Types of occupational contracts: a guide for contract-holders

For contract-holders it is important to understand the different types of occupational contracts available. An occupational contract, whether written or verbal, outlines the terms between a landlord and a contract-holder, ensuring both parties are clear about their responsibilities. Here’s a detailed overview of the various types of occupational contracts you might encounter.

What Different Occupational Periods Are There?

The two primary types of occupational periods are:

  • Fixed-Term Occupation: these run for a specified period, such as six months or a year.
  • Periodic Occupation: continue on a rolling basis, either week-by-week or month-by-month, after a fixed-term ends.

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Fixed-Term Occupational Contracts

A fixed-term occupational contract is set for a defined period, typically six or 12 months, though there is no maximum duration. The agreed length must be specified in the tenancy agreement, and if it exceeds three years, the agreement must be signed as a deed.

Some key points to note about fixed-term occupations include:

  • Ending the Occupation: You cannot terminate a fixed-term occupation early unless there is a break clause in the agreement.
  • Moving to a Periodic Occupation: Once the fixed term ends, the occupation automatically becomes periodic unless notice is given.

Periodic Occupational Contracts

A periodic occupation continues indefinitely on a weekly or monthly basis until either the landlord or the contract-holder provides written notice to terminate it. All fixed-term occupations become periodic if the contract-holder stays in the property without signing a new agreement.

Assured Occupations

Assured occupations, which allow contract-holders to live in a property for life, are rare today. They typically apply to occupations starting between 15 January 1989 and 27 February 1997, or later if specific conditions are met, such as receiving a written notice of an assured occupation from the landlord. Assured contract-holder enjoy significant protection from eviction.

Assured Shorthold Tenancies (AST)

The most common type of tenancy, ASTs, are governed by the Housing Act 1988. They apply to most residential tenancies that meet the following criteria:

  • The property is privately owned.
  • The tenancy started after 1989.
  • The property is the tenant’s main residence.
  • The landlord does not live in the property.

Key features of ASTs include:

  • Fixed Term: Typically, the initial fixed term is six or twelve months.
  • Deposit Protection: By law, any deposit must be registered with a government-approved protection scheme.
  • Rent Reviews: Rent cannot be increased during the fixed term unless agreed upon or stipulated in a rent review clause.

After the fixed term expires, an AST can either be renewed with a new contract or become a statutory periodic tenancy.

Non-Assured Shorthold Contracts

Non-assured shorthold contracts are used in specific circumstances where an AST is not applicable. Examples include:

  • Rent exceeds £100,000 per year.
  • The contract-holder has a primary residence elsewhere.
  • The landlord lives in the property but does not share facilities with the contract-holder .
  • In these cases, landlords are not required to use a deposit protection scheme, and eviction procedures differ from those of ASTs.

Excluded Contracts

Excluded contracts apply when a landlord has a lodger sharing their home, or if someone is living rent-free with family or friends. These contracts offer less eviction protection but still come with basic rights.​

Company Lets

Company lets involve a business renting a property to house employees or equipment. This type of contract is governed largely by common law rather than the Housing Act 1988, which applies to individual landlords and contract-holders.

Regulated Contracts

Regulated contracts, governed by the Rent Act 1977, are now rare and typically apply to agreements made before 15 January 1989. They offer long-term security and often feature below-market rent levels.

Statutory/Rolling Contracts

When a fixed-term occupation expires and no new contract is signed, the agreement becomes a statutory periodic contract. This arrangement continues on a month-by-month basis (or other regular periods) until either party decides to end it through proper legal channels.

Choosing the Right Occupational Contract

Understanding the different types of occupational contracts helps both landlords and contract-holders make informed decisions. Key considerations for contract-holders include:

  • The start and end dates.
  • The landlord’s details.
  • Rent amount, payment schedule, and potential for rent reviews.
  • Deposit protection details.
  • Responsibility for utility bills and maintenance.
  • For landlords, keeping up-to-date with the latest legislation is crucial to ensuring compliance and supporting contract-holders effectively.

Creating a Occupational Contract

Drafting a occupational contract involves ensuring all necessary details are included, from basic terms to specific clauses about rent reviews and deposit protection. Both parties should understand their rights and obligations to avoid disputes.

We are here to help

If you have any questions or need assistance with occupational contracts, we are here to help at Darlows. Our team of professionals can provide guidance on all aspects of renting properties in South Wales and Cardiff. Contact us today for expert advice.