The rental landscape is poised for the impending shift towards periodic tenancies. Currently, the market is largely dominated by fixed-term assured shorthold tenancies. However, the Renters' Rights Bill is set to eliminate this model, meaning significant change.
As the Renters' Rights Bill progresses towards implementation, understanding the intricacies of periodic tenancies will become increasingly crucial for both property agents and landlords navigating this evolving legal framework.
A periodic tenancy, also known as a rolling tenancy, is a type of rental agreement that automatically renews for successive periods, such as month-to-month or week-to-week. This goes on until either the landlord or tenant provides proper notice to end it.
At the moment, the market is predominantly fixed-term assured shorthold tenancies, but these will be eliminated as part of upcoming reforms. As a result, all fixed-term tenancies will become rolling agreements.
Following the implementation of the Renters' Rights Bill, it will be important to know how to create a tenancy agreement. Our blog on this details exactly how.
The Renters' Rights Bill intends to replace all fixed-term tenancies with periodic tenancies on a monthly rolling basis, meaning the tenant can give two month's notice before leaving. Section 8 grounds for eviction will be strengthened to account for more circumstances where a landlord may wish to gain possession of their property.
Existing tenancy agreements that are fixed-term will automatically become periodic. As a result, many of the rules tied to these tenancies will change, plus clauses in current agreements will become null and void. These changes could include the removal of the rent review clause, any clauses prohibiting pets unless the landlord has a reasonable excuse to deny them, and the way in which rent is put up.
Tenants will have more rights to challenge rent increases. They will also be able to serve two months' notice to end the tenancy at any time, as long as the two months expire at the end of a rent period. This will make it more difficult for landlords and letting agents to plan ahead, especially without the comfort of a six or 12-month tenancy.
Renewals will be scrapped, and the inevitable higher turnover of tenants will make operating harder for HMO landlords in general. Student landlords may struggle without a fixed term that lasts the full academic year, with students coming and going during term times to save money on rent.
The bill will go to Royal Assent, which is when the King approves it and it becomes an act. However, this is not when most legislation within it will come into force. The commencement date, which is currently unknown, will dictate this.
Letting agents will need to write new tenancy agreements and figure out new processes for the handling of the rent at the beginning of a tenancy once it comes into effect.
By replacing fixed-term agreements with automatically renewing monthly tenancies, the new legislation aims to empower tenants with greater flexibility and rights. While this change promises increased tenant agency and the elimination of renewal fees, it presents new considerations and potential challenges for landlords and letting agents.
Adapting to a potentially higher tenant turnover rate, revised tenancy agreement terms, and altered rent management processes will be essential.
Fixflo can help you prepare for the Renters' Rights Bill. Get a free, no-obligation quote today!