Jersey residential property - a guide to letting18 Apr 2013
Letting residential property may seem like an easy source of income, but it can also be a legal and practical minefield. If there are disagreements between you and your tenants, it can quickly become a drain on your time and resources. The best way to avoid common pitfalls is to take the right legal advice at the outset. We deal with all areas of landlord and tenant law and are skilled in settling disagreements, but prevention is better than cure.
Types of Tenancy Agreement
There are two types of tenancy agreement in Jersey:
- Contract lease: this has to be used if the term is for more than nine years, or if it is for nine years or less, with a contractual option to renew resulting in a total of more than nine years. A contract lease requires registration in the Royal Court of Jersey, and stamp duty is payable by the tenant.
- Paper lease: this runs for periods of nine years or less. The majority of residential leases are paper leases. There is no requirement for registration in the Royal Court and there is no stamp duty payable.
We can help you decide what the terms of the tenancy will be, and can build these terms into a written tenancy agreement tailored to your requirements.
The Residential Tenancy Law
The Residential Tenancy (Jersey) Law 2011 (the "Law") will apply to all residential tenancy agreements made or amended after 1 May 2013 for the exclusive occupation of a residential unit by one or more natural persons who are party to the agreement for value (i.e. consideration or payment) for a period of nine years or less or without a specified term. To begin with, the Law will only apply to tenants, not to licensees or lodgers.
The Law does not mention the situation of an initial term of nine years or less with an option to renew resulting in a total of more than nine years, but it is safer to assume that it does apply in such a situation.
The Law will apply to residential units situate in larger premises containing non-residential areas, such as offices and shops, but will not apply to:
- lodging houses;
- licences, where the licensor retains control over the premises and provides some sort of service;
- premises which are not self-contained (as defined in the Law); and
- holiday lets (for no more than three months).
The Law requires all residential tenancy agreements to be in writing and to contain certain standard matters set out in Schedule 1 to the Law, although additional provisions can be included so long as they do not conflict.
Further provisions are automatically included even if the agreement is silent or conflicts, for example:
- the tenant can remove anything which he or she has fixed to the premises at the end of the letting, subject to making good any damage caused;
- if the agreement states that your consent is required for anything, it must not be unreasonably withheld or delayed; and
- you must not force the tenant to buy movables or pay a premium or key money.
The court can vary or end a tenancy agreement which is oral or conflicts with the provisions of the Law, or was signed before one working day elapsed after you gave it to the tenant to sign.
Please note that it is a criminal offence, punishable by a fine, to interfere with the tenant's peaceful possession without reason and to evade the provisions of the Law, and this extends to officers, managers (in name or fact), and partners of a landlord and to aiders and abetters.
The Petty Debts Court has full and sole jurisdiction to deal with civil matters relating to residential tenancies governed by the Law.
If your property becomes uninhabitable (other than if caused through the tenant's malicious act), rent and other sums due under the tenancy agreement cease to be payable, and you or your tenant can apply to the court to vary or terminate the agreement.
If you interfere with the tenant's peaceful possession without lawful reason, your tenant can again apply to the court to vary or terminate the agreement.
If your tenant is in breach of the tenancy agreement, you may serve notice requiring him or her to desist or take reasonable measures within seven days for the breach to be remedied and only if the tenant does not comply can you then apply to the court to terminate the agreement and order eviction. The court must consider various set factors before it orders eviction. It may grant a stay of the eviction order after considering the balance of hardship, the history of the tenancy, the parties' circumstances and the availability of other accommodation.
As Jersey law applicable to landlord and tenancy relationships is different from English law, you should not use the internet for "cheap and quick" pro forma agreements as they will probably not be compliant, or may contain terms and conditions that do not protect the parties adequately.
Considerations before letting
The following are some of the issues to consider regarding any letting:
The type of property for let
- Will you be living in part of the property you intend to let?
- Is the property a self-contained unit?
- Will the property be let as several units?
- Will you be letting your property while you are abroad?
Who to consult before letting
- Your mortgage lender for consent to let.
- Your insurance company, as you are unlikely to be covered by your normal residential insurance policy in the event of accident, damage, fire or theft.
- Your partner or co-owner.
