WHAT IS A PERIODIC TENANCY? THE EXPLANATION, RISK & REWARD
WHAT IS A PERIODIC TENANCY? THE EXPLANATION, RISK & REWARD
Jordane Thompson
June 22nd, 2022
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If you’re a landlord there are a variety of different types of tenancies out there for you to choose from, and it can all be a little bit confusing, especially if it’s your first time.
One of those options, is a periodic tenancy, but what exactly does that mean? There are some fantastic benefits to this type of tenancy, as well as a few pitfalls.
Not to worry, we’ve created this post to explain exactly what this type of tenancy is, how it works and just about everything you need to know!
A periodic tenancy, unlike a fixed-term tenancy that has a set end date, offers more flexibility but comes with an ongoing commitment. Here’s a breakdown:
- No Fixed End Date: The key characteristic of a periodic tenancy is the absence of a predetermined conclusion. It continues indefinitely until either the landlord or tenant decides to terminate it with proper notice.
- Renewal Periods: These tenancies typically renew automatically at the end of each “period.” This period can be monthly, quarterly, or even weekly, depending on the agreement and how rent is paid (e.g., monthly rent payments would indicate a monthly renewal period).
- Flexibility: Periodic tenancies offer flexibility for both landlords and tenants. Landlords can benefit from the ability to reclaim the property with proper notice, while tenants have the security of staying as long as they wish, subject to proper notice and fulfilling their lease obligations.
- Importance of Notice: Terminating a periodic tenancy requires following legal guidelines for notice periods. This ensures a smooth transition for both parties.
Examples of Periodic Tenancies:
- A tenant rents an apartment and pays rent monthly. With no signed end date, this likely becomes a month-to-month periodic tenancy.
- An office space lease ends, but the tenant and landlord agree to continue the tenancy on a month-to-month basis while they negotiate a new long-term lease.
The reason this tenancy and the fact it runs month by month is common is usually due to an assured shorthold tenancy agreement automatically rolling into a periodic tenancy at the end of the agreed term. The terms of the original tenancy agreement remain the same but it just roles to a periodic agreement, and the period is dictated when by the frequency that rent is paid.
A period tenancy as mentioned usually runs month by month, and in theory, can continue for an indefinite period. The start date of when the period tenancy kicks in would be the day following the end of your previous contractual term.
The tenancy does not automatically terminate as soon as your agreement with the tenant expires.
When a fixed-term tenancy ends and neither party takes action to terminate it or establish a new one, a periodic tenancy often arises automatically. However, there are two main types of periodic tenancies with slightly different implications:
Contractual Periodic Tenancy:
- Pre-Planned Transition: This type of periodic tenancy occurs when the original tenancy agreement explicitly outlines what happens after the fixed term ends. There will likely be a clause detailing the renewal period (e.g., monthly, quarterly) and any specific procedures or fees associated with ending the tenancy.
- Benefits of Clarity: A contractual periodic tenancy offers clarity and avoids potential confusion. Both the landlord and tenant understand the renewal terms and notice requirements beforehand, minimizing the risk of disagreements.
- Less Common: It’s less common than statutory periodic tenancies as many standard tenancy agreements don’t include clauses for automatic rollovers into periodic tenancies.
Statutory Periodic Tenancy:
- Default Option: This is the most common type of periodic tenancy. It arises automatically if the fixed-term tenancy expires and there’s no prior agreement on what happens next, or no new fixed-term agreement is signed. Local tenancy regulations determine the specific rules governing statutory periodic tenancies, including the default renewal period (often monthly) and notice requirements for termination.
- Limited Details: Unlike a contractual periodic tenancy, a statutory tenancy might not have specific details outlined regarding procedures or fees for ending the tenancy. Standard notice periods dictated by local regulations would apply.
Unlike a fixed-term tenancy with a clear start and end date, a periodic tenancy can arise in a few ways, often without any formal paperwork. Here’s a breakdown of the key scenarios:
Following a Fixed-Term Tenancy: This is the most common situation. If a fixed-term tenancy ends and neither the landlord nor tenant takes action to terminate it or sign a new fixed-term agreement, a periodic tenancy typically begins automatically. In most cases, the renewal period will mirror the rent payment schedule. For instance, with monthly rent payments, a month-to-month periodic tenancy would likely arise. It’s important to note that specific local regulations might influence how a periodic tenancy is established after a fixed term ends.
Holding Over: This occurs when a tenant continues to occupy the property and pay rent after the fixed-term tenancy has expired without any new agreement in place. With continued rent acceptance by the landlord, a periodic tenancy is often implied.
Express Agreement: In rarer circumstances, a landlord and tenant might explicitly agree to a periodic tenancy from the outset, outlining the renewal period and notice requirements in a written document.
