I’m surprised I haven’t covered this incredibly mundane issue already, but apparently this one slipped through the net (so I’ve been hastily informed by a rather disgruntled reader that is under the impression I’m running a subscription based landlord support service here and acting like I swindled him out of money. Dickhead!).
Thinking about it, I probably haven’t dedicated an entire post on the matter because it’s already been covered 100 times over by many reputable websites. However, since it’s a Wednesday night and I have nothing to do but scratch dust particles off my balls (it’s been a dry week) and aimlessly watch my Twitter stream get filled with garbage that I couldn’t give a shit about, I thought I’d go ahead and answer the question from my point of view, while also including additional information that I’ve noticed lack from the other articles I’ve read on the topic.
Renewal options available
Most landlords will be pondering “how to” towards the end of a tenancy.
There are generally two common ways of renewing an existing tenancy. The good news is both processes are pretty straight forward, so even if you aren’t the sharpest tool in the shed, you’ll be in safe hands. But the simplistic nature means I’m going to have one hell of a time making this post seem compelling/engaging, so try to bear with me without crashing out and drooling like a rabid dog.
1) Sign a new tenancy agreement
It’s really as simple as it sounds. Just get a copy of a tenancy agreement and get it signed, and date it from the day the old tenancy ends.
Many landlords assume that this is the only way to renew a tenancy. It’s not, but it’s probably the most common.
This maybe the perfect time to re-tweak your tenancy agreement if the current one failed you by containing insufficient clauses (for whatever reason).
2) Do nothing, let it roll
Yeah, seriously, do nothing, just let the good times roll.
When a tenancy isn’t terminated and new contracts aren’t signed while the tenant remains in the property, the tenancy becomes what is known as a periodic tenancy (or “rolling tenancy”). It’s perfectly legit.
All the same terms and conditions in the expiring tenancy agreement will still apply, but the only difference is that the new tenancy agreement becomes periodic. The “period” is dependent on how frequently the rent is paid. For example, if the rent is paid on a PCM (Per Calendar Month) basis, then the contract will run on a month-by-month basis. Same principle applies if the rent is paid on a weekly or bi-weekly basis.
This essentially means the tenant and landlord are NOT tied into a long-term contract e.g. 12 months. Once the tenancy has become periodic, the tenant can give 1 month’s notice (assuming it’s a monthly rolling contract), and the landlord is allowed to give 2 months notice (landlords are always required to give a minimum of 2 months notice by law).
So that pretty much sums up the two options. Pretty simple, innit?
You still with me? Good. Let’s keep going…
The less common options
There are a few other ways of renewing a tenancy, which are just as legitimate as the 2 approaches listed above, but perhaps not as commonly used.
You can also use a Memorandum which is a 1 page document, which extends the contracts terms and condition (the new end date should be specified) but can also include clauses such as rent increases and break clauses.
2) Sign a contractual periodic tenancy
At the end of the tenancy, instead of starting a new fixed term contract, for example, for 6 or 12 months, you can start a “contractual periodic tenancy”, which is a new contract which specifies the term as being just one month (or a week) and then just allowing it to run on.
The difference between a “periodic tenancy” and a “contractual periodic tenancy” is that a contractual periodic tenancy exists when both landlord and tenant agree in contract that the tenancy will become a “contractual periodic tenancy”, as opposed to allowing it to naturally roll into one without any mention of it (a fixed term contract will naturally roll into a periodic tenancy if no other action is taken). There are a few other ways of starting a contractual periodic tenancy, more details available on the periodic tenancy post.
There are actually some advantages of going down the contractual route over the non-contractual, which Hayley discusses in comment #33 (scroll down), it is also discussed on the periodic tenancy post, which I linked to above. In brief, the advantages relate to landlords avoiding the responsibility for council tax expenses when a tenant has been served an eviction notice, otherwise held responsible. It’s a bit of an odd one.
Tenancy renewal fees
If you used a high-street letting agent to find your tenant and you’re wanting to renew a tenancy, the odds are the agency is rubbing their grubby little mitts together because they’re on the verge of slapping you with what is known as a tenancy renewal fee. In “theory”, the fee covers the admin costs for renewing the tenancy and retaining your tenant.