- A managing agent, if you are letting your property whilst living abroad.
Suitability of the property for letting
- Is the property of an adequate size, with suitable facilities for the rent required?
- Is the property clean and free from damp?
- Is the property free from serious disrepair and structurally stable?
What is the period of the lease?
If you have doubts, you may prefer to start with a relatively short term lease and grant a longer one when you have built up a good relationship. Your tenant may prefer a paper lease so as to avoid stamp duty.
If GST is payable, that is borne by you as landlord unless you stipulate to the contrary in the agreement, as is usually the case. There is no GST on wholly residential tenancies. If the property is not wholly residential, you do not have to register for and charge GST if your turnover is below a certain annual amount. For more information, contact the Taxes Department at Cyril Le Marquand House, St Helier, Jersey.
What restrictions do you want to place on your tenant with regard to:
- allowing children to reside at the property;
- keeping pets in the property;
- smoking in the property;
- decorating and making changes;
- assignment or sub-letting;
- playing loud music within or outside the property;
- conducting a business from the property; and
- allowing visitors (if leasing out part of the property you reside in) and general use of the property?
It is strongly advised that you draw up a list (inventory) of all equipment and furniture provided in the property, even if the property is unfurnished, as this will help avoid disputes involving the condition of the property and the return of deposits. It is also useful to make a note of the condition of the property before letting, detailing any existing damage on walls, carpets, paintwork etc. The inventory should be agreed by both the landlord and tenant, both keeping a signed copy.
- How much rent will you charge and will it be inclusive of rates and utility charges?
- When must the tenant pay the rent (weekly, monthly or quarterly) and by what means (for example, will you collect it personally (noting payment in a rent book) or by direct debit from the tenant's bank account to the landlord's bank account?
- What penalties are there for paying late?
- When can you increase the rent? You may wish the rent to be increased annually or every three years and you can choose for it to increase in accordance with the rise in the Jersey Retail Prices Index or some other index or, instead, to market rental then prevailing, but this requires input from surveyors and is only worthwhile for high value rents.
You may well require a deposit at the beginning of the tenancy to cover against breaches of the lease. This is usually equivalent to one month's rent. The amount of the deposit, and the terms for its return to the tenant on termination of the lease, should be clearly stated within the lease. It is also advisable to provide a receipt.
Service charges and repairs
In contract leases, the tenant normally pays for all repairs. However, if the relevant unit is part of a bigger property, the tenant normally reimburses a proportionate part of the cost to the landlord.
In paper (non-contract) leases, the traditional and default position is that the tenant of a residential property pays only for interior repairs and decoration but, sometimes, the tenant is required to pay for the exterior decoration.
If your tenant does not comply with its obligations to repair and decorate, in the case of a residential tenancy covered by the Law, you must serve a notice to remedy the defects. You need to reserve a right to enter and inspect, and ought to do so regularly. In other leases, the tenant is liable for breaches without you having to serve a notice, although it is sensible to do so. Your tenant may ask you to exclude liability for fair wear and tear. On a very short lease, your tenant may ask you to soften the repair liability which could be otherwise very onerous. All these matters are for negotiation depending on the age and state of the property and what the market can bear.
Is the tenant creditworthy enough to be able to pay the rent and perform the other covenants? You ought usually to obtain references from:
- a previous landlord and/or a bank, as to creditworthiness; and
- a previous landlord and/or reliable third parties, as to personal suitability.
If you feel it sensible, and certainly in the case of a private company, you should ask for a guarantor who should supply similar references.
It is important not to forget to check that the references provided are genuine.
The tenancy agreement should give you or your agent the right to enter and inspect the property with and without workmen for various purposes. If the tenant fails to do the repairs, the agreement should state that you may enter and have the work done and charge the tenant for it.
Assignment or sub-letting
In a residential tenancy agreement covered by the Law, if you do not want your tenant to have the right to assign the lease to a third party or to sublet, you should clearly state this. If you state that the tenant cannot do this without your consent, the Law provides that this means that your consent may not be unreasonably withheld.
Termination of periodic tenancies
The Law alters the notice periods necessary to bring to an end a "periodic" tenancy i.e. one which has no set term. You must give at least three months' written notice and the tenant must give at least one month's written notice.