While periodic tenancies can be convenient, the lack of a formal start date can lead to misunderstandings. To ensure a smooth transition and avoid potential disputes, it’s always best for both the landlord and tenant to communicate clearly:
Reviewing the Fixed-Term Lease: Before the fixed-term tenancy ends, both parties should review the lease agreement and discuss their intentions. Do they want to renew with a new fixed term, or transition to a periodic tenancy?
Providing Written Notice: Even though a formal agreement isn’t necessarily required for a periodic tenancy to begin, it’s highly advisable to put the terms in writing, especially regarding the renewal period and notice requirements. This helps to avoid any confusion or disagreements down the line.
Even though a periodic tenancy offers ongoing flexibility, ending it requires following a legal process. Here’s a breakdown of the key methods:
The most straightforward approach is for both the landlord and tenant to agree on a termination date in writing. This allows for an amicable and planned exit.
This is a formal notification from either the landlord or tenant that they intend to terminate the tenancy. The specific notice period will vary depending on your location and the type of periodic tenancy (contractual or statutory). It’s crucial to adhere to the required notice period to avoid potential legal issues.
- Landlord Notice: Landlords typically need a valid reason for eviction (grounds for possession) to serve a notice to quit. These reasons might include rent arrears, tenant breach of contract, or the landlord’s intention to sell the property. However, some locations allow landlords to use a “no-fault” eviction notice with a longer notice period. Always check your local regulations.
- Tenant Notice: Tenants generally have more flexibility when providing notice to quit. They typically don’t need a specific reason and simply need to comply with the designated notice period.
While the tenancy has transitioned to periodic, it’s important to remember that the clauses outlined in the original fixed-term agreement (regarding notice periods, breaking the tenancy early, etc.) might still apply. Review the original agreement to ensure both parties are following the correct procedures.
In order to avoid complications, you will want to have:
- Understanding Local Regulations: Tenancy laws vary by location. Familiarise yourself with the specific rules governing notice periods and eviction procedures in your area.
- Clear Communication: Maintain open communication with your landlord or tenant throughout the process. Discuss your intentions clearly and well in advance to avoid misunderstandings.
Periodic tenancies can offer several advantages for landlords, particularly when it comes to flexibility and control over your property.
Shorter Notice Periods for Repossession:
Unlike fixed-term tenancies where you’re locked in for a set period, a periodic tenancy allows you to regain possession of the property more quickly with a Section 21 notice (assuming you have valid grounds).
This can be beneficial if you need the property vacant for personal use, extensive repairs, or a planned sale. However, it’s important to remember that you must still adhere to the required notice period as outlined by local regulations.
Simplified Renewal Process:
Periodic tenancies eliminate the need to constantly renegotiate and sign new tenancy agreements every time the fixed term ends. This can save you time and hassle, especially if you have a reliable tenant who takes good care of your property.
Potential for Increased Rental Income:
In some regions, local regulations might allow you to raise the rent periodically during a tenancy. This can help you keep pace with rising property management costs and inflation. Always check your local regulations and provide proper notice to tenants before any rent increases.
Adaptability to Changing Circumstances:
Periodic tenancies offer flexibility for both you and your tenant. If a situation arises where a longer-term tenant becomes ideal, you can always discuss transitioning back to a fixed-term agreement with them.
While periodic tenancies offer advantages, it’s important to be aware of some potential drawbacks for landlords:
Increased Vacancy Risk:
Since periodic tenancies allow tenants to vacate with a relatively short notice period (as determined by local regulations), you might face periods of vacancy between tenancies. This can lead to rental income loss and additional expenses related to marketing the property and finding new tenants.
Limited Rent Control:
Depending on your location, rent increases during a periodic tenancy might be restricted by local regulations. While some regions allow periodic rent adjustments, fixed-term tenancies might offer more flexibility to establish the desired rental rate at the outset.
Uncertainty in Long-Term Plans:
Periodic tenancies can make it challenging to plan long-term, especially if you have specific goals for the property in the future. For instance, if you envision selling the property within a particular time frame, a periodic tenancy might not provide the necessary predictability.
Potentially Less Stable Tenancy:
While good tenants can remain for extended periods in a periodic tenancy, there’s always the possibility of them giving shorter notice and leaving. This can be disruptive, especially if you rely on consistent rental income for budgeting purposes.
ARE PERIODIC TENANCIES A GOOD IDEA?
Overall then, is it a good idea to let your tenant roll onto a periodic tenancy? It’s often favoured by landlords that enjoy a bit more flexibility, but you’ve got to remember that the same flexibility applies to the tenants and it makes it significantly riskier to have a periodic tenancy.
Keeping that in mind, a periodic tenancy may be great for landlords who are either looking to sell soon, raise their rents or want a change of tenants. If you’re wanting more long-term stability and are averse to risk, then you should try and keep your tenant on an assured shorthold tenancy agreement topped up!
