Periodic tenancy agreements

Periodic Tenancy Agreements – Guide for Buy-to-Let Landlords & Property Investors

Periodic tenancy agreements are something of an unknown quantity for many landlords and property investors. Talk to most buy-to-let landlords about residential tenancy agreements and they will automatically think in terms of contracts between landlords and tenants which define a set period – usually six months, or a year… a fixed term, in other words. And, within the current buy-to-let arena that is the most common scenario. There is however, another form of tenancy agreement which is not as well known, and that is referred to as a periodic tenancy.

Investment Property Partners guide for buy-to-let landlords, property owners and investors covers periodic tenancy agreements, what they are and the advantages and disadvantages of using this form of tenancy agreement.

What is a Periodic Tenancy?

In the case of a periodic tenancy the term of the lease will run from week to week or, more usually, month to month.

One reason why many buy-to-let landlords and property investors have little or no idea as to what a periodic tenancy entails is because residential letting agents almost always insist on renewal of the original lease agreement when a fixed term tenancy comes to an end.

Whilst this could be seen as “good practice” on the part of the letting agent, it is something for which they charge an additional fee, irrespective of whether or not it is in anyone’s interest to have a further fixed term or not.

This is not to rubbish the idea of a formal lease renewal process as it can offer a number of benefits to both landlords and tenants.

After all, it gives both the landlord and the tenant security of tenure for a further set period.

It can also be an opportunity for the buy-to-let landlord to adjust the property rent in line with the prevailing market rates.

The Flexibility of Periodic Tenancies

On the other hand however, there are certain situations where periodic tenancies come in to their own because a fixed term lease renewal may not be suitable.

  • Uncertain Future

    What if the tenants are not too sure what the future holds?

  • Job Security

    What if the bread-winner’s job is at risk?

  • Relocation

    Or maybe a career posting hundreds of miles away is a possibility?

There are many instances where a tenant might be averse to signing a new 12-month fixed term lease agreement, but would be more than happy to stay put for the time-being and see how things develop.

In such situations it is often better for all concerned to agree to a periodic tenancy as it offers a greater degree of lease flexibility, the tenant is allowed to continue occupation and the landlord gets to retain their tenant (and their rental income stream).

An Option for Dealing with Bad Tenants

Additionally, a landlord could also introduce a periodic tenancy agreement with a tenant who had been causing problems, who consistently failed to pay their rent on time, or one with whom the landlord was unhappy.

Such an approach gives a greater degree of protection to the landlord…why face the frustration of having to wait until the end of a fixed term tenancy before evicting a trouble-maker from the property?

Getting to Grips with Periodic Tenancies

If after all this, you are still confused as to the nitty-gritty details of a periodic tenancy agreement, perhaps the following definition might help to put you a little bit more in the picture.

A periodic tenancy occurs when there is no specific end date to a lease, but there is a term agreed between landlord and tenant, such as week-to-week or month-to-month, for occupancy.

What happens with this type of periodic agreement is that the owner or buy-to-let landlord and tenant agree to certain rights and obligations for these periods, but do not specify an end date, so it’s an indefinite period of tenancy.

Since no end date is formally specified, notice as stipulated in the agreement, must be given for termination and vacancy of the property.

Transition from a Fixed Term Lease to a Periodic Tenancy

You should recognise that a residential periodic tenancy usually comes into force at the end of a fixed term lease agreement.

If the tenant stays in the property they are assured, under Section 5 of the Housing Act, that they will then have a monthly periodic tenancy.

The rent will be the same and the terms and conditions will be the same as those of the original fixed term tenancy agreement.

In most cases the tenancy will have been an assured short-hold tenancy, but even if it was not, if the tenant stays on after the end of the fixed term and pays rent which is acceptable to the landlord, a periodic tenancy is implied in that situation.

Therefore all occupants of the property staying put after the end of a fixed term agreement are still bona fide tenants with a tenancy agreement in place.

There are Two Forms of Periodic Tenancy

If very few property investors and buy-to-let landlords are aware of what a periodic tenancy is, fewer still will know that there are two different forms of this type of tenancy.

  • Statutory Periodic Tenancy

    Firstly, if a tenancy is formed as a result of an act of Parliament it is called a “statutory periodic tenancy”.

    This is what happens when an assured short-hold tenancy continues after the end of the fixed term.

    The term “statutory periodic tenancy” is also used for Rent Act tenancies where the original “protected tenancy” is ended by a “notice to quit” but the tenant is entitled to stay on because the statute says that a new periodic tenancy will be created.

    If you are a property investor or buy-to-let landlord it is well worth noting that such tenants are, for the most part, very difficult to evict – unlike the assured short-hold tenants.

  • Contractual Periodic Tenancy

    The alternative form of periodic tenancy is a “contractual periodic tenancy” which comes into existence when both the landlord and tenant agree to this form of tenancy rather than because of a statute.

    Under certain circumstances it is possible for a landlord to give a tenant a periodic tenancy rather than a fixed term tenancy agreement right from the outset, but such instances are rare in the private sector at least.

    When this happens the tenant is given an initial term – a week or a month – and it then continues indefinitely.

    As a property investor or buy-to-let landlord, if you want to introduce a greater degree of flexibility it is not such a bad idea, but be aware that under this type of periodic agreement it is against the law for landlords to evict tenants during the first six months of the agreement.

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Further reading…

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