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POSTED 21 November 2018 Lettings

What is a Periodic Tenancy?

A periodic tenancy is created once a fixed-term agreement has come to an end. Unless a new fixed-term tenancy is agreed between the landlord and their tenant, all tenancies become periodic and continue until one side gives notice.

The terms of a periodic tenancy

The terms of a periodic tenancy are the same as the preceding fixed-term agreement. The tenancy rolls on from month to month or week to week, depending on how the tenant pays rent.

The tenant can end the contract at any time by providing the landlord with a minimum of one month’s notice. However, a landlord wishing to terminate the agreement must provide their tenant with a minimum of two months’ notice.

Creating a periodic tenancy from the start

Although not common, it is possible for a landlord to create a periodic tenancy from the get go. To do this, they start a tenant on an initial short fixed-term agreement, such as one month or even one week, once this expires they simply allow the agreement to roll on to a periodic tenancy.

Periodic tenancies vs renewals

Once a fixed-term contract has expired, there is no legal obligation for either the landlord or tenant to do anything, so both parties may just wish to allow the assured shorthold agreement to turn into a periodic tenancy.

However, a landlord may encourage the tenant to renew the assured shorthold agreement. Indeed, many letting agents insist on automatic renewal at the end of a fixed-term contract.

A renewal can be a good idea if the landlord and tenant are happy with the current arrangement, as it offers both security for a specific period of time.

Benefits of a periodic tenancy

Renewals are not always advisable though. For example, if the tenant’s plans are uncertain it would not make sense for them to singe a new contract.

Similarly, it would not be in the landlord’s interests to offer a problematic tenant a new long term deal. However, should the landlord want to avoid a potentially costly void period, they may consider retaining the tenant on a periodic basis knowing that they will only have to provide two months’ notice should they wish to retake possession of the property.

A landlord may also look favourably on the idea of a periodic tenancy as it provides the opportunity to increase the rent at any given point. Although they must not do this more than once in a 12 month period, they’d also need to provide the tenant with sufficient notice.

Potential periodic tenancy problems

As well as potential benefits, there are a few risks associated with a periodic tenancy. The key danger for a tenant is that they do not have the full security offered by a fixed-term deal.

Similarly, a landlord is in danger of their tenant upping sticks at any time, with only one month’s notice. What’s more, the contract from the original fixed-term tenancy may eventually become out of date due to new laws. If the contract doesn’t cover new regulations it could lead to the tenant making a financial claim against the landlord.

It’s important to note that changes to laws should also be considered when creating a new assured shorthold contract. Although it’s tempting to copy and paste an existing contract, it’s always best to issue a completely new deal to ensure that all new laws are accounted for.