As a new buy-to-let investor, what essential tenancy agreement clauses and referencing checks should I implement now to mitigate risks ahead of the Section 21 abolition and the shift to periodic tenancies?
Quick Answer
Ahead of Section 21 abolition expected in 2025, new buy-to-let investors must strengthen tenancy agreements with clear clauses on property use and maintenance, and conduct thorough referencing, including credit checks and verifiable landlord references, to mitigate future risks.
## What are the most important tenancy agreement clauses for buy-to-let investors now?
With Section 21 no-fault evictions abolished in England from 1 May 2026, landlords must rely on stronger tenancy agreements and the new possession grounds. Key clauses that were always important are now absolutely critical for risk mitigation and efficient property management. A clear, legally sound tenancy agreement forms the bedrock of any successful landlord-tenant relationship and provides the framework for addressing issues should they arise.
* **Clear Rent Payment Terms**: This clause must explicitly state the exact monthly rent, the due date (e.g., the 1st of each month), the accepted payment method, and any applicable late payment charges. It should also outline the process for rent reviews, typically annually, with provisions for 3-6 months' notice before any increase. For instance, if a property is let at £1,200 per month, the agreement should clearly state how and when this payment is made and the consequences of non-payment. This clarity helps streamline collection and provides a firm basis if possession proceedings under Ground 8 (mandatory ground for rent arrears) become necessary.
* **Property Maintenance and Responsibilities**: Detail who is responsible for what. The tenant is typically responsible for minor maintenance, cleanliness, and notifying the landlord of repair needs. The landlord is responsible for major structural repairs, safety checks, and ensuring the property meets minimum housing standards, as reinforced by Awaab's Law (when commenced for the private sector). For example, the agreement should clarify that tenants are responsible for changing lightbulbs and reporting a leaky tap, while the landlord is responsible for fixing a broken boiler or repairing a leaking roof. This prevents disputes over minor issues and ensures the property is maintained.
* **Detailed Inventory and Schedule of Condition**: While not strictly a clause, this document is referenced within the tenancy agreement and is paramount. It meticulously records the condition of the property and its contents at the start of the tenancy, including photographic evidence. This is vital for deposit disputes when the tenancy ends. Without a clear, agreed-upon inventory, landlords may struggle to justify deductions from a tenant's deposit for damage beyond fair wear and tear. For example, if a sofa was stained when the tenant moved in, but the inventory stated it was clean, the landlord has limited recourse for deposit deductions.
* **Permitted Occupiers and Use**: Clearly define who can reside in the property (e.g., named tenants only) and the permitted use of the property (e.g., residential purposes only, no business use without written consent). This helps prevent overcrowding and unauthorised subletting. If the agreement specifies two named tenants, any additional occupants would be a breach, allowing the landlord to address the issue. This also impacts mandatory HMO licensing requirements, which apply to properties with 5+ occupants forming 2+ households.
* **Break Clauses and Notice Periods**: While Section 21 is abolished, a well-drafted break clause can offer flexibility for both parties in fixed-term tenancies, allowing either party to end the agreement early with a specified notice period (e.g., six months into a 12-month agreement, with two months' notice). The new Renters' Rights Act 2025 will primarily see tenancies transition to periodic after a fixed term. The Act introduces new grounds for possession, such as for landlord occupation or sale, which will require specific notice periods that override contractual clauses if shorter. However, it is still prudent to outline notice periods for contractual grounds like tenant breach.
* **Access for Inspections and Repairs**: Include clauses detailing the landlord's right to access the property for inspections, repairs, and safety checks, always with reasonable notice (typically 24-48 hours) and tenant consent. This ensures compliance with legal obligations like gas safety checks and helps monitor property condition. For example, a clause permitting annual inspections with 48 hours' written notice is standard practice and balances tenant privacy with landlord responsibilities.
## Which referencing checks are now non-negotiable for new investors?
Comprehensive tenant referencing is no longer just good practice; it is a critical defensive measure for landlords. With the abolition of Section 21, evicting problematic tenants will rely on proving a breach of tenancy or a specific ground for possession. Thorough referencing reduces the likelihood of these issues arising in the first place, saving significant time and potential costs. Each check provides a layer of protection against financial loss and property damage.
* **Credit Check and Financial History**: This is fundamental. A detailed credit check reveals any County Court Judgements (CCJs), insolvencies, or bankruptcies, indicating financial stability and payment reliability. It also verifies electoral roll registration. This check helps identify potential rent arrears risks. For instance, a tenant with multiple recent CCJs for unpaid debts might be a higher risk for defaulting on rent payments, potentially leading to months of lost income, which, on a £1,000 per month property, could easily amount to £3,000-£4,000 during a possession process.
