HMO Assured Shorthold Tenancy Agreement – Furnished House
This template ‘HMO Assured Shorthold Tenancy Agreement - Furnished House’ should be used where a Landlord has a furnished house which is a House in Multiple Occupation (HMO) and there is to be one tenancy agreement signed by all Tenants who will be joint and severally liable under the agreement. Usually, the tenancy will have a term of 6 or 12 months.
In its simplest form, the Landlord has an HMO if both the following apply:
1. There are three or more tenants who form more than one household; and
2. The tenants share some or all of the toilet, bathroom, or kitchen facilities.
There are other instances where an HMO may apply. Please see our Guidance Note on HMOs and Licensing of Private Rented Properties.
This 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. It also complies with the tenant fees ban 2019 in both England and Wales.
An Assured Shorthold Tenancy (AST) is the usual form of tenancy granted by private landlords to HMO tenants. 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 under Section 21 of the Housing Act 1988.
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 the Contractual Tenancy Agreements.
If the Landlord requires a guarantor for a Tenant, e.g., because a Tenant does not have a satisfactory credit history or references, the HMO Assured Shorthold Tenancy Agreement Guarantee and Indemnity should be used in addition.
This Agreement sets out the main details at the beginning, being the parties’ names, the address of the property, the term, and the monthly rent. An Inventory should be completed and attached to the Tenancy Agreement to record the condition of the property and the furniture and contents.
Clause 1 is the grant of the tenancy.
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 tenant fees ban, 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 Welsh government has 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 and utilities), repair and maintenance, use, allowing the Landlord access for inspections and end-of-tenancy arrangements.
Under the tenant fees ban, both Landlords in England and Wales can only charge permitted payments which 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). Landlords cannot require a Tenant to pay for a professional clean at the end of the tenancy as this is a prohibited payment. Landlords can require Tenants to clean to a professional standard.
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. This clause also includes Tenant covenants specific to HMOs. Additional clauses have been left in square brackets if your HMO is licensed.
Clause 5 provides for interest to be paid on overdue rent. Under the tenant fees ban in England, Landlords can only charge interest for late payment if the rent is more than 14 days overdue. In Wales, Landlords can only charge interest for late payment if the rent is more than 7 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 the 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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