Home Business Tenancy Agreement for Unfurnished Bedsit

Home Business Tenancy – Unfurnished Bedsit (Rent Excl of Outgoings)

PROP.RES.98

This Home Business Tenancy (AST) – Unfurnished Bedsit (Rent Exclusive of Outgoings) should be used where a Landlord is granting an assured shorthold tenancy (AST) of an unfurnished bedsit to a tenant who will or may be operating a “home business” from the premises. Usually the tenancy will have a term of 6 or 12 months. 

This document is an adaptation of the AST Unfurnished Bedsit (Exclusive Rent) template from our Assured Shorthold Tenancies subfolder. The AST templates in that subfolder prohibit the tenant from using the property for any business purposes. This template allows the tenant to operate a “home business” from the bedsit, but any other type of business use is not permitted.

A home business is defined in Section 43ZA of the Landlord and Tenant Act 1954 as “a business of a kind which might reasonably be carried on at home” but the definition excludes businesses involving the supply of alcohol for consumption at the premises. Further exclusions may be set out in regulations.

The concept of the home business tenancy was introduced in October 2015. A home business tenancy does not attract security of tenure as a business lease under the Landlord and Tenant Act 1954. This gives comfort and certainty to residential landlords, allowing them to let premises to tenants who will run a business from the premises without any risk that the letting will be deemed to be a business lease.

This agreement can either give blanket permission for home business use or can state that home business use is permitted at the bedsit subject to the tenant obtaining the landlord’s prior written consent.

A bedsit tends to be a self-contained unit comprising a living area and a sleeping area. The bedsit may include a small kitchen or kitchenette and/or bathroom facilities. Alternatively, kitchen and/or bathroom facilities may be shared with other occupiers of the house in which the bedsit is situated.

This template provides for the tenant to pay for outgoings, such as council tax (if the property is separately rated), utilities charges, telephone and broadband, in addition to the rent.  If the property is not separately rated for council tax purposes, the Tenant's proportion of the council tax payment must be included in the rent.  Under the Tenant Fees Act 2019 ('the TFA') Council Tax cannot be paid to the Landlord unless it is included in the rent.  The costs of cleaning any communal areas must also only be charged if these costs are included in the rent.  If the rent is to include outgoings, please use the HBT Unfurnished Bedsit (Incl).

An Assured Shorthold Tenancy (AST) is the usual form of tenancy granted by private landlords. Unlike other forms of residential tenancy, a tenant under an AST has virtually no security of tenure. As long as the proper procedures are followed, a landlord can regain possession of the property after six months.

Although the majority of private lettings are ASTs, there are some residential tenancies that cannot be assured shortholds. The main exclusions are lettings to companies or other non-natural persons (the tenant under an AST must be one or more individuals), high value properties (where the annual rent exceeds £100,000), lettings where the tenant does not occupy the property as his only or principal home (e.g. a second home) and resident landlords. Lettings such as these are contractual tenancies – see our Contractual Tenancy Agreements.

This tenancy agreement complies with the Housing Act 1988 (as amended) and the tenancy deposit legislation and takes account of the OFT’s 2005 Guidance on unfair terms in tenancy agreements.

This Tenancy Agreement has been updated to comply with the TFA which affects landlords and letting agents in England and the Renting Homes (Fees etc.) (Wales) Act 2019 ('the RHFWA') which affects landlords and letting agents in Wales.  Whilst similar, the TFA and RHFWA are different.  It is important that landlords and letting agents are aware of the differences and comply with the regimes in their respective countries.  Please see our Guidance Notes on both the TFA and RHFWA for further information. 

If the landlord requires a guarantor for the tenant, e.g. because the tenant does not have a satisfactory credit history or references, the Tenancy Agreement Guarantee should be used in addition.

This Home Business Tenancy (AST) – Unfurnished Bedsit (Rent Exclusive of Outgoings) sets out the main details at the beginning, being the parties’ names, the address of the property, the term and the monthly rent. This template does not make reference to an inventory so it is only suitable for use for a completely unfurnished property. If the property is part-furnished the landlord should use one of the HBT Furnished Bedsit templates.