* **Affordability and Income Verification**: Crucially, verify that the tenant's income is sufficient to cover the rent comfortably. A common benchmark for affordability is that a tenant's gross annual income should be at least 2.5 to 3 times the annual rent. This means for a property renting at £1,200 per month (£14,400 annually), the tenant should ideally earn £36,000-£43,200 per year. This verification involves requesting payslips (three months minimum), employment contracts, and bank statements, or contacting employers directly. Self-employed individuals will require tax returns (SA302) and accountant's letters.
* **Previous Landlord or Letting Agent References**: This is arguably one of the most insightful checks. Contacting a previous landlord or letting agent provides direct insight into the tenant's payment history, property care, and general behaviour during prior tenancies. Questions should cover promptness of rent payments, any significant damages, neighbour complaints, and notice periods given. This reference can reveal patterns of problematic tenancy that credit checks might miss. For example, a previous landlord might disclose that the tenant consistently paid rent late or caused significant damage that was only resolved via a deposit dispute.
* **Right to Rent Checks**: This is a legal requirement under the Immigration Act 2014. Landlords must check the immigration status of all adult occupants to ensure they have the right to rent in the UK. Failure to do so can result in significant fines (up to £3,000 per tenant for first breaches). This involves checking original documents like passports or visas, in person or via approved digital identity verification services. This is a non-negotiable legal obligation rather than just a risk mitigation strategy.
* **Identity Verification (ID Checks)**: Always verify the prospective tenant's identity by requesting photographic ID (passport, driving licence) and proof of current address (utility bills, bank statements). This helps prevent fraud and ensures the agreement is made with the correct individual. This underpins all other checks, as knowing the true identity of the applicant is paramount.
## Investor Rule of Thumb
Always treat your tenancy agreement as your primary defence and your referencing as your first line of attack; strong preparation in both areas significantly reduces future problems, particularly with the abolition of Section 21.
## What This Means For You
As an investor building a portfolio, understanding the nuances of tenancy agreements and rigorous referencing is more critical than ever. The changes from May 2026 shift the balance, requiring proactive rather than reactive management. Most landlords don't lose money because of unexpected legal changes; they lose money because they fail to adapt their foundational processes. If you want to refine your legal processes and referencing strategies for the new regulatory landscape, this is exactly what we analyse inside Property Legacy Education.
Steven's Take
The abolition of Section 21 in May 2026 is a significant shift, not a complete removal of landlord power. It simply means that your initial due diligence and your ongoing tenancy management become paramount. I built my portfolio with robust processes from day one, which served me well, and these changes underscore why that approach is essential. A weak tenancy agreement or inadequate referencing can cost you months of rent and substantial legal fees, easily £5,000-£10,000 for a complex eviction. You need to view your tenancy agreement as a comprehensive business contract, not just a standard template. Pay particular attention to the specifics of income verification and previous landlord feedback; these are often the most reliable indicators of future tenant behaviour. The new periodic tenancy framework also means you need to be confident in your tenant from the start, as ending a tenancy on your terms will require more specific grounds. Proactive management and solid documentation are your best friends now.
What You Can Do Next
Review your current tenancy agreement template: Engage with a specialist property solicitor to update your agreement to reflect the latest legislation and strengthen clauses on rent payment, maintenance, and access, ensuring compliance with the Renters' Rights Act 2025. Visit gov.uk/housing-for-rent for government guidance on tenancy agreements.
Implement enhanced tenant referencing procedures: Use a reputable referencing agency to conduct comprehensive checks including credit reports, affordability calculations (targeting 2.5x-3x rent), previous landlord references, and Right to Rent verification. Confirm with your agency that their checks meet the latest legal requirements.
Create a meticulous inventory and schedule of condition: Ensure a detailed photographic and written inventory is completed at the start of every tenancy, signed and agreed upon by both parties, using an independent inventory clerk or a robust digital platform. This document is crucial for deposit protection scheme adjudications.
Understand the new possession grounds: Familiarise yourself with the Renters' Rights Act 2025 and the updated mandatory and discretionary possession grounds that replace Section 21. Consult the Ministry of Housing, Communities & Local Government (MHCLG) guidance documents on gov.uk for official information.
Budget for potential extended void periods and legal costs: With more complex eviction processes, factor in potential longer void periods between tenancies and higher legal fees (e.g., £3,000-£5,000+ for court proceedings) into your financial projections. Review your landlord insurance policy to ensure it includes rent guarantee and legal expenses cover.
Stay informed on Awaab's Law and property standards: Keep up-to-date with the commencement date and specific requirements of Awaab's Law for the private sector to ensure your properties meet the necessary housing standards and reporting obligations. Monitor official government announcements on gov.uk.
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