Periodic Tenancies Explained
Most initial Tenancy Agreements these days are for six months – the typical term of an Assured Shorthold Tenancy (AST) in England. Once a landlord is happy with their tenant he or she can extend the next Tenancy Agreement to a year, two years or even five years.
If another Tenancy Agreement isn’t set up and the tenant continues to stay in the flat then this is known as a ‘rolling’ or periodic tenancy. Many tenancies go on for years on this basis and what it really means is that the tenancy is renewed on a monthly basis. It’s also a flexible way of working since usually only a month’s notice is necessary from the tenant to end it. Its polite for the landlord to give at least a couple of months’ notice so the tenant can find somewhere else to live.
Periodic Tenancy vs Fixed Term Tenancy
The ‘plus’ of a fixed term tenancy is that both the landlord and the tenant have security. They both know the situation is going to remain for a certain period of time.
It means the landlord can count on rent every month until the end of the tenancy. The tenant doesn’t just have the security of having a roof over their head for a certain length of time, but also knows the rent won’t increase. Having said that, some landlords put a clause in their Rental Agreement which says they can increase the rent during a fixed term tenancy so it’s always worth checking for this.
How is a Periodic Tenancy Created?
There are three ways in which a periodic tenancy can be created which are detailed below.
Statutory Periodic Tenancy
Under section 5 of the Housing Act 1988 a tenancy becomes periodic at the end of an Assured Shorthold Tenancy when the lease is not renewed.
The Act states that if the tenant stays in the property after the fixed term has passed then a periodic tenancy is created. It remains under the same conditions as the preceding fixed tenancies.
Periodic tenancies are usually monthly, but they can also be weekly (depending on how often the rent is paid). Having said that, if the previous tenancy involved paying six months’ rent upfront, them this will also be the length of the periodic tenancy ie six months.
‘Common Law’ Unregulated Tenancy
Schedule 1 of the Housing Act 1988 states that if the tenant is a limited company, or the rent more than £100,000 per annum or less than £750 per annum (£1,500 in London), then it is a periodic tenancy.
This also applies if the landlord also lives in the property. This is often the case with a house owner who lets out a granny flat or some other out building on the grounds.
Under section 54(2) of the Law of Property Act 1925 it is not necessary to have a formal written tenancy agreement. This is when the tenant is paying rent and the fixed term is for three years or less. A new tenancy is automatically created.
Contractual Periodic Tenancy
At the end of the tenancy agreement (which would have mentioned the contractual tenancy) the tenancy continues as a contractual one – usually on a monthly basis, but it’s up to the landlord to state how long he or she wants the period to be.
Some landlords will be worried a periodic tenancy may make it more difficult to evict a tenant when he or she wants their property back. But rest-assured that isn’t the case. Provided the statutory eviction process is carried through, ie Section 21 and follow ups, then there should be no problem in this regard.
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