What rights does your tenant have when their fixed-term tenancy expires?
What is a periodic tenancy?
A periodic tenancy is a tenancy referring to a specific period, whether that is weekly, monthly, quarterly or yearly. It may also be referred to as a ‘rolling contract’ because it rolls from one period to the next. They commonly occur when a fixed-term tenancy expires. If the landlord does not renew the tenancy agreement or does not issue a formal notice to end the tenancy at the expiry of the fixed-term, the tenant is entitled to continue to occupy the property whilst paying the rent. If the landlord continues to accept this rent; then a periodic tenancy will arise.
Periodic tenancies can also occur in other circumstances, such as a landlord demanding rent and a tenant making payment for set periods. A periodic tenancy is likely to arise despite the lack of written agreement.
How does a periodic tenancy work?
A periodic tenancy, in theory, can continue for an indefinite period. If following the expiry of a fixed-term tenancy, then it would remain subject to the same clauses and conditions of the original agreement signed by both the landlord or the tenant. The term of the periodic tenancy will be in accordance with the rent schedule – if a tenant paid rent monthly in the previous agreement it will become a monthly periodic tenancy, if quarterly then it will be quarterly.
The start date of the new term is determined by the date the previous tenancy ended as opposed to the rent payment date. Landlords should note that they cannot change the term of the tenancy simply by changing the date the rent is due. For example, if the previous contractual term ended on the 28th of the month and rent was paid monthly, then the new term would be from the 29th to the 28th every month, even if both parties agree rental payment were due on a different date.
How can you end a periodic tenancy?
In order for a landlord to end a periodic tenancy, they must serve a minimum of 2 months’ notice or a complete period of the tenancy, whichever is the greater, ending on the last day of the period. This means that if the tenancy is quarterly, the landlord must give three months’ notice, but if the tenancy is monthly, they must give a minimum of two months’ notice. Even once this notice is served and expires, the tenant is still legally entitled to stay at a property until a landlord obtains a court order.
For a tenant, they can serve a Notice-to-Quit on the landlord. Again, the minimum period is a complete period of the tenancy, but the absolute minimum period is lowered to one month rather than two. i.e. if the contractual term is monthly, they need only give one month notice as opposed to two.
What are the advantages and disadvantages of a periodic tenancy?
A periodic tenancy is considerably more flexible than a fixed-term tenancy, particularly if the tenancy runs monthly. For either party to terminate the relationship there is a much shorter notice period and no need to wait until the expiration of the term. It also saves the need to renegotiate the tenancy agreement. This is particularly helpful if both parties are content with the current arrangement; it saves money, time and effort on both sides to allow the tenancy to become a periodic tenancy as opposed to renewing the tenancy agreement.
Whilst flexibility can be a positive; it can also be a large negative. As stated previously, either party may end the relationship on a short notice period. This can leave a tenant searching for somewhere to live, or a landlord with no tenant and therefore, no rental income. This becomes an even larger problem for a landlord if works are required in order to attract a new tenant and make the property look presentable.
Given that there have been so many changes to current practices and legislation recently, another issue to consider when allowing a fixed term tenancy to continue into a periodic tenancy for an extended period of time is that the terms of the tenancies may become out of date should a problem arise.