The End of Fixed Term Tenancies

What does this mean for Landlords?

Instead of the usual residential contract of an Assured Shorthold Tenancy (AST) ending on a specific date all tenancies will automatically become periodic.

The reason given for this by government is that it should give landlords the reassurance of rental income for an exact/ set period.

It is stated that the aim of the Bill is to give tenants more freedom to move when their circumstances change and to address the issue of being tied to a property.

Landlords will no longer benefit from the current protection of section 21 notices and will only be able to evict tenants with a specific and valid reason.

When the Bill is passed any AST that is already in existence at that date then comes to an end and will automatically become a periodic tenancy. It is not know at present whether a new agreement will be required.

Once the new law is introduced, issuing a fixed-term agreement to a tenant will not be permitted and it could lead to fine for a landlord who enters into such an agreement after the commencement date of up to £7,000.00. With more serious, persistent or repeated breaches by landlords the fines are predicted to be up to £40,000.00 or even the threat of criminal prosecution.

What is a periodic tenancy?

A period tenancy is a rental agreement that continues indefinitely until either the landlord or the tenant gives proper notice to end it.

How can landlords prepare now

Whilst we wait for the legislation to be finalised there are some steps that landlords can take :-

·       Review tenancy agreements to ensure they meet current requirements;

·       Keep properties well maintained to encourage tenants to stay longer;

·       Use robust referencing to find tenants who are likely to remain long term;

·       Stay in touch with tenants to understand their future plans; and

·       Keep up to date with local rent levels.

For all new tenancies, landlords will need to provide a written statement outlining the terms of the tenancy agreement.  This statement will be a legal requirement replacing the current situation where written agreements are not always required.  The statement must include specific terms as defined by regulations to ensure that tenants are fully informed of their rights and responsibilities.

 Please get in touch with our Property Litigation Team at Forbes who can help you further.