What rent covers

Rent is a regular payment to a landlord by an occupier for the use of premises and may include water or service charges under the agreement.

This content applies to England

Definition of rent

Although rent is not defined in any of the Rent or Housing Acts, rent has been held in the courts to be a regular, contractual payment, which a landlord is entitled to receive from a tenant in return for the tenant's use and occupation of premises.[1]

Rent can be defined as the total amount paid to a landlord by an occupier in return for use and occupation of accommodation. Although it is not essential for rent to be paid in order to create a valid tenancy, most landlords ask for rent.

Tenants and licensees who do not pay rent have very limited security of tenure.

It is the tenant's obligation to make sure that the landlord receives the rent. If the landlord refuses to accept rent, then it is advisable for the tenant to keep the rent in an interest accruing account marked 'rent'. The tenant should then make regular attempts to pay the rent to the landlord.

Other charges

Rent can be inclusive of other charges, such as maintenance. If a tenancy agreement defines the rent as inclusive of items like service charges, then the charges and the 'net rent' are defined as the rent.

If there is a distinct, separate obligation in the tenancy agreement for charges such as water rates to be paid, then it is likely that arrears of these rates could not be considered arrears of rent.[2]

By 31 December 2016, all final customers of district heating, district cooling, and communal heating and hot water systems must be provided with individual meters and actual consumption bills by their heat suppliers.

Tenancy agreement

When the tenancy agreement provides for the payment of additional charges, such as water charges, service charges and council tax, as part of the rent or in consideration for use of the property, then such charges can be classified as rent.[3] In some agreements the 'basic' rent may be described as the net rent and the full payment including other charges as the gross rent.

Where the tenancy agreement makes no express provision for the payment of additional charges as rent (or for use of the property) the tenant may be able to argue that they are not rent.[4]

Service charges

Where the rent contains an element for the payment of service charges a tenant can challenge the reasonableness of the service charge on application to First-tier Tribunal (Property Chamber).[5]

Water charges

A tenancy agreement may set out that the tenant pays water charges to the landlord as part of the rent. Many local authority and private registered providers of social housing landlords enter into an agreement with a water company to collect the water and sewage charges from their tenants (who don't have water meters).

However, under water resale rules [6] the amount that a landlord water re-seller can pass on to its tenants is capped. The courts held that the amounts that a local authority had charged its tenants for the supply of water exceeded the maximum charge permissible and that the tenants were entitled to a refund.[7] Additionally, tenants in such a situation could have a defence to a possession claim brought on the ground of rent arrears.

On the basis of the differently worded commercial agreement between the local authority/landlord and water company, the courts distinguished other cases from the decision above and held that the local authority/landlord was merely an agent of the water utility company and had not breached the terms of water resale rules.[8]

Level of rent and the tenancy or licence

Checking the rent is crucial because it can determine whether it is a tenancy or a licence, the type of tenancy and the tenant's rights.

The obligation to pay rent is generally held to be one of the three requirements for a tenancy to be created, as opposed to a licence.[9]

The rent payable on a property (or the lack of rent payable) plays an important role in determining an occupier's security of tenure and rights. Case law has held that rent is not always essential to the creation of a tenancy, but any such tenancy would still fall outside the security of tenure provisions of the Rent Act 1977 and Housing Act 1988.[10]

Low or high rents

The level of the rent payable can also determine the type of tenancy that the occupier has, and thus the security of tenure and other rights of that occupier.

For example, a tenancy at a very low or very high rent does not qualify as a protected tenancy under the Rent Act 1977, nor as an assured tenancy under the Housing Act 1988.

Avoiding rent arrears

When advising clients on rent issues, it is important to know what payments are lawfully due to the landlord as a term of the written or verbal tenancy agreement.

Rent arrears will accrue if lawfully due payments are not made. This constitutes a breach of the tenancy agreement. Where this happens, the landlord could apply for possession and/or a money judgment.

Where there is a separate charge, for payments such as water rates or council tax, set out in the tenancy agreement as an obligation of the tenancy, it is likely that arrears of these charges would be classified as rent arrears. The landlord could apply for possession using the rent arrears grounds.[11]

Law of distress – abolished

Distress was a little used common-law right where in certain circumstances a landlord could take goods from a tenant for non-payment of rent. It was abolished with effect from 6 April 2014.[12]

Last updated: 18 March 2021

Footnotes

  • [1]

    Dudley Metropolitan BC v Bailey (1990) 22 HLR 424.

  • [2]

    Unified Scientific Holdings Ltd v Burnley [1978] AC 904.

  • [3]

    for eg see Escalus Properties Ltd v Robinson [1996]; Sidney Trading Co v Finsbury Corp [1952] 1 All ER 460.

  • [4]

    Dudley MBC v Bailey (1990) 22 HLR 424.

  • [5]

    eg see Cardiff Community Housing Association Ltd v Kahar [2016] UKUT 279 (LC).

  • [6]

    see Water Resale Order 2001 and Water Resale Order 2006, made under s.150 Water Industry Act 1991.

  • [7]

    The Mayor & Burgesses of the Royal Borough of Kingston-Upon-Thames v Moss [2020] EWCA Civ 1381; Jones v Southwark LBC [2016] EWHC 457 (Ch).

  • [8]

    Rochdale Boroughwide Housing Ltd v Izevbigie (2017) EWHC 790 (CH); Rochdale BC v Dixon [2011] EWCA Civ 1173; Lambeth LBC v Thomas(1997) 30 HLR 89.

  • [9]

    Street v Mountford [1985] 2 WLR 877.

  • [10]

    Ashburn Anstalt v Arnold [1988] 2 WLR 706, CA; AG Securities v Vaughan (1988) 21 HLR 79, HL.

  • [11]

    for eg see Escalus Properties Ltd v Robinson [1996]; Sidney Trading Co v Finsbury Corp [1952] 1 All ER 460.

  • [12]

    s.71 Tribunals, Courts and Enforcement Act 2007; art. 2(1)(a) Tribunals, Courts and Enforcement Act 2007 (Commencement No. 11) Order 2014 SI 2014/768.