The pros and cons of periodic tenancies explained
When the tenancy agreement that is signed between you and your tenant comes to an end, if you don’t sign a new contract the tenancy immediately becomes what is known as a ‘periodic tenancy’. A common question that we get asked is, what is a periodic tenancy, and what does it mean to a landlord?
What is a periodic tenancy?
Rather than write a new tenancy agreement at the end of a fixed-term tenancy, buy-to-let landlords can simply let the tenancy roll from one rent date to the next – providing the same tenants remain in the property. This is a periodic tenancy. You don’t have to do anything, as the process is automatic.
The pay period (typically one month) becomes the period of tenancy, with the terms and conditions from the fixed-term contract rolling over from one period to the next. If the rent is paid fortnightly, the period of tenancy becomes fortnightly.
Tenancies do not terminate unless you terminate them
An important concept to understand is that tenancies do not terminate when the tenancy agreement comes to an end. If you don’t write a new tenancy agreement, your tenant automatically moves to a periodic tenancy arrangement. The tenant may decide to move at the end of the fixed term, but if you wish to remove the tenant from your property when a tenancy agreement ends, you must do so legally by:
- Serving a Section 21 Notice
- Mutual agreement
Of course, the third of these options is often the best method, with Section 21 or eviction as options of last resort.
Do periodic tenancies favour tenants?
Some landlords feel that periodic tenancies favour the tenant over the landlord. This is because the tenant can give a notice period of just one month. You will then have the expense of finding new tenants. The fear must be that your void periods increase.
While this is technically true, if you’re a good landlord and treat your tenants and property well, there is little reason the tenant should wish to leave. Moving home is a stressful and costly business. In addition, while you must hold the tenant’s deposit in a tenancy deposit scheme when considering how much of the tenancy deposit you can withhold you will assess for damage and cosmetic repairs that were the fault of the tenant.
Are periodic tenancies more flexible?
For you as a landlord, a periodic tenancy is more flexible:
- You can take vacant possession faster if you wish, by serving a Section 21 Notice.
- You don’t need to rewrite tenancy agreements. The terms and conditions of the original fixed-term agreement apply.
- The admin costs of producing new agreements are avoided.
- You can terminate the periodic tenancy and put in place a new agreement quickly. This allows you to raise rents if you wish, without issuing a Section 13 Notice.
What is a contractual periodic tenancy?
You may decide that it would be better to move the tenant to a contractual periodic tenancy, rather than allowing the fixed-term tenancy to roll over. The advantage of this is that if the tenant leaves during the contracted period (the periodic period which becomes the notice period), then they are still liable to pay for bills such as council tax during the notice period.
You can start a tenancy with a contractual periodic tenancy, or you may:
- Stipulate the contractual periodic nature of ongoing tenancy in the original fixed-term tenancy agreement
- Ask the tenancy to sign a periodic tenancy before the fixed-term tenancy agreement expires
Don’t forget to update the tenancy agreement during periodic tenancies
Landlord laws and regulations are in a constant state of flux, and for unsuspecting buy-to-let landlords, periodic tenancies can be a bit of a trap. Our advice is that landlords should review regulatory changes regularly and update the original agreement in line with current legalities. You’ll find you avoid being wrongfooted and will steer clear of disputes with tenants by doing so.
You don’t have to be the one to break the ‘bad news’ of a rent increase to your tenant. We keep our clients updated on local rents. We’ll offer advice about raising rents. And we liaise with the tenant on your behalf. To chat about this and other benefits of hiring us as your property manager, get in touch with the team at Ezytrac.
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