The Renters’ Reform Bill has finally had its airing in Parliament and now starts the process of becoming an Act – which is when a law is agreed by the House of Commons, the House of Lords and the King.
One of the Bill’s details up for discussion is the proposal to scrap fixed-term tenancies. Instead, the Government wants to transition all tenants on fixed-term assured shorthold tenancies or assured tenancies onto a "single system of periodic tenancies". In this blog, LandlordBuyer looks at the proposal in more detail and examines what this may mean for landlords.
What is a periodic tenancy?
A periodic tenancy is an agreement where there is no specific end date for the tenancy – it’s often referred to as a rolling tenancy for this reason. Periodic tenancies usually run from month to month but they can run from week to week.
Are there any landlord benefits to a periodic tenancy?
The Government has highlighted how it can be expensive for landlords to renew fixed-term tenancies, so it suggests periodic tenancies will save them money by avoiding 6 or 12-monthly tenancy renewal costs.
What is the downside of a periodic tenancy?
A period tenancy allows tenants to give notice more freely and although billed as giving tenants greater flexibility, it will leave landlords at the mercy of ‘flighty’ renters who move on more quickly. This may result in a faster churn of tenants, empty lets, increased voids and more frequent tenant-find fees.
Will tenants on fixed-term agreements need switching to period tenancies?
Migrating to blanket periodic tenancies will be a two-step process. Once the Bill passes into law, all new tenancies created will be periodic from day one. All existing fixed-term tenancies will then transition to a periodic style by a set date. This date has not been announced but it is expected to be in 2024.
How much notice do you need to give for a periodic tenancy?
If a landlord wants to end a periodic tenancy, they must give the tenant two months’ notice and this timeframe is expected to stay when the Renters’ Reform Bill becomes law. At the moment, tenants only need to give one months’ notice if they wish to exit a periodic agreement. The Bill would extend the notice period tenants have to give to landlords, doubling from one to two months.
How does a landlord terminate a periodic tenancy?
Presently, a landlord with tenants on a periodic tenancy can start the Section 21 notice process to evict tenants. This method of regaining possession is being scrapped as part of the Bill, however, so a landlord will need to use a revised Section 8 notice. They will also have to adhere to the reformed grounds for possession after the Bill becomes law. It’s worth noting that the reforms stipulate that a Section 8 can only be served after the tenant has lived in the property for six months.
How do periodic tenancies work in the student let sector?
Firstly, all purpose-built student accommodation is exempt from the new periodic tenancy clause. This leaves all other landlords who let to students, including those with Houses in Multiple Occupation (HMOs) and student flats in university hotspots, with a new risk. There are concerns that students may choose to leave a tenancy before the academic year ends, with the landlord struggling to find a replacement tenant mid-term, or the landlord finding they don’t have vacant possession at the beginning of a new academic year.
Periodic tenancies will be especially troublesome for licensed HMO landlords, who may find students staying on after their education finishes and dragging the entire household into paying council tax, discovering an inability to fill vacant rooms on a short let basis due to planning rules. Landlords in tourist destinations who use the summer months when students vacate to tap into the lucrative short-let holiday market will also suffer if their student occupants continue with their tenancy on a year-round basis.
Are you worried about periodic tenancies?
If you would like to discuss how mandatory periodic tenancies will affect your property investment activities, please contact LandlordBuyer and we can talk through your options. If exiting the buy-to-let market is the best outcome, LandlordBuyer will provide a free cash offer and exchange within seven days, if required.