What Are the 5 Steps to Setting Up a New Tenancy Correctly?

Setting up a new tenancy correctly is one of the most important things a landlord can do. Get it right and you have a solid legal foundation for the entire tenancy. Get it wrong and you may find yourself unable to recover rent arrears, serve valid notices, or make deposit deductions when the tenancy ends. Here are the five steps every landlord should follow.

Step 1: Reference Your Tenant Properly

Referencing is your first line of defence. Before you agree to let to anyone, you should carry out:

- Credit check: confirms the applicant has no County Court Judgments (CCJs), bankruptcies, or history of missed payments

- Employment or income verification: confirms they can afford the rent — the standard benchmark is that gross income should be at least 2.5 times the annual rent

- Previous landlord reference: asks whether rent was paid on time, whether the property was kept in good condition, and whether the landlord would let to them again

- Right to Rent check: a legal requirement — you must check that the applicant has the right to rent in England before the tenancy starts (see our separate guide on Right to Rent checks)

Keep copies of all referencing documents. If you ever need to take possession proceedings, a well-documented referencing process demonstrates that you acted responsibly at the outset.

Step 2: Use the Right Tenancy Agreement

Under the Renters' Rights Act 2026, all new tenancies must be assured periodic tenancies (APTs) from day one. Fixed-term tenancies can no longer be offered. Your tenancy agreement must reflect this — any agreement that purports to create a fixed term for a new tenancy entered into on or after 1 May 2026 is not legally valid.

Your agreement should cover:

- The parties (landlord and tenant names and addresses)

- The property address

- The rent amount and payment date

- The notice periods (minimum two months from the landlord using Section 8; minimum two months from the tenant)

- Tenant obligations (care of property, garden maintenance, no subletting without consent)

- Landlord obligations (repairs, quiet enjoyment, compliance with legislation)

- Pet policy (you cannot unreasonably refuse a pet request under the RRA 2026)

If you are using an older template agreement, check it carefully. Many standard AST templates are no longer suitable for new tenancies.

Step 3: Carry Out a Thorough Check-In and Inventory

A detailed check-in inventory is your most important protection against deposit disputes. It should:

- Record the condition of every room, fixture, fitting, and appliance at the start of the tenancy

- Include dated photographs of every area — walls, floors, ceilings, windows, kitchen appliances, bathroom fittings

- Note any pre-existing damage, marks, or wear

- Be signed by the tenant at check-in to confirm they agree with the recorded condition

Without a signed inventory, you will struggle to make any deposit deductions at the end of the tenancy. The tenant can simply deny that any damage was caused during their occupation, and without evidence of the starting condition, you have no basis for a claim.

Step 4: Serve All Prescribed Documents

Before or at the start of the tenancy, you must serve the following documents on the tenant:

- How to Rent guide — the current government version (check the date — it is updated periodically)

- Gas Safety Certificate — if the property has any gas appliances

- Energy Performance Certificate (EPC) — must be at least Band E (Band C from 2030)

- Deposit Prescribed Information — if you have taken a deposit, this must be served within 30 days

Keep proof of service for every document — a signed receipt, a read receipt on an email, or a recorded delivery slip. If you cannot prove service, you may be treated as if you never served the document at all.

Step 5: Protect the Deposit and Confirm in Writing

If you take a tenancy deposit, you must:

1. Place it in a government-approved scheme within 30 days

2. Serve the Prescribed Information within 30 days

3. Keep the deposit protected for the entire tenancy

The deposit is capped at five weeks' rent (or six weeks' for properties with annual rent above £50,000). You cannot take more than this.

Once everything is in place, send the tenant a brief written confirmation: the deposit scheme reference number, the scheme's dispute resolution process, and a reminder of the check-in inventory. This sets a professional tone and reduces the risk of misunderstandings later.

The Bottom Line

These five steps take time to do properly — but they take far less time than dealing with a deposit dispute, a possession claim, or a penalty for non-compliance. Use the New Tenancy Compliance Checklist in your Starter Kit to work through every item before the tenant moves in.