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Original article from Landlord Vision - Understanding Periodic Tenancies Ahead of the Renters’ Rights Bill
When the Labour Party’s Renters’ Rights Bill becomes law later this year, all fixed-term assured tenancies will automatically become rolling periodic tenancies.
The bill plans to abolish all fixed-term tenancies to “end the injustice of tenants being trapped paying rent for substandard properties and offer more flexibility for both parties to respond to changing circumstances.”
Most of the buzz surrounding the Renters’ Rights Bill concerns the abolition of Section 21 “no-fault” evictions. However, the less-discussed abolition of fixed-term tenancies will also shake up the sector.
With the Renters’ Rights Bill expected to come into effect in the summer, landlords should familiarise themselves with how periodic tenancies work and what they need to do to plan and prepare for a smooth transition.
A periodic tenancy is a rolling tenancy with no fixed end date. Most periodic tenancies run from month to month, but they can also run on a week-to-week basis, depending on how frequently rent is paid.
There are two main types of periodic tenancy: statutory and contractual.
If a fixed-term tenancy agreement does not contain a clause specifying what happens to the tenancy at the end of the fixed term, it will automatically become a statutory periodic tenancy at the end of the agreement unless a new fixed-term agreement is signed. When this happens, the same terms and conditions as the expired tenancy apply to the new statutory periodic tenancy.
A contractual periodic tenancy is much the same as a statutory one, but it occurs when there is a clause in the fixed-term agreement that explicitly states that the tenancy will become periodic at the end of the fixed term.
A statutory periodic tenancy counts as a brand new tenancy, whereas a contractual periodic tenancy is a continuation of the fixed-term tenancy.
The rights and responsibilities of the landlord and tenant under a periodic tenancy are very similar to those under a fixed-term tenancy. Let’s explore what these rights and responsibilities are and how they differ between fixed-term and periodic tenancies.
Currently, tenants with periodic tenancies are responsible for paying their rent on time, taking care of the property, and giving the landlord the correct amount of notice before leaving.
The tenant’s rights include:
The landlord is responsible for repairing and maintaining the property to keep it safe and habitable. They must also comply with all relevant legal regulations, including protecting the tenant’s deposit in a government-approved scheme and providing tenants with proper notice of eviction.
The landlord’s rights include:
Currently, the main differences between fixed-term and periodic tenancies lie in security, flexibility, and rent increases.
Landlords cannot serve a Section 21 notice during a fixed-term tenancy unless the agreement features a break clause. However, they can serve a Section 21 notice at any time during a periodic tenancy with the appropriate notice, making this type of tenancy a less secure option for tenants.
Despite the reduced security, periodic tenancies do offer tenants more flexibility. If their circumstances change, they can give the landlord one rental period of notice, allowing them to leave on short notice. In comparison, tenants under a fixed-term tenancy cannot usually leave before the end of the fixed term.
The other area where there are clear differences is rent reviews. Landlords cannot usually increase rent during a fixed-term tenancy unless there is a clause in the agreement that allows it. However, under a periodic tenancy, they can increase rent at any point using a Section 13 notice and adequate notice.
The next section will explain how many of these differences are being addressed within the Renters’ Rights Bill, which is set to change how periodic tenancies work once it becomes law later this year.
The Renters’ Rights Bill is poised to abolish fixed-term assured tenancies later this year. Once the bill becomes law, all fixed-term tenancies will become periodic, including existing ones. This means that any 12-month fixed-term agreements that you sign now will transition to periodic tenancies later in the year before they have reached the end of their term.
The bill will introduce several changes to the legislation surrounding periodic tenancies to make them fairer and more secure for both landlords and tenants. Key changes include:
Once all tenancies become periodic, they will continue indefinitely until they are terminated by either the landlord or tenant. Currently, the tenant must give one full rental period of notice (usually one month). Under the new rules, the tenant gains greater flexibility but is required to provide the landlord with two months’ notice that they wish to end their agreement. The notice period that landlords must provide will vary depending on their reason for ending the agreement. Generally, the notice period will be shorter if the tenant is causing trouble for the landlord and longer if the landlord requires the tenant to leave through no fault of their own.
Landlords will no longer be able to end periodic tenancies without providing a valid reason. However, the grounds under which they can evict tenants using Section 8 are being strengthened to support them in regaining possession of their properties when needed. Strengthened grounds include tenant antisocial behaviour, persistent rent arrears, and the need to sell or move into the property.
To protect tenants from unfair rent increases, landlords will only be allowed to increase rent to the market rate once per year and must give tenants two weeks’ notice of an increase.
All of the above changes aim to balance flexibility, security, and fairness for both landlords and tenants. However, in the beginning, they could cause some challenges for landlords, who will need to adapt their property management strategies to comply with the new regulations.
Changes introduced by the Renters’ Rights Bill, including the abolishment of fixed-term tenancies, will shake up the rental sector, creating both challenges and opportunities for landlords. Many landlords currently appreciate the security and predictability of fixed-term tenancies. Let’s explore some of the potential pros and cons of moving to rolling periodic agreements.
The Renters’ Rights Bill has identified and acknowledged the main landlord concerns surrounding the move to periodic tenancies. One common worry—the risk of tenants leaving at short notice—has been addressed by extending the tenant notice period. Additionally, Section 8 grounds for eviction have been strengthened, and new grounds have been added to help quell landlord worries about how they will regain possession without Section 21.
While the changes could increase tenant turnover if tenants choose to leave sooner than they would have with a fixed term, the reforms also have the potential to foster more harmonious relationships. If tenants feel secure and fairly treated, it could help to reduce disputes and create happier, more satisfied tenants who stay longer.
The best way to ensure a smooth transition to periodic tenancies is to familiarise yourself with the new rules under the Renters’ Rights Bill and start preparing well in advance. To help you get ready, we’ve created five action points to carry out over the next few months.
With the right preparation and a proactive approach, landlords should be able to navigate the transition with ease. By carefully planning and preparing for potential challenges, landlords can position themselves to thrive under the new reforms and begin creating more positive and long-lasting relationships with tenants who feel secure and valued
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