How do periodic tenancies work?
Periodic tenancies can sometimes cause some confusion for landlords and tenants, with both parties unsure what a periodic tenancy might mean or if it will even work for them. This article will explain what a periodic tenancy is and the correct procedures to follow.
Periodic tenancies, also known as a rolling tenancy or rolling contract, run periodically, which means on a monthly basis or even week to week. Rent payments are made on a monthly basis or weekly basis, depending on the period of the tenancy that is decided between the landlord and the tenant.
One of the reasons that periodic tenancies are sometimes favoured for landlords, and tenants alike, is that they are short running contracts which can be terminated easily and quickly by either party - unlike the fixed term tenancy.
There are two different types of periodic tenancies - statutory and contractual.
This type of tenancy occurs when the fixed term of a tenancy comes to end and the tenant remains in the property with the landlord accepting it. Section 5 of the Housing Act 1988 makes this statutory as it states that this scenario will automatically create a new tenancy which will run from one period of time to the next, until one party gives notice.
In contrast, this type of periodic tenancy is set out by a clause within the contract between the tenant and the landlord. The tenancy agreement itself will state that the contract will continue on a periodic basis after the expiry the initial fixed term, until one party gives notice.
The notice period for a periodic tenancy from the landlord will be 2 months’ written notice. This is known as a Section 21 notice where the landlord intends to repossess the property, perhaps to sell it or to rent to another tenant. Note that notice to serve a Section 21 notice can be changed. For example, under coronavirus legislation, between 1st June 2021 and 30th September 2021, landlords had to give 4 months’ notice to tenants which provided additional protection against evictions during the pandemic. The landlord can seek a court order to evict the tenant if the tenant stays in the rental property after the notice has expired.
A tenant on the other hand can end the periodic tenancy at any time that they wish. This is typically the length of the rental period, i.e. in a monthly periodic tenancy, the tenant should give the landlord 1 months’ notice.
How do you create a periodic tenancy?
An assured shorthold tenancy agreement will often convert into a periodic tenancy after the initial term of the tenancy ends but this is not a formal requirement. Alternatively, the assured shorthold tenancy agreement can be a fixed term agreement which means the tenancy will not convert into a periodic tenancy. There is no minimum duration for the initial fixed period but is usually 6 or 12 months.
The tenants’ deposits should remain protected in a tenancy deposit protection scheme until the end of the tenancy, whether it is fixed term or periodic.
If the periodic tenancy is a statutory one, the landlord should provide the tenant with an updated How to Rent letter since the agreement is technically an updated agreement to the original contract.
For contractual periodic tenancies, you can insert a clause within the contract stating that you may wish to review the rent at some given point. Provided this clause is fair, the landlord can follow it and increase the rent if necessary. If no clause is given, a Section 13 notice must be used to increase the rent, but only after the end of the fixed term tenancy and 12 months’ after the tenant first moved in.
For statutory periodic tenancies, however, the rules are different since the fixed term and the periodic tenancies are two different agreements. A landlord must use a Section 13 notice to increase the rent, but this can be served at any time - there is no need to wait until 12 months’ have passed.
Legislate is an end-to-end contracting platform which allows landlords and letting agents to create and manage assured shorthold tenancy (AST) Agreements, Section 21 Notices, Section 8 Notices, and relevant tenancy-related documents and letters (such as Rent Increase and How to Rent). If you are interested in finding out more about Legislate for you contracting, why not sign up, arrange a call with the team or download a whitepaper.