Whenever a residential property is rented out, there’s typically a written contract between landlord and tenant that sets out the period of time for which the tenancy will last – normally six months or a year. But what happens when this period of time ends? Is agreeing a new fixed term always the best way forward? Let’s look at the options.
What is a periodic tenancy?
Most private tenancies start with a fixed-term tenancy, so called because it stipulates an agreed fixed term of time. During this time both parties are legally bound – the tenant to pay rent for the full term, and the landlord to allow exclusive, safe possession of the property.
Once the fixed term of a tenancy has expired – and unless a new fixed term is agreed to – all tenancies automatically, by law, become periodic tenancies. Unlike a standard assured short hold tenancy, a periodic tenancy rolls on week by week or month by month, for example – with no end date. There’s no fixed term, in other words. The periodic tenancy simply continues ‘running’ until one party, landlord or tenant, gives notice.
If your tenant wants to stay in your property at the end of their contract and you are happy for them to stay, you have two options.
You can prepare a new assured shorthold tenancy contract for both parties to sign. Or you can simply allow the original tenancy to become ‘periodic’.
If – without giving notice – a tenant stays even one minute past midnight on the last day of the fixed term of your contract, the agreement between you automatically becomes a (statutory) periodic tenancy, and the tenant will have to give proper notice, unless you agree to them leaving.
There’s no legal obligation to give tenants a new fixed-term contract; some tenancies run on happily for years on a periodic basis.
Statutory periodic tenancy
Most periodic tenancies are by default statutory periodic tenancies because they were created by statute law.
The majority of private renters are contracted by assured shorthold tenancies, which were established and are regulated by the Housing Act 1988. Section 5 of the act states that if the tenant remains in the property after the end of the fixed term, then a new ‘periodic’ tenancy is automatically created.
It goes on to say that the periodic tenancy:
- Starts immediately after the fixed term ends
- Is between the same people who were the landlord and tenant at the time the fixed term ended
- Relates to the same rental property
Be ‘periodic’, meaning it will run from period to period – normally monthly or weekly.
Under a periodic tenancy, all the terms and conditions of the original contract continue to apply, except that your tenant can end the contract at any point by giving you a minimum of one month’s notice.
Contractual periodic tenancies
You have a contractual periodic tenancy if your last agreement was either a:
- rolling contract with no end date, or
- fixed-term tenancy with a clause that says it would become a periodic contract when the fixed term ended.
One of the plus points of contractual periodic tenancies is that the landlord can specify what the period of the periodic tenancy will be. It allows for and creates some certainty for you.
How long can a periodic tenancy last?
In most cases, the period will be monthly or weekly, depending on what the payment terms are in the original tenancy agreement.
However, if the last payment of rent was different – for example, tenant paid three months in advance in one payment – then the period of the tenancy will reflect this last payment, in this case, three months.
Is a periodic tenancy a good thing?
It depends on what you need. It’s certainly not a bad thing.
If you or the tenant are uncertain of your plans – you may be thinking of renovating or selling your property, for example – it may be better to let the tenancy run on as a periodic because it gives you more flexibility.
It also suits landlords who are concerned about the behaviour of a tenant. A periodic tenancy allows tenants to stay on a month by month basis only if you consider them to be behaving well, month to month.
What are the dangers of a periodic tenancy?
It’s good to be aware of the risks associated with periodic tenancies. Here they are:
- The tenant could leave at any time with only a month’s notice
- The original contract might eventually become out of date because of new laws. A contract that doesn’t cover all legal requirements is effectively useless and could even lead to the tenant making a financial claim against you
Under a statutory periodic tenancy the landlord, not the tenant, is liable for paying council tax on the property if the tenant leaves during their notice period.
You can avoid this by creating a ‘contractual periodic tenancy’, either by stating in the original contract that the tenancy will become a ‘contractual periodic tenancy’ at the end of the original period, or by issuing a new contractual periodic agreement.
Can a landlord increase the rent on a periodic tenancy?
Yes, you can. A periodic tenancy offers the option of upping the rental fee at any point during any 12-month period. Of course, you need to give the tenant fair notice first.
Can a periodic tenancy start straightaway?
Yes, it does automatically by law.
What is the notice period for a periodic tenancy?
How much notice a tenant needs to give you on a periodic tenancy depends on what type it is. Do you have a statutory periodic tenancy? Then the tenant must give at least:
- one month’s notice for a monthly tenancy
- four weeks’ notice for a weekly tenancy.
Whereas with a contractual periodic tenancy the landlord has more control and flexibility. The tenant must adhere to the notice term decided by you and written in your tenancy agreement e.g. two months. In other words, the tenant’s notice period is stipulated by you.
How much notice does a landlord need to give on a periodic tenancy?
Once a tenancy has become periodic, a landlord must give the tenant at least two months’ written notice through a section 21 notice to leave the property, and terminate the tenancy.