What is the difference between a Fixed Term Tenancy or a Periodic Tenancy

If your current fixed term tenancy is soon to be coming to an end and your tenant would like to stay.  You have two options to choose from, you can either issue them with a new fixed term Assured Shorthold Tenancy Agreement or you can let the current Tenancy Agreement to automatically turn into a Periodic Tenancy.

A Periodic tenancy will roll on to a month to month basis or week to week basis depending on how the tenants pay their rent (weekly or monthly).

If your original tenancy turns into a Periodic tenancy, then all parties will continue to adhere to the terms and conditions of the contract, however, the tenants can end the tenancy at any point by giving you the minimum notice as stated in the tenancy agreement (usually one month’s notice).

Please Note: If notice to leave is not issued to your tenants at the end of the contract and a new Assured Shorthold Tenancy Agreement is not issued, then that tenancy will automatically turn into a Periodic Tenancy.

What are the advantages of a Periodic Tenancy Agreement

When the initial fixed term comes to an end you may prefer to allow the tenancy to turn into a Periodic tenancy, rather than have the tenants sign up for another fixed term.  One reason landlords do this is that they do not want to ask their tenants to have to consider their position and possibly trigger them into deciding to move.  You may not want to lose a good tenant, so leaving the tenants alone and allowing the tenancy to turn into a Periodic one can often be the better solution.

By doing this can also be of benefit to the tenants, as the landlord with long-term tenants may leave the rent at the original amount for an extended period.

A lot of landlords believe that having the rent slightly lower than what the current market is demanding, will encourage the good tenant to stay for a longer period.  Also by taking a slightly lower rent can be cheaper than the expense and risk involved finding a new unknown tenant.

Another reason you may want to let the tenancy turn into a periodic tenancy is that it offers flexibility.  The tenant can issue their notice (usually one month) but you can also re-posses the property by given them notice (usually two months), plus the court process for possession should this become necessary.

What are the advantages of a Fixed Term Tenancy Agreement

A fixed-term tenancy agreement gives both you and your tenants some security.  You can rest assured that you will have rent payments for the whole fixed period (providing the tenants stick to their obligations).

This also means that your tenants can rest assured that they have the security of a home (providing they are paying the rent and sticking to the terms of the agreement) for the full period of the tenancy.

How to Increase the Rent with a Periodic Tenancy Agreement

There will come a time when the rent will be needed to be increased.  The tenancy agreement might provide this, and the increase can be implemented.  If there is no mention of a rent increase in the tenancy agreement, then you can issue your tenants with a Section 13 Notice, giving the tenants two months’ notice of your intention to increase the rent.

How to Increase the Rent with a Fixed Term Tenancy Agreement

When you write to your tenants to find out if they wish to renew their tenancy, you can also state that you will be increasing the rent.  You can simply do this by issuing the new fixed term tenancy agreement with the higher rent.  Your tenants then have the option of agreeing to the new rent, negotiating it or leaving the property.

Disadvantages of a Periodic Tenancy

The main disadvantage for landlords is that the tenants can issue the notice to leave at any time and therefore not having the security of income for a fixed period.

A danger of a periodic tenancy is that it could become obsolete if affected by any subsequent legislation, for example, the deposit protection rules which have changed several times could mean that it is now out of date.

Final thoughts

Whether you always renew tenancies for a further fixed term or you allow them to turn into Periodic ones it really is a matter of choice.  On one hand, you have flexibility and on the other, you have the knowledge of security.

If you have any questions regarding this article, please either comment below, email: lettings@pmslettings.co.uk or call us on 01243 788257.