Now that the Renters (Reform) Bill has not passed through parliament, what does it mean for periodic tenancies? Here's what landlords need to know:
The Renters (Reform) Bill was set to become the biggest change for the private rented sector within the last thirty years. One of the proposed changes is to simplify tenancy structures by abolishing Section 21 and to therefore move all tenants currently on Assured Shorthold Tenancies onto a single system of Periodic Tenancies..
However, since the announcement of the general election, the Bill and Periodic Tenancies were not introduced in time before the government closed prior to election.
So what does this mean for Periodic Tenancies?
What do letting agents think of periodic tenancies?
A report by Goodlord and the National Residential Landlord Association (NRLA) found that 47% of letting agents believed that introducing periodic tenancies would harm the sector. The idea of introducing periodic tenancies was voted the most harmful impact on letting agents compared to other policies from the Renters (Reform) Bill. In comparison to other policies such as pets in lets and introducing decent home standards, periodic tenancies are the most negatively perceived policy.
What's the difference between a fixed-term and a periodic Agreement?
In England, most tenancies in the private rented sector are Assured Shorthold Tenancies (AST's). These can be fixed term or periodic.
A fixed term tenancy is where a tenant is liable to pay rent for a pre-defined period of time - normally six or twelve months. At the end of the fixed term tenancy, the landlord and tenant can agree to renew it for a further defined period of time, the tenancy will move to a rolling periodic tenancy, or notice can be served.
Landlords cannot issue a Section 21 Notice to evict a tenant during a fixed term tenancy, but they can use other grounds for possession. A landlord may also use a break clause to allow either party to give notice to end the tenancy early.
On a periodic contract, if a tenant wishes to leave, they would need to give the landlord required Notice. This is usually one month, and they remain liable for the rent until the time has passed. Landlords can use Section 21 to end a tenancy within two months of a periodic agreement
What does this mean for providing notice periods for AST's?
As the Renters (Reform) Bill has not passed through government before the general election, it means that no elements of the bill will come to pass in the next couple of months.
Because of this, landlords and letting agents can still use Section 21 and Section 8 notices if they wish for their tenant to vacate the property.
This means the period will be back to one month or a minimum of twenty eight days, depending on the tenancy agreement.
Why did the government propose moving to this single system of periodic tenancies?
As part of the Renters (Reform) Bill, the government highlighted to cost to landlords, of renewing tenancies yearly, as one reason for it's decision. (* Landlords with Accent Lettings never have to pay a fee for tenancy renewals - it's part of our service).
The Fairer Rented Sector white paper outlined the inflexible nature of ASTs on a fixed term which doesn't allow for tenants to move easily if they wish to.
Break clauses are one way to balance this, yet the white paper says that "tenants may find themselves locked into unsuitable, unsafe or unaffordable housing" in the interim.
The change to periodic tenancies was therefore introduced to create more flexibility for tenants, allowing them to "move when circumstances require them to".
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