There is usually a fixed term to tenancy agreements. In general, these fixed terms last for six to twelve months, although the length can vary based on the need.
Fix term lease
A fixed-term lease, however, does not require the tenant to vacate the property at the end of the term. The landlord usually regains possession of the premises by obtaining a court order if a tenant ends their tenancy and leaves or until the tenancy ends.
After a fixed-term tenancy, there will be two different types of periodic tenancies: contractual and statutory. It has both benefits and drawbacks for landlords, and each has its own specific differences.
The purpose of this guide is to provide landlords and agents with information about how to determine which type of periodic tenancy to use, and how to identify which type of periodic tenancy they have.
Contractual periodic tenancies
Contractual periodic tenancies, as agreed in the tenancy agreement, are tenancies that run from month to month, week to week, etc. A clause stating that periodic tenancies following fixed-term tenancies will be included in the tenancy agreement.
This type of tenancy typically lasts for a set period. As the fixed term ends, the tenancy may continue as a periodic tenancy or carry over from month to month. Council tax purposes require that both the fixed term and periodic portions be included in the same tenancy. It is this type of periodic tenancy clause that is referred to as contractual periodic tenancy in this guide.
Statutory periodic tenancies
It is not uncommon for tenancy agreements to include no provision concerning how the tenancy will continue after the fixed term has expired.
Tenancy agreements for these types of tenancies are referred to as statutory periodic tenancies under Section 5 of the Housing Act 1988.
According to the last rent paid, this tenancy will run from one month to another. The periodic tenancy, for instance, is the same as the fixed-term tenancy if the tenant pays monthly. The instalment payment will be made monthly if your tenant pays 5 months upfront followed by one monthly payment in the fixed term.
As a statutory periodic tenancy differs from the original fixed-term lease, it is a brand-new lease. As far as council tax, deposits, and document service are concerned, this is crucial.
How do I see the difference in periodic tenancies?
In the first place, read your tenancy agreement to determine if a periodic tenancy clause is included. Contractual periodic tenancies are usually the norm.
Generally speaking, statutory periodic tenancies are defined as those that are not subject to a clause stating that the tenancy is a statutory periodic tenancy or that the tenancy is arising under Section 5 of the Housing Act 1988.
If I don’t grant a fixed-term agreement, what type of periodic tenancy do I have?
A fixed-term tenancy is not always required before tenants can move into a property. These tenancies are usually informal and without a written agreement.
Despite the fact that statutory periodic tenancies can only arise through the expiration of fixed-term agreements, these tenancies are still considered contractual periodic tenancies.
These informal contracts, particularly when verbally agreed upon, do not enjoy many of the benefits associated with contractual continuations.
In order to ensure that everyone understands their obligations, the NRLA strongly recommends that tenancies be agreed upon in writing.
A shorthold tenancy with NRLA creates an ongoing contractual periodic tenancy.
For more details on shorthold tenancy please see here
At lofti.co we allow Landlords and agents to make their own AST through the system directly, free of charge. This can then be sent directly to the tenant using Lofti’s integration with Signable. This is then returned and added to the system automatically. Landlords and agents are also able to upload their own custom AST for future use.
Council tax during a periodic tenancy
Even if the tenant moves out without giving notice, they will be liable for the council tax for the duration of the fixed term of at least six months if the tenancy is for the whole house or flat rather than a room.
A contractual periodic tenancy will apply after this fixed term if the tenancy continues as a fixed term tenancy. No matter how early they leave, the tenant(s) will still have to pay council tax until the end of their notice period.
The tenants are only responsible for council tax as long as they live on the property because statutory periodic tenancies have no fixed term of 6 months. A landlord may be required to pay both rent and council tax if a tenant abandons the property without notice during a statutory periodic tenancy.
As with statutory periodic tenancies, periodic tenancies or tenancies with a fixed term of fewer than 6 months continue to follow the same rules.
Protections and penalties for periodic tenancy
As long as all relevant parties receive the prescribed information and the deposit is protected by a scheme, there is no difference between periodic tenancies.
Deposits that have not been properly protected, however, will interact differently with the law.
Tenancies on a contractual period are subject to a penalty of one to three times the deposit. Due to the combination of fixed term and periodic tenancies, only one tenancy is in breach. A landlord who violates a statutory periodic tenancy can be penalized by 2-6 times the deposit as a penalty for non-compliance.
Landlords who have protected deposits late in the initial fixed term must return them before serving section 21 notices for contractual periodic tenancies. The deposit is protected, and the prescribed information should be served before the start of the periodic tenancy in statutory periodic tenancies.
Landlords are required to follow section 21(4) of the Housing Act 1988 when their tenants are on contractual periodic tenancies. Section 21(1) of the Rent Act makes it easier for landlords to manage a statutory periodic tenancy.
It is only the length of the notice that differs between the two rules in England. Otherwise, there will be no difference in the notice.
If the landlord wishes, the section 21 notice period can be extended to more than two months for statutory periodic tenancies. Coronavirus legislation, however, currently mandates longer notice periods.
It is usually the same for contractual periodic tenancies. It is necessary to provide three or six months’ notice to a landlord if he or she is taking rent quarterly or six months. This problem can be avoided by taking payments monthly, weekly, or fortnightly, according to the NRLA.
Section 21(1) notices in Wales must be at least two months long during a statutory periodic tenancy.
Section 21(4) prescribes rules for landlords who hold contractual periodic tenancies. When rent is paid in quarterly or higher instalments, an extended notice period may apply. Furthermore, the notice must expire on the day before the rent is due.
Periodic tenancies work very differently in terms of rent increases.
Rent review clauses may be inserted into contractual periodic tenancies. In this case, both the tenant and landlord are bound by this increase. After that, the landlord can raise the rent according to the clause.
In rental agreements without rent review clauses, a landlord can invoke the prescribed section 13 (form 4) to increase the rent, but only after 12 months from the tenant’s move-in date.
Rent review clauses are not permitted for tenants on statutory periodic tenancies since the fixed term tenancy is separate from the statutory periodic tenancy. The Section 13 form must be used instead. However, unlike the contractual periodic tenancy, this can be served as soon as the fixed term is over, even if only 6 months have passed since the tenants moved in.