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The Advantages And Disadvantages Of Periodic Tenancies

Written by on 14 Jun 2010

The other day I wrote a blog post about how my selfish tenant has decided to abandon me and my property by unexpectedly giving me notice. That obviously wasn’t the best news in the world to receive since he’s genuinely a nice chap, and an awesome tenant.

Urgh. What a limp-dicked, cock-stain. How could he do this to me? I’ve been so good to him! I thought we had something special.

What made matters worse is that he was able to give me a pathetic, minuscule one month notice because he was on a periodic tenancy! That got me wishful thinking… I wish I had tied him down by locking him into a 12 month tenancy agreement, as opposed to allowing him to have the flexibility of a periodic tenancy. Actually, scratch that, a 24 month fixed contract, with no room to escape my sexual grip.

After the news of his departure sunk in, I started pondering about the advantages and disadvantages of a periodic tenancy from the perspective of a landlord. I always used to think periodic tenancies were a good thing, but I’m starting to see some extremely unsettling holes.

What is a periodic tenancy?

A Shorthold Tenancy automatically becomes a “periodic tenancy” if new contracts aren’t signed after the fixed-terms expire in the original Tenancy Agreement. All the same terms and conditions apply, but the only difference is that the contract 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.

What are the advantages of a periodic tenancy?
  • They allow flexibility e.g. if the landlord suddenly wants the property vacated, he/she can immediately serve a Section 21 Form – notice of possession, without having to wait for a fixed term to expire before the tenant has to vacate.
  • There’s no need to arrange another tenancy agreement, the clauses in the expired agreement will still apply. Additionally, saving paper is awesome; some say better than sex!
  • A lot of snake-oil letting agents charge a fee for renewing contracts. So, if a landlord allows the contract to transform into a periodic tenancy, a new contract is not required, consequently escaping the costs of renewing contracts.
  • If the landlord wants to be greedy and increase rent, or add any additional clauses to the contract, he can do so pretty sharpish, providing that the periodic tenancy is terminated and a new agreement is put in place. Since the period of a periodic tenancy depends upon the rent payment schedule, it doesn’t take long for any of the new clauses to be added since most rent is paid on a monthly basis.
What are the disadvantages of a periodic tenancy?
  • As I already experienced in a harsh life lesson, putting good tenants on periodic tenancies is risky because they can unexpectedly vacate pretty quickly. Landlords shouldn’t make it so easy for good tenants to leave!!
  • Tenants typically only need to give one month’s notice when they’re on a periodic tenancy, which may not allow a comfortable amount of time for the landlord to find new tenants if the current tenant gives minimal notice. The issue can become extra stressful if the property requires cosmetic work in order to attract new tenants.
  • Over the years, new regulations have been passed through into the BTL industry (e.g. Tenancy Deposit Scheme). These new regulations should be mentioned in the tenancy agreement as statutory clauses. Point being, if you allow a contract to continually be periodic for a long period of time, it can slowly become out of date. It’s important to keep tenancy agreements inline with the law, so the T&C’s are always clear in black and white.
  • Finding new tenants can be expensive, so if you’re a landlord that prefers using 6 months fixed term agreements, and always allows the tenancy to go periodic, you’re leaving a big window of opportunity for a high tenant turnover. It can often be more cost-effective to secure tenants for long term, on fixed contracts. Of course, that’s larely dependent on your own judgment to decide on whether you have good tenants or not that are worth the commitment.
Conclusion

I know many landlords, including myself, favour periodic tenancies because of the flexibility. I generally like things to dangle and have flexbility. But it’s important for landlords to remember that the flexibility also applies to tenants. Once the tenancy becomes periodic, tenants have the ability to vacate quickly, and leave the landlord with a lot of work to do in a short space of time, especially if the property needs to be repaired in order to become presentable. Finding good tenants isn’t always the easiest, cheapest or quickest of processes.

I’ve never really had a “game plan” regarding periodic tenancies because I’ve never really thought about something so mundane to this extent until now (am I getting old/boring?). In future, I’m going to try and make extra effort to keep my good tenants on long-term fixed agreements, while the average Joe’s can slip into a periodic and die for all I care. Only joking.

So, my question to my fellow landlords, do you allow tenancies to go periodic? Do you have any kind of game plan when it comes to contracts?

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10 Comments - join the conversation...

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Aunty_P2010-06-15 08:44:34 We let tenancies go periodic as standard practice for some of the reasons you laid out. All parties avoid the renewal fee and most tenants feel comfortable about the felxibility it offers them. Occasionally a tenant asks for another fixed term and all being well we'd usually agree.

