When a renter’s initial contract comes to an end, most landlords feel comfortable sticking with a tried and tested Assured Shorthold Tenancy (or, AST). However, for some the benefits of a more flexible arrangement such as a ‘period’ tenancy may be tempting.
In this guide, we take a look at the potential pitfalls of periodic tenancies as well as the benefits. We also consider other options.
What is a Periodic Tenancy?
A periodic tenancy is one that extends beyond the initial contract term of an Assured Shorthold Tenancy and simply rolls on for a successive period. If rent is paid monthly then this would be deemed one period and the tenancy would extend to cover an additional month until such time as notice is given.
Period tenancies extend the terms and conditions of the original contract by default however a couple of new rules apply. Under a periodic tenancy:
- The tenant is only required to issue one month’s notice to end the contract.
- The landlord must give the tenant a notice of at least two months to take possession of the property.
It should also be noted that if you do not renew an AST at the end of the contract term and the tenant remains in the property with no notice given then the tenancy agreement becomes periodic by default. This is known as a statutory period tenancy.
Why Should You Choose a Periodic Tenancy Over a New Assured Shorthold Tenancy Agreement?
There are two simple reasons why a landlord would choose to opt for a periodic tenancy instead of a new AST; flexibility and simplicity.
Put simply, a periodic tenancy gives the landlord a flexible two-month notice period without any necessity to reissue paperwork.
In addition to this, the lack of an AST does offer the landlord some further flexibility with rent increases. As opposed to locking in a fixed price for the rent at the time of issuing a renewed tenancy agreement, the landlord can decided when they want to impose an increase. As long as the tenant is given the adequate notice for a proposed change in rent and this only occurs once in any 12-month period then the decision of when to do this is left open.
What are the Risks of a Periodic Tenancy?
Though the above scenario may sound appealing and may save time, and money if the landlord uses a lettings agent to process the paperwork, there are some potential pitfalls which you should be aware of.
Firstly, and reasonably obviously, just as the landlord has flexibility to serve notice so too does the tenant. A periodic tenancy does not offer the longer-term security of a fixed lettings period and the tenant could walk away from his rental agreement with just a single month’s notice.
By contrast, an AST provides you with the reassurance that the income from a rental property is secured for a fixed period.
Another pitfall of periodic tenancies is the eventual problem that the original contract under which the tenancy continues to exist may become so out of date that it no longer complies with landlord/tenant laws. A periodic tenancy doesn’t have to run for long before new legislation could render the original terms and conditions obsolete. In this instance, a landlord is no longer protected against potential financial claims that could arise from the tenancy. Deposit protection is one area that could potentially lead to problems in this regard.
Another possible scenario under statutory periodic tenancy is if the tenant vacates a property during their notice period. Under an AST, or even a contractual periodic tenancy (see below), the tenant remains responsible for council tax until the end of the notice period. Without either of these assurances, it would be the landlord who ends up picking up the cost for these charges.
What is the Alternative to a Periodic Tenancy?
An AST is the most dependable form of securing a tenancy agreement and provides both parties with the guarantee of knowing exactly what is expected from them and for what period. It also provides the landlord with a regular opportunity to review the terms and conditions to ensure that these comply with the prevailing laws and that any deposit is re-protected in line with the deposit protection scheme.
However, if you are interested in the flexibility offered by a periodic tenancy then you could always arrange to have a new AST that addresses this for next time. By including a condition that the tenancy will default to a contractual period tenancy on expiry will give you some protection against issues like those detailed above.
Finally, all tenancy agreements should be drawn up with the help of a property professional to ensure that you and your tenant are properly protected and that the contract is legal and binding. Designed well, a simple AST can offer a secure undertaking between both parties but a badly put together rental agreement could leave you facing big problems in the future particularly when it comes to rent reviews and terminating the contract.
Property Assistant and Lettings Management
Property Assistant is a family run business based in Wokingham, Berkshire specialising in all aspects of property sales and lettings.
We take an active role in managing our client’s rental properties and understand the desire to access flexible alternatives to assured shorthold tenancies in certain circumstances; however, we would always recommend that tenancy agreements are reviewed regularly to ensure that the terms and conditions are kept up to date and in line with current legislation.
To find out more about how we can help manage this aspect of your tenancy management contact us today on 0118 912 2370.
Featured image via Rental Realties.