What Is a Periodic Tenancy? Benefits & Drawbacks

There are a few different kinds of tenancy agreements that are used in the UK that you should be aware of as a property investor. Assured Shorthold Tenancies (AST) are the most common for residential tenancies, although others are occasionally used too. This blog is all about periodic tenancy, the different types of periodic tenancy you may come across, and the pros and cons of a periodic tenancy.

Table of Contents

What is a Periodic Tenancy?
Types of Periodic Tenancy
What Happens When a Tenancy Turns Periodic?
Rent Increases on a Periodic Tenancy
Benefits and Drawbacks to a Periodic Tenancy

What is a Periodic Tenancy?

A periodic tenancy, also known as a rolling tenancy, can carry on after the contracted period of a fixed tenancy. For example, If someone is living at a property for a year as contracted by an AST, and the fixed term has expired. If no new agreement has been signed, the previous contract rolls over into a periodic tenancy. Every tenant has the right to stay in a property even if the AST is over, until they leave and end the tenancy or the landlord issues a possession order. Some AST contracts state the terms of a periodic tenancy once it comes to an end.

Types of Periodic Tenancy

There are two kinds of periodic tenancy, statutory and contractual. The type of periodic tenancy used at the end of an AST will be indicated by the contract.

Statutory Periodic Tenancy

If the AST contract does not specify any fixed time for a periodic tenancy once the contract expires, then according to Section 5 of the Housing Act 1988, it will become a statutory periodic tenancy. It counts as a new tenancy but will operate on the same rules as the original, so the same rent will need to be paid as per usual. If the tenant usually pays rent every month, then the tenancy will continue on a month-by-month basis, until the tenant leaves or the landlord starts the eviction process. The landlord must give 2 months’ notice to terminate a statutory periodic tenancy using a Section 21 notice.

These are a practical solution that can provide the landlord and tenant some flexibility with the tenancy, as either can terminate the contract but also remain legally compliant according to the Housing Act.

Contractual Periodic Tenancy

A contractual periodic tenancy is stipulated in the original rental contract, usually stating that the periodic tenancy will carry on on a week-to-week or month-to-month basis. The clause in the contract relating to periodic tenancies will detail the new contract, including changes to rent, the required notice period, and the responsibilities of the tenant and landlord.

Contractual periodic tenancies provide structure and stability to all parties involved and avoid any confusion.

What Happens When a Tenancy Turns Periodic?

While the contract remains the same in many ways, it’s important to remember that it is technically a brand-new contract and carries with it certain responsibilities on behalf of the landlord.

How To Rent Guide

The landlord must give their tenants a new copy of the How To Rent guide if it has been updated since the original tenancy began. Depending on their validity, the landlord may also need to issue a new EICR certificate or gas safety certificate.

Deposit Protection Scheme

Depending on the type of deposit protection scheme, the landlord may need to ensure the existing deposit is ‘re-protected’. If the deposit is held in either a TDS-insured or Custodial scheme, then nothing needs to be done, but if it is held using a different deposit protection scheme, then you may need to check the details of the scheme used.

Council Tax Liability

If a contractual periodic tenancy is in place, then the tenant is liable for the council tax on the property for the entire length of the periodic tenancy, even if they leave before then. In the case of a statutory periodic tenancy, the tenant is only liable for the council tax while they are living in the property. In this case, the landlord would have to pay the council tax until the periodic tenancy comes to an end.

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Rent Increases on a Periodic Tenancy

For a periodic tenancy, any rent review clause from the fixed-term contract expires, so landlords must always use a Section 13 form if they want to increase the rent. While notice periods remain the same, landlords can propose a rent increase immediately after the fixed term ends without waiting 52 weeks in a statutory periodic tenancy.

Benefits and Drawbacks to a Periodic Tenancy

There are a few pros and cons to periodic tenancies, including:

Pros of a Periodic Tenancy

Pro: The tenancy agreement just carries on as before, with no need to negotiate or sign a new contract.

Pro: Periodic tenancies are ideal in situations where flexibility is needed, e.g. the tenant is looking for a new place but hasn’t found anywhere suitable yet.

Pro: The landlord can benefit from the continued rental income.

Pro: the landlord can regain possession of the property fairly quickly and easily if required by issuing a Section 21 notice without needing to wait for a fixed term to end.

Cons of a Periodic Tenancy

Con: Tenants can leave with just a month’s notice, which might not be enough time to find new tenants, leading to void periods and a loss of income.

Con: A local authority can charge the landlord for any unpaid council tax if the tenant leaves during a periodic tenancy.

Con: The lack of a formal contract can lead to confusion and misunderstandings about tenant and landlord responsibilities.

So that’s the main details of periodic tenancies, including common pros and cons for all parties involved. It may be a sensible idea to include a clause about periodic tenancies in your AST agreements, as this can give clarification to your tenants and will ensure you are not liable for any council tax payments if a tenant leaves early during a periodic tenancy.

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