of the RTA before requiring the tenant to sign it.
A landlord must provide a copy of the RTA to their tenant as soon as possible after it is first made, or otherwise varied. The landlord must also provide a receipt for any deposit monies paid (although landlords are now required to register any deposits through the mydeposits scheme). Failure to do either could result in the Landlord receiving a fine of up to £10,000.00!
In addition to this there are statutory requirements for landlords to ensure that fire and electrical certificates are provide to the tenant or visible within the dwelling.
Both landlords and tenants should carefully consider the terms of any agreement in relation to residential property before they enter into it to ensure it meets their specific needs and requirements and complies with the provisions of the 2011 Law.