Dangers of a Periodic Tenancy
If your tenant wants to stay in your property at the end of their contract and you are happy for them to remain, you have two options. You can issue them with a new Assured Shorthold Tenancy (AST) or you can simply allow their original tenancy to become ‘periodic’, in other words it will roll on from week by week or month by month, depending on whether they pay their rent weekly or monthly.
Note that if you don’t give your tenant notice to leave at the end of their contract and you don’t issue a new AST, they will be allowed to stay in the property and their tenancy will automatically become ‘periodic’.
Under a periodic tenancy, all the terms and conditions of the original contract will continue to apply, but the tenant can end the contract at any point by giving you a minimum of one month’s notice. Once a tenancy has become periodic, you must give the tenant at least two months’ written notice if you want to repossess the property.
So, what should you do? Issue your tenants with a new AST or allow them to roll onto a periodic contract?
Some landlords prefer the flexibility of a periodic tenancy, which allows them to repossess the property by simply giving the tenant two months’ notice, and it also avoids the hassle of re-issuing any paperwork.
However, there are several risks associated with periodic tenancies which you need to be aware of. The first is that the tenant could leave at any time, giving you only one months’ notice. If you issue a new AST, you will have the reassurance of locking your tenant into another fixed period and you won’t have the uncertainty of not knowing when the tenancy might end.
Another danger of a periodic tenancy is that the original contract might eventually become obsolete due to new landlord and tenant laws, such as those covering deposit protection. If a contract is out of date and doesn’t cover all legal requirements, it’s useless and might lead to the tenant having a financial claim against you.
Also, under a statutory periodic tenancy the landlord, not the tenant, is responsible for council tax on the property if the tenant leaves during their notice period. This can be avoided 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.
You might prefer the idea of a periodic tenancy because it leaves you the option of raising the rent at any given point in the future, assuming you give the tenant sufficient notice and don’t do this more than once every 12 months. However, the best time to discuss rent increases is when you issue a new AST – the tenant will be expecting this and if they agree, they won’t have the option to change their mind and make an early exit!
If you do decide to issue another AST, you should resist the temptation to save time and money by simply ‘cutting-and-pasting’ the original contract, changing only the dates and rental figure. Landlord and tenant law is constantly changing and your old contract may no longer cover all legal requirements,
It is always better to issue a completely new contract so that you can be sure it complies with the law and all of the terms and conditions have been checked. If the contract contains inaccuracies, it isn’t worth the paper it’s written on and you might have difficulty terminating the tenancy if it hasn’t been properly established in the first place.
Remember that if you issue a new AST you will need to re-protect any deposit you took at the start of the tenancy. If the tenancy becomes periodic, you must inform the deposit protection scheme but you won’t need to re-issue the prescribed information to the tenant.
Don’t forget that regardless of whether you issue a new AST or allow the tenancy to become periodic, you’ll also have to check that any tenants who have a time-limited right to live in the UK have up-to-date passports and visas.
Upad can take care of all your paperwork for just £169, which includes a bespoke tenancy agreement, deposit protection, first month’s rent collection and setting up a standing order.