Tue 03 Nov 2020
After much thought and consideration, we have decided to slightly change our tenancy agreements so that if they continue after the initial fixed term on a periodic basis, they will do so as contractual periodic tenancies, instead of statutory periodic tenancies. These changes will be for new lets starting in November 2020 and do not apply to existing tenancies.
So what is the difference and what does that mean to you?
Different periodic tenancy types
Statutory periodic tenancy
When a fixed term tenancy expires, if the tenancy is not renewed on another fixed term basis (the preferred option), then the tenancy ‘rolls on’ as a statutory periodic tenancy on the same terms as the original agreement. The ‘period’ is dependent on how frequently the rent as paid at the end of the original fixed term, eg. if the rent was paid monthly, the periodic tenancy would run from month to month, if the rent was paid quarterly, the periodic tenancy would run quarter to quarter.
In order to bring the statutory periodic tenancy to an end, the landlord must give two clear months (except at the moment under the Coronavirus Act 2020, when the landlord must give six months’ notice).
The tenant, however, needs to serve only one periods’ notice, which is one month if the rent was paid monthly. Should the landlord wish to increase the rent during a statutory periodic tenancy then, unless there is a ‘rent increase clause’ negotiated in the original agreement, they must serve a ‘Section 13 Notice’. As a Statutory Periodic tenancy creates a ‘new tenancy’ then any changes in legislation must be complied with.
Contractual periodic tenancy
The other option is to let the tenancy roll-on as a ‘contractual periodic tenancy’, which means that, at the end of the fixed term, the tenancy will become periodic on a ‘month by month basis’ and a new tenancy is not created. Both parties can serve notice in line with the notice/break clause set out in the original tenancy agreement.
A clause will be automatically included regarding a rent increase on the anniversary of the start date of the tenancy.
Another advantage of changing to a contractual tenancy is that tenants will be liable for council tax until the end of their notice period providing the tenancy was originally for 6 months or longer. There have been instances where tenants have left a property early, notified the local authority of their vacation and the local authority pursued the landlord for council tax due despite the tenancy still running.