With several types of tenancy agreements to choose from, it can be difficult for landlords to decide which is right for them. Let’s take a look at the specifics of a periodic tenancy, why they are used, and how they differ from other tenancy agreements.
What is a periodic tenancy agreement?
Periodic tenancy agreements run from month-to-month or sometimes week-to-week, depending on when the rent is paid. For example, if rent is paid monthly, then the tenants are on a monthly periodic agreement.
Simply put, either party can terminate a periodic tenancy agreement relatively quickly. Conversely, in a fixed-term tenancy, the tenant or landlord would typically need to wait until the end of the agreed-upon term before any tenancy changes could be made.
Related: The landlord guide to amending and renewing tenancy agreements
Why are they used?
For some landlords and tenants, periodic tenancies are ideal. Not only do both parties have a clear and straightforward process for ending the tenancy, but they can also avoid the hassle of renewing the lease as periodic tenancies automatically renew.
- For tenants, there is greater flexibility to move out with relatively short notice, which could be a necessity for certain groups, such as students and young professionals.
- For landlords, the same level of flexibility applies, allowing for regular rent reviews and an easier process should they need to regain possession of the property.
The two types of periodic tenancy agreements
Statutory periodic tenancy
If your tenants are on an assured shorthold tenancy and it ends, they will automatically be switched to a periodic tenancy if they wish to stay in the home. Unless they sign up for another fixed tenancy in the property, the tenancy will continue ‘in statute’. Although this is technically a new tenancy, there is no need to sign a new periodic tenancy agreement.
Contractual periodic tenancy
A contractual periodic tenancy is when you and your tenants have agreed that the tenancy will become a periodic tenancy once the fixed-term tenancy ends.
Related: Why DIY tenancy agreements are a bad option for landlords
Other types of tenancy agreements
Assured shorthold tenancy (ASTs)
Assured shorthold tenancies are the most commonly used in the private rental sector. They allow landlords to let their property while retaining the right to regain possession of it at the end of the agreed-upon tenancy period. For an assured shorthold tenancy, all of the following must apply:
- The property is owned by a private landlord or housing association
- The tenancy started on or after January 15, 1989
- The property is the primary occupancy of the tenants
- The owner does not live in the property
Non-assured shorthold tenancy
A non-assured tenancy is a type of agreement used when the criteria for an assured shorthold tenancy is not met. A tenancy cannot be an assured shorthold tenancy if:
- It began or was agreed before January 15, 1989
- The rent costs more than £100,000 a year, or less than £250 a year (less than £1,000 in London)
- It is a business tenancy, tenancy of licensed premises, or a holiday let
- The landlord is a local council
Regulated tenancy
Most lettings that began before January 15, 1989, will be regulated tenancies, which are protected under the Rent Act 1977.
Excluded tenancy
Excluded tenancies are most commonly used for lodgers who share a property with a landlord. In this type of tenancy, tenants tend to have fewer rights against eviction than they would in other types of tenancies.
Company let
A company let agreement is usually taken out by a limited company that is looking to use the property to accommodate their employees or directors. As this falls outside the criteria of an assured tenancy agreement, it does not fall under the rights of the Housing Act 1989.
The future of periodic tenancies
Proposed changes in the now abandoned Renters’ (Reform) Bill included the potential abolishment of ASTs. The Bill hoped to replace them with periodic tenancies, meaning that instead of agreeing to a fixed rental term, tenants will be placed on a rolling contract, which they can end with two months’ notice. Additionally, landlords would have to follow Section 8 rules to terminate the tenancy, as the bill proposes to abolish Section 21 notices.
Although the Bill is no longer going ahead, there will be alternative legislation in future which may put ASTs into question. In order to stay compliant with the law, speak to your local Ellis & Co agent today.
How your agent can help
Here at Ellis & Co, we can help you navigate the complexities of tenancy agreements by helping you understand which type is suitable for you based on your circumstances. We can help explain the legal implications, rights, and responsibilities associated with each type, ensuring you are fully informed before making a decision.
Furthermore, we can draft you a comprehensive tenancy agreement which is legally compliant and fair to both parties, giving you peace of mind as a landlord.