I find the main downside is the contracts getting out of date but it's not caused us any real problems or cost us any money! 1
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Cynthia2010-07-08 05:14:01 IMO, I would go for monthly periodic tenancy as it will give me 1 month time period before my tenant plans to leave the property.

I agree with you "Finding good tenants isn’t always the easiest, cheapest or quickest of processes."
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mllysbb2010-07-08 16:57:06 I deal with very much the lower end of the market, so go for 6 months followed by periodic, and have just served a section 21 on one of the nastiest bits of work I've given house room to. Owes 8 weeks rent and every time I ask, he says he will pay, then doesn't, then invents a list of problems... (flat was only completed within the last 12 months and was inspected to within an inch of its' life) He has now called in environmental health, so I've fixed all the bits he's broken, and served him notice :-) He's off to see a solicitor.. But I'm glad I have the flexibility to get rid. 3
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lee2010-07-20 20:46:07 The UK we have a rolling 6 month contract which is great called an assured shorthold tenency. 4
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Chris2010-08-19 08:39:47 Apologies for commenting on an old post but I was hoping to get a bit of advice if any of you have got a sec.

I'm on the other side of the fence in that I'm a tenant not wanting to pay the estate agents £100 - "my share of the admin costs". Seems very wrong that they can charge me and my landlord for essentially just reprinting my tenancy agreement.

I'm a good tenant and I'd like to remain in the property, so what would be the best way to move onto a periodic tenancy? Do I just do nothing and let it roll over or should I be speaking to the estate agents to tell them my plans?

I'm not planning on moving out any time soon but I'd like to keep my options open and I think 1 month's notice on either side is pretty fair.

Thanks in advance for any of your suggestions. 5
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Aunty P2010-08-19 18:18:05 @Chris The Landlord wrote a helpful post on this subject. Here's the link.

http://www.propertyinvestmentproject.co.uk/blog/this-is-how-i-helped-my-friend-stop-paying-a-tenancy-renewal-fee/

Good advice and I can't see a downside.

Good luck! 6
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Kat2011-02-09 16:13:48 I have a simple question. You said that one month is not enough for finding new good tenants, but even if you are given two or three month notice, practically you cannot start marketing process until one month before the end of tenancy because most AST agreements say something like 'Tenants should let prospective new tenants access the property in the last month of the tenancy' and 'at least 24 hour written notice should be given before the property is shown to prospective tenants'. Landlord must respect tenants' privacy (which is also mentioned in Agreements as Landlord's obligation) so probably it is not easy to do repair/cosmetic work while the tenant is still living there.
As a landlord myself, I would expect some void period and prepared to survive without property income or pay council tax. If you cannot do that, you'd better to use a professional agent (I also noticed many agents ask tenants to give two month notice and landlord to give three months notice instead of one and two month notices, respectively).
Plus, a good tenant may be transformed later in which case locking him up for 24 months is not always a good idea! 7
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james2011-03-17 14:43:54 Me being a landlord I’ve had tenants in property for 2 years. They asked for a renewal this year but I did nothing (although I would like to put them on for another year) as I would like the flexibility to warn them or give notice to leave as I had a couple of complaints about sound. 8
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Kate2011-03-19 14:08:48 I am a tenant on a periodic tenancy agreement - have had a letter from the landlord/estate management people saying I have three options:
1. continue with the periodic agreement paying £10 a month;
2. pay £40 for a 6 month AST
3. pay £60 for a 12 month AST
Is this legal to ask for the £10 each month? It's new to me and I understand that an AST does cost something to administer but surely the point of a periodic agreement is that there are none (as yu outline above). Incidentally, I am planning to move out within two months (hopefully sooner) as I am buying a place but I would be keen to know where I stand. 9
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miniportfoliochris2011-06-20 14:57:34 Been a landlord of 4 properties since 2004 - the golden rule is simple. Be fair and you'll be treated fairly. I'm slightly bellow market rent, and keep my properties in a good state - 4 weeks voids in total. I've just found by fiance 2 tenants in 3 hrs via the council - who'll gaurantee my rent and provide me with a deposit bond.

Go with your instincts - not just your cheque book. If you don't click with the tenant or think they're dodgy - say no.

I've had 9 tenancies during this time, last one since 2004 - moved out last week - and they've found me my new tenants.

Infact all of my tenancies, bar one - have been recommendations from the ex tenants. So far i've never been let down.

Its no secret - be honest and not gready and you'll go far. 10

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