The Renters' Reform Bill will include a shift to a 'single system of periodic tenancies'. Here's what agents and landlords need to know.
Plans to move to a system of periodic tenancies - rather than fixed term - in England were an unexpected addition to the Renters' Reform Bill proposals included in the A Fairer Private Rented Sector white paper. Agents and landlords need to understand what this means for their tenants, and ensure they're prepared to meet their legal obligations when the changes come into play.
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 pre-defined 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, and they can include a break clause allowing 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 (normally one month) and 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.
How will tenancies change under the Renters' Reform Bill?
The government will move all tenants on ASTs or Assured Tenancies onto a "single system of periodic tenancies". This means that tenants will need to give two months' notice if they wish to leave.
Section 21 will also be abolished under the Renters' Reform Bill, so this will no longer be an option, but landlords wishing to regain possession of their property will be able to use the strengthened section 8 grounds to do so.
Why has the government proposed moving to this single system of periodic tenancies?
The government highlights the cost to landlords of renewing tenancies on a yearly basis as one reason for its decision. The white paper also outlines the inflexible nature of ASTs on a fixed term, which don'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 new system therefore aims to introduce more flexibility for tenants, allowing them to "move when circumstances require them to."
When will the new tenancy system start?
The government has said it plans to introduce legislation in the 2022/2023 parliamentary session. It will implement the system in two stages:
- Stage one: After the first implementation date, any new tenancies, which would have previously been Assured Tenancies or Assured Shorthold Tenancies, will be governed by the new system. The sector will be given six months' advance notice of the first implementation date, with timing dependent on when Royal Assent is secured.
- Stage two: To avoid "a prolonged 2-tier tenancy system", the reforms will be extended to all existing Assured and Assured Shorthold Tenancies. These will move to the new system after the second implementation date, which will take place at least 12 months after the first implementation date. After this point, any previously agreed fixed terms will not apply.
How will the single system of periodic tenancies affect students?
The white paper confirms that students renting privately will also move to the new single periodic system. However, students living in "privately-run purpose-built student accommodation" will follow the same contract structure as university-owned accommodation.
The paper highlights that landlords have "raised concerns they may be unable to re-let a property if a tenant leaves early or they cannot guarantee vacant possession at the beginning of an academic year."
However, the government believes that excluding students renting privately would be "challenging for landlords and tenants to understand their rights", due to the "diversity of student households."
This article is intended as a guide only and does not constitute legal advice. For more information, visit gov.uk.