Clause 1 is the grant of the tenancy. The tenant is given rights to use communal parts of the house, as specified by the landlord.

Clause 2 contains standard legal interpretation clauses.

Clause 3 deals with the tenancy deposit. The amount of the deposit should be inserted in clause 3.1.  Under the TFA, from the 01 June 2019, security deposits for new or renewed tenancies in England must be capped at five weeks' rent if the yearly rent is under £50,000 or six weeks' rent if the yearly rent is £50,000 or more.  

Security deposits for tenancies in Wales are not currently capped but the RHFWA gives the Welsh government the power to introduce caps in the future.

In clause 3.4 the landlord must specify whether the deposit will be protected in an insurance scheme or a custodial scheme. Please see the “Guidance on Tenancy deposit Protection for Assured Shorthold Tenancies” for details of the different schemes and the procedural steps the landlord must take. Please note that this clause should not be used if the landlord is protecting the deposit in the Tenancy Deposit Scheme (one of the insurance schemes). That scheme has its own clause which should be substituted – please see the Prescribed Information and Clauses document on the TDS website: https://www.tenancydepositscheme.com/agents-and-landlords-documents-and-forms.html

Clause 4 contains the tenant’s covenants. These cover payment of rent and other outgoings (council tax (if not included in the rent) and utilities), repair and maintenance, use (including reference to home business use), allowing the landlord access for inspections and end-of-tenancy arrangements.  

Under the TFA, Landlords in England must only charge ‘permitted payments’ as defined by the TFA or face financial penalties (and subsequent offences could result in a criminal offence).  ‘Permitted Payments’ include rent, tenancy deposit, council tax, utilities, tv licence and default fees (for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement).  Under the TFA, Landlords cannot require a Tenant to pay for a professional clean at the end of the tenancy as this is a prohibited payment under the TFA.  Landlords can require Tenant’s to clean to a professional standard.

Similar provisions also affect Wales by virtue of the RHFWA.  Any breach of this act is an offence and is prosecutable in the magistrates' court and the offender will be liable to a fine.  Landlords in Wales must only charge 'Permitted Payments' as defined by the RHFWA which are rent, tenancy deposit, council tax, utilities, tv licence and default fees (in the event of breach of the AST by the tenant which must be written in the tenancy agreement). Welsh Ministers have the power to make further regulations to prescribe a list of payments in default as well as a limit on what is permitted will be subject to prescribed limits.  

Clause 4 includes covenants requiring the tenant to observe the terms of the landlord’s insurance policy and any title documents such as a superior lease. These covenants will only have effect if the landlord has given the tenant copies of the relevant documents.

Clause 5 provides for interest to be paid on overdue rent.  Under the TFA, Landlords can only charge interest for late payment if the rent is more than 14 days overdue.  The rate of interest must not exceed 3% above the Bank of England’s base rate. 

Clause 6 is the forfeiture clause. This allows the landlord to forfeit (i.e. bring to an end) the tenancy if the rent is at least 21 days overdue or if there has been a substantial breach of any of the Tenant’s obligations. Landlords should note that it will still be necessary to go to court in order to obtain possession of the property; the forfeiture clause does not have quite the effect it purports to have but it is important to have the clause in a tenancy agreement, otherwise the court will be unable to order possession during the fixed term of the tenancy.

Clause 7 contains the landlord’s covenants. These cover quiet enjoyment (the right of the tenant to use the property without interference) and repair.

Clause 8 is an optional break clause for each party. Landlords should note that, as well as serving a notice to exercise the break, they must also serve a notice under section 21 of the Housing Act 1988. The break notice will only bring the fixed term of the tenancy to an end. A section 21 notice is needed in respect of the periodic tenancy which will automatically arise once the fixed term has ended.

Clause 9 will contain the parties’ addresses for service of documents. Section 48 of the Landlord and Tenant Act 1987 provides that rent is not lawfully due from a tenant unless the landlord has provided him with an address where notices are served. It is vital that the tenant is given an up to date address for the landlord.

Clause 10 is a jurisdiction clause.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

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