Start your property portfolio today!
If you’re a landlord there are a variety of different types of tenancies out there for you to choose from, and it can all be a little bit confusing, especially if it’s your first time.
One of those options, is a periodic tenancy, but what exactly does that mean? There are some fantastic benefits to this type of tenancy, as well as a few pitfalls.
Not to worry, we’ve created this post to explain exactly what this type of tenancy is, how it works and just about everything you need to know!
A periodic tenancy, unlike a fixed-term tenancy that has a set end date, offers more flexibility but comes with an ongoing commitment. Here’s a breakdown:
- No Fixed End Date: The key characteristic of a periodic tenancy is the absence of a predetermined conclusion. It continues indefinitely until either the landlord or tenant decides to terminate it with proper notice.
- Renewal Periods: These tenancies typically renew automatically at the end of each “period.” This period can be monthly, quarterly, or even weekly, depending on the agreement and how rent is paid (e.g., monthly rent payments would indicate a monthly renewal period).
- Flexibility: Periodic tenancies offer flexibility for both landlords and tenants. Landlords can benefit from the ability to reclaim the property with proper notice, while tenants have the security of staying as long as they wish, subject to proper notice and fulfilling their lease obligations.
- Importance of Notice: Terminating a periodic tenancy requires following legal guidelines for notice periods. This ensures a smooth transition for both parties.
Examples of Periodic Tenancies:
- A tenant rents an apartment and pays rent monthly. With no signed end date, this likely becomes a month-to-month periodic tenancy.
- An office space lease ends, but the tenant and landlord agree to continue the tenancy on a month-to-month basis while they negotiate a new long-term lease.
The reason this tenancy and the fact it runs month by month is common is usually due to an assured shorthold tenancy agreement automatically rolling into a periodic tenancy at the end of the agreed term. The terms of the original tenancy agreement remain the same but it just roles to a periodic agreement, and the period is dictated when by the frequency that rent is paid.
A period tenancy as mentioned usually runs month by month, and in theory, can continue for an indefinite period. The start date of when the period tenancy kicks in would be the day following the end of your previous contractual term.
The tenancy does not automatically terminate as soon as your agreement with the tenant expires.
When a fixed-term tenancy ends and neither party takes action to terminate it or establish a new one, a periodic tenancy often arises automatically. However, there are two main types of periodic tenancies with slightly different implications:
Contractual Periodic Tenancy:
- Pre-Planned Transition: This type of periodic tenancy occurs when the original tenancy agreement explicitly outlines what happens after the fixed term ends. There will likely be a clause detailing the renewal period (e.g., monthly, quarterly) and any specific procedures or fees associated with ending the tenancy.
- Benefits of Clarity: A contractual periodic tenancy offers clarity and avoids potential confusion. Both the landlord and tenant understand the renewal terms and notice requirements beforehand, minimizing the risk of disagreements.
- Less Common: It’s less common than statutory periodic tenancies as many standard tenancy agreements don’t include clauses for automatic rollovers into periodic tenancies.
Statutory Periodic Tenancy:
- Default Option: This is the most common type of periodic tenancy. It arises automatically if the fixed-term tenancy expires and there’s no prior agreement on what happens next, or no new fixed-term agreement is signed. Local tenancy regulations determine the specific rules governing statutory periodic tenancies, including the default renewal period (often monthly) and notice requirements for termination.
- Limited Details: Unlike a contractual periodic tenancy, a statutory tenancy might not have specific details outlined regarding procedures or fees for ending the tenancy. Standard notice periods dictated by local regulations would apply.
Unlike a fixed-term tenancy with a clear start and end date, a periodic tenancy can arise in a few ways, often without any formal paperwork. Here’s a breakdown of the key scenarios:
Following a Fixed-Term Tenancy: This is the most common situation. If a fixed-term tenancy ends and neither the landlord nor tenant takes action to terminate it or sign a new fixed-term agreement, a periodic tenancy typically begins automatically. In most cases, the renewal period will mirror the rent payment schedule. For instance, with monthly rent payments, a month-to-month periodic tenancy would likely arise. It’s important to note that specific local regulations might influence how a periodic tenancy is established after a fixed term ends.
Holding Over: This occurs when a tenant continues to occupy the property and pay rent after the fixed-term tenancy has expired without any new agreement in place. With continued rent acceptance by the landlord, a periodic tenancy is often implied.
Express Agreement: In rarer circumstances, a landlord and tenant might explicitly agree to a periodic tenancy from the outset, outlining the renewal period and notice requirements in a written document.
