47% of Agents think periodic tenancies are harmful – What is the future of them?

Now the Renters (Reform) Bill has not passed through parliament, what does it mean for periodic tenancies? Here’s what agents and landlords need to know.

The Renters (Reform) Bill was set to become the largest change for the private rented sector in the last 30 years. One of the proposed major changes is to simplify tenancy structures by abolishing fixed-term tenancies (e.g. 6, 12 or 24-month contracts). However, as the bill did not pass before the general election, what does this mean for periodic tenancies?

The introduction of periodic tenancies was an unexpected addition to the Renters’ Reform Bill proposals, intending to move all tenants on ASTs or Assured Tenancies onto a “single system of periodic tenancies”. 

However, since the announcement of the general election, the bill and periodic tenancies were not introduced in time before the government closed before the election.

So what does this mean for periodic tenancies? Read our guide to find out more:

1. What did letting agents think of periodic tenancies?
2. What’s the difference between a fixed-term and periodic tenancy agreement?
3. How will tenancies change under the Renters (Reform) Bill?
4. Why has the government proposed moving to this single system of periodic tenancies?
5. Will letting agents and landlords see a change in tenancies

What do letting agents think of periodic tenancies?

A report by Goodlord and the National Residential Landlord Association (NRLA) found that 47% of letting agents believed that introducing periodic tenancies would harm the sector. 

The idea of introducing periodic tenancies was voted the most harmful impact on letting agents compared to other policies from the Renters (Reform) Bill. In comparison to other policies such as pets in lets and introducing decent home standards, periodic tenancies are the most negatively received policy.

Download our Renting Done Right report for more information on what agents of future policy priorities for the next government. 

What’s the difference between a fixed-term and periodic tenancy agreement?

In England, most tenancies in the private rented sector are Assured Shorthold Tenancies (ASTs). These can be either fixed term or periodic:

• A fixed-term tenancy is where a tenant is liable to pay the rent for a predefined period of time – normally six or 12 months. At the end of a fixed-term tenancy, the landlord and tenant can agree to renew it for another defined period of time, the tenancy will move to a rolling, periodic contract, or notice can be served.
  
  Landlords can’t use section 21 to evict a tenant during a fixed-term tenancy, but they can use other grounds for possession. A landlord may also use a break clause to allow either party to give notice to end the tenancy early.
  
  
• On a periodic contract, if a tenant wishes to leave, they would need to give the required notice. This is usually one month, and they would be liable for the rent until this time has passed. Landlords can use section 21 to end a tenancy with 2 months’ notice under a periodic agreement. 

What does this mean for landlords providing notice periods for ASTs? 

As the Renters (Reform) Bill has not been passed through the government before the general election, it means that no elements of the bill will come to pass in the next couple of months.

Because of this, landlords and letting agents can still use Section 21 and Section 8 notices if they wish for their tenant to vacate the property. 

This means the notice period will be back to one month, or a minimum of 28 days, depending on the tenancy agreement. 

Why did the government propose moving to this single system of periodic tenancies?

As part of the Renters (Reform) Bill, the government highlighted the cost to landlords of renewing tenancies yearly as one reason for its decision.

The Fairer Private Rented Sector white paper outlined the inflexible nature of ASTs on a fixed term, which doesn’t allow tenants to easily move if they need to.

Break clauses are one way to currently balance this, yet the white paper says that “tenants may still find themselves locked into unsuitable, unsafe or unaffordable housing” in the interim.

The change to periodic tenancies was therefore introduced to create more flexibility for tenants, allowing them to “move when circumstances require them to.”

Will letting agents and landlords see a change in tenancies?

Before the announcement of a general election to take place on 4 July, the Renters (Reform) Bill was in the report stage of the House of Lords. 

However, as the bill did not pass before parliament was dissolved for the general election, it will need to go through the same process all over again if it were to become law.

This doesn’t mean we will never see a change in tenancies. If the Conservative Party win the next general election, they will have to resubmit the Renters (Reform) Bill, which means agents may see another submission to change tenancies.

While it is unclear whether the Labour Party will want to introduce rolling tenancies, the Liberal Democrats plan to strengthen renter’s rights and make “longer tenancies default”. 

Landlords and letting agents need to keep up to date with all political party’s manifestos to understand their approach to the private housing sector and how it may affect their business.  

This article is intended as a guide only and does not constitute legal advice. For more information, visit gov.uk.

TDS API and Goodlord have integrated, saving agents up to 10 minutes per tenancy registration.   You can read more about this integration with Goodlord here.

Protecting deposits with Tenancy Deposit Scheme is quick and easy. Choose from our FREE custodial scheme, or our best value Insured scheme.

The views expressed in this content are solely those of the author alone and do not necessarily represent the views of TDS, its officers, or employees. To read more on TDS views, visit our Policies & Procedures webpage.