An assured shorthold tenancy (AST) agreement can be granted by a landlord for a fixed period, such as six months. Tenancies of this nature are known as Fixed Term tenancies. If the landlord does not renew the tenancy agreement at the end of this stated period, it becomes a Statutory Periodic Assured Shorthold Tenancy (AST). This is a tenancy where the original terms remain in place, except that it now proceeds from period to period, depending on when the rent was required to be paid. So if rent was required to be paid every month, then the Statutory Periodic Tenancy also becomes monthly.
Another type of tenancy is the Contractual Periodic Tenancy, where the end time of the let period is not set. This type of agreement continues until it is terminated at the discretion of either the tenant or the landlord.
As to which is the best option out of a fixed term or a periodic tenancy agreement, the obvious big advantage of the former is that there is the supposed certainty with regard to the exact time period of occupation. However, there are actually fewer and less critical differences than you might have thought. With neither type of agreement in place can a landlord gain possession of their property within the tenancy’s first six months without giving two months notice (section 21) to the tenant, and even then they will have to satisfy other stipulations.
Many landlords fear that there is little leeway in getting their agreements ‘right’ as far as maintaining the ability to repossess their property is concerned. However, all residential tenancies since the 1996 Housing Act have been considered to be Assured Shorthold Tenancies, eliminating a source of much previous uncertainty for landlords. A landlord can now regain possession from the tenant after six months provided that two months’ notice is given - unless, of course, the agreement was for a longer period. That said, it is still important for landlords to keep abreast of all relevant legislation, including recent developments.
With regard to the most popular nature and length of tenancy, most landlords opt for a fixed term Assured Shorthold Tenancy (AST) for between six and twelve months. The shorter of those two lengths is to be recommended for most landlords, particularly if there is an unfamiliar incoming tenant. This makes it easier to remove the tenants from the property if there are any problems.
The advantages of a longer agreement include, in the case of managed property, if an agent charges a landlord a fee on each occasion the contract is renewed. However, there are also several disadvantages to a longer let. If a tenancy is, for example much longer than a year, the amount of rent charged will not keep up with the market rate due to rental growth and inflation, causing you to lose money until the time finally does come for renewal - unless, of course, provisions exist in the agreement to increase it.
A landlord may also wish to let for a shorter time period. However, under an Assured Shorthold Tenancy Agreement, possession cannot be ordered even by a court to occur until after six months from the tenancy’s start. Nonetheless, there are several grounds on which you may gain possession earlier, provided that the tenancy’s terms include relevant provisions for it to be ended.
If you do not want possession at a definite time, then you can simply grant a Periodic Tenancy, which can be weekly or monthly and will continue from one period to another until you serve notice to end it.
At the end of your fixed term tenancy, you can grant one of a new fixed term tenancy or a contractual periodic tenancy, or alternatively, do nothing. This will cause the tenancy to become a statutory periodic tenancy, running from one rent period (i.e., a month if the previous agreement required rent to be paid that often) to another. It will then not end until either the landlord puts a new agreement in place, or the property is left by the tenant and is possessed by the landlord. Remember to look for good landlord insurance.
Tags: Advice for Landlords, tenancy