While periodic tenancies can be convenient, the lack of a formal start date can lead to misunderstandings. To ensure a smooth transition and avoid potential disputes, it’s always best for both the landlord and tenant to communicate clearly:
Reviewing the Fixed-Term Lease: Before the fixed-term tenancy ends, both parties should review the lease agreement and discuss their intentions. Do they want to renew with a new fixed term, or transition to a periodic tenancy?
Providing Written Notice: Even though a formal agreement isn’t necessarily required for a periodic tenancy to begin, it’s highly advisable to put the terms in writing, especially regarding the renewal period and notice requirements. This helps to avoid any confusion or disagreements down the line.
Even though a periodic tenancy offers ongoing flexibility, ending it requires following a legal process. Here’s a breakdown of the key methods:
The most straightforward approach is for both the landlord and tenant to agree on a termination date in writing. This allows for an amicable and planned exit.
This is a formal notification from either the landlord or tenant that they intend to terminate the tenancy. The specific notice period will vary depending on your location and the type of periodic tenancy (contractual or statutory). It’s crucial to adhere to the required notice period to avoid potential legal issues.
- Landlord Notice: Landlords typically need a valid reason for eviction (grounds for possession) to serve a notice to quit. These reasons might include rent arrears, tenant breach of contract, or the landlord’s intention to sell the property. However, some locations allow landlords to use a “no-fault” eviction notice with a longer notice period. Always check your local regulations.
- Tenant Notice: Tenants generally have more flexibility when providing notice to quit. They typically don’t need a specific reason and simply need to comply with the designated notice period.
While the tenancy has transitioned to periodic, it’s important to remember that the clauses outlined in the original fixed-term agreement (regarding notice periods, breaking the tenancy early, etc.) might still apply. Review the original agreement to ensure both parties are following the correct procedures.
In order to avoid complications, you will want to have:
- Understanding Local Regulations: Tenancy laws vary by location. Familiarise yourself with the specific rules governing notice periods and eviction procedures in your area.
- Clear Communication: Maintain open communication with your landlord or tenant throughout the process. Discuss your intentions clearly and well in advance to avoid misunderstandings.
Periodic tenancies can offer several advantages for landlords, particularly when it comes to flexibility and control over your property.
Shorter Notice Periods for Repossession:
Unlike fixed-term tenancies where you’re locked in for a set period, a periodic tenancy allows you to regain possession of the property more quickly with a Section 21 notice (assuming you have valid grounds).
This can be beneficial if you need the property vacant for personal use, extensive repairs, or a planned sale. However, it’s important to remember that you must still adhere to the required notice period as outlined by local regulations.
Simplified Renewal Process:
Periodic tenancies eliminate the need to constantly renegotiate and sign new tenancy agreements every time the fixed term ends. This can save you time and hassle, especially if you have a reliable tenant who takes good care of your property.
Potential for Increased Rental Income:
In some regions, local regulations might allow you to raise the rent periodically during a tenancy. This can help you keep pace with rising property management costs and inflation. Always check your local regulations and provide proper notice to tenants before any rent increases.
Adaptability to Changing Circumstances:
Periodic tenancies offer flexibility for both you and your tenant. If a situation arises where a longer-term tenant becomes ideal, you can always discuss transitioning back to a fixed-term agreement with them.
While periodic tenancies offer advantages, it’s important to be aware of some potential drawbacks for landlords:
Increased Vacancy Risk:
Since periodic tenancies allow tenants to vacate with a relatively short notice period (as determined by local regulations), you might face periods of vacancy between tenancies. This can lead to rental income loss and additional expenses related to marketing the property and finding new tenants.
Limited Rent Control:
Depending on your location, rent increases during a periodic tenancy might be restricted by local regulations. While some regions allow periodic rent adjustments, fixed-term tenancies might offer more flexibility to establish the desired rental rate at the outset.
Uncertainty in Long-Term Plans:
Periodic tenancies can make it challenging to plan long-term, especially if you have specific goals for the property in the future. For instance, if you envision selling the property within a particular time frame, a periodic tenancy might not provide the necessary predictability.
Potentially Less Stable Tenancy:
While good tenants can remain for extended periods in a periodic tenancy, there’s always the possibility of them giving shorter notice and leaving. This can be disruptive, especially if you rely on consistent rental income for budgeting purposes.
ARE PERIODIC TENANCIES A GOOD IDEA?
Overall then, is it a good idea to let your tenant roll onto a periodic tenancy? It’s often favoured by landlords that enjoy a bit more flexibility, but you’ve got to remember that the same flexibility applies to the tenants and it makes it significantly riskier to have a periodic tenancy.
Keeping that in mind, a periodic tenancy may be great for landlords who are either looking to sell soon, raise their rents or want a change of tenants. If you’re wanting more long-term stability and are averse to risk, then you should try and keep your tenant on an assured shorthold tenancy agreement topped up!
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