Agents typically charge anywhere between £100 – £200 for the tenancy to get renewed. Some agents even calculate the fee based on a percentage taken from the rental income (the fees some landlords have been subjected to by that formula is actually terrifying).
I know what you’re all thinking, “what admin work is actually required to renew a tenancy, which warrants that price?” That’s a good question and one I’ve also asked on several occasions. I’ve been told that walking over to a photocopy machine and pressing the ‘copy’ button isn’t as easy as it looks; pressing the wrong button(s) can lead to carnage. Not to mention, the immense strain caused by lifting the lid is unimaginable.
Poor agents, it must be exasperating for them.
Basically, the fee is unjustifiable and total bullshit, in my opinion.
If the fee applies to you and you’re reluctant to pay (which would make you relatively normal), you may want to allow the tenancy to roll into a periodic tenancy (as opposed to getting a new tenancy agreement signed), because then the agent isn’t subjected to any of that gruelling “admin” work. I’ve previously escaped from paying a renewal fee that way.
Be wary, some agents will actually try and force you to renew the contract just so they can charge the fee, implying it’s the only and/or safest option. That is of course non-sense. Stay strong and resist if you’re happy for the tenancy to roll.
It’s also worth checking your landlord/agent contract to determine if the fees apply at all, because it must be clearly stated in order for it to be enforceable.
Changing the terms and conditions / rent increases
When you renew the tenancy, you may want to make changes to the terms and conditions. For example, a common change is increasing rent.
You have a few options here…
- 1) Create a new tenancy agreement and add the new terms and conditions in there (this will create a new fixed term tenancy).
- 2) If the only change is a rent increase, you can serve a rent increase notice and the new tenancy can roll into a periodic tenancy.
- 3) Create a separate counterpart document that contains the new terms. Endure the document is dated and signed by both landlord and tenant. This can apply for both periodic and fixed term tenancies.
It’s important to note that all terms and conditions in tenancy agreements are subject to the Unfair Terms in Consumer Contracts Regulations, so don’t just add any old clause, because it may not be enforceable. If you’re unsure, check with a solicitor or landlord law specialist.
On a sidenote, in case I’ve just planted a rotten seed in your mouldy cranium and encouraged you to unnecessarily jack up your prices, you should carefully consider whether or not you really need to increase your tenant’s rent. Don’t just unfairly do it for the sake of it, especially if you have good tenants.
It’s always amazing how easily and quickly a landlord can be encouraged to increase rates.
Some of you maybe aware that due to a ridiculous case (Superstrike v. Rodrigues), landlords were required to re-serve the tenancy deposit prescribed information to the tenants when a tenancy became periodic. Thankfully, as of 30th March 2015, landlords are no longer required to re-serve the PI if the deposit was protected and the prescribed information was served during the original fixed term- once will do.
From October 2015, where tenancies in England are “renewed” (this does NOT include tenancies that roll onto a periodic tenancy), the landlord must serve the following:
I prefer periodic tenancies
From a personal standpoint, I prefer allowing tenancies to roll into periodic tenancies, as opposed to getting new fixed contracts signed. I prefer the flexibility of periodic tenancies; problematic tenants can get dealt with quicker since I’m not tied into a long-term contract. Although, I do appreciate that some landlords find great appeal in securing good tenants, knowing they won’t have to find replacements for X amount of time.
However, as I recently discussed in a blog post titled, if your tenant wants to leave early, it’s often easier to just allow them to leave if That’s their desire, even if it is during a fixed period. On that basis, it kind of makes the purpose of the new fixed term contract redundant. But it’s your call. However, I will say this, if there’s one lesson I’ve painfully learned from being a landlord, it’s that a good tenant can quickly turn into a tenant from hell at the flick of a switch. In those cases, I want to be able to serve a section 21 notice ASAP. You NEVER know what’s around the corner.
Do you really want to renew the tenancy?
Needless to say, you should always carefully consider before dishing out new tenancy agreements. Seems like such an obvious and stupid thing to say, but you might be surprised at how many landlords renew tenancies with awful tenants just for the sake of convenience. The last thing you want to do is commit yourself to a tenancy for 6+ months with someone that makes you nervous.
So what’s your preferred poison, renewing tenancies or periodic, and why? Hit me with it!