Tenancy agreements – At the end of the fixed term

All good things come to an end – and in due course your  tenancy agreement’s fixed term will end too.

What happens then?

When the fixed term ends

Some people assume that the tenancy will end and that if the tenants stay on they will be squatters who can be easily evicted.  However you will probably realise that this is very far from the case!

All assured shorthold tenancies will continue, by virtue of a new ‘periodic’ tenancy which will come into place immediately the fixed term ends, under s5 of the Housing Act 1988.  So if the fixed term ends on 4 July, then the new periodic tenancy will start at about 1 second past midnight on 5 July.

The ‘period’ is linked to how the rent is paid.  So if the rent is paid monthly, this will be a monthly periodic tenancy and will run on from the 5th of the month to the 4th of the month.

So when the fixed term comes to an end – the parties have a choice.  They can either let the tenancy run on as a periodic, or sign up a new fixed term tenancy.

Which should you do?

Well either are fine.  Lets look at the options:

1. Giving a new tenancy agreement.  Letting agents often use this as a reason for a ‘renewal fee’ and are therefore understandably anxious for this to be done.  It can often be the best solution – both parties know where they are, and if you want to increase the rent, including it in a new tenancy agreement which is then signed by the tenant as agreed is probably the best way.

This is also a good time to incorporate any changes – for example if there are new tenants wanting to come onto the tenancy agreement, or if either party want the terms of the tenancy to be changed in any way.

2. Allowing the tenancy to continue as a periodic.  Although this is often thought of as a continuation of the original tenancy, in fact, unless perhaps the tenancy is continuing under a clause in the tenancy agreement, the periodic tenancy will actually be a new tenancy.

This is down to the wording in s5 of the Housing Act 1988 and the Court of Appeal have recently confirmed in the Superstrke case  that this is what happens.  So landlords need to consider whether their tenancy deposit needs to be re-protected and the prescribed information re-served.

Allowing the tenancy to continue as a periodic is often the best choice if the tenants have proved unsatisfactory and are being allowed to stay on approval.  If you issue a new tenancy agreement, then this will cancel any section 21 notice served, meaning that you will need to re-serve and will not be able to issue any proceedings under the notice until the end of the fixed term.

Whereas if the tenancy is a periodic, you will (assuming your section 21 notice period has expired) be able to issue proceedings immediately if the tenants continue to prove unsatisfactory.

Vacating the property and notice periods

Assuming that the tenants do not want to stay on – what are the rules regarding notice?

Generally landlords will want at least 1 month notice, usually more, so they can arrange for checkout meetings and the like.  However if the tenants leave at or before the end of the fixed term they are not actually obliged to do this.  If the tenancy is for, say, six months, and the tenants leave on the last day, then the tenancy will end by what we lawyers call ‘effluxion of time’.

There is no need for the tenants to give notice as the tenancy (that tenancy) ended then anyway.

This is a bit unfair on landlords as it means that the tenants can choose whether to stay on under a periodic or leave by the end of the fixed term, without letting the landlord know.

My tenancy agreement has a clause which requires the tenant to let the landlord know what he intends to do – but breach of this clause will not make the tenants liable for any rent in lieu of notice (if I tried to do this I would risk the clause being found unfair).  It may be sufficient though to allow the landlord to claim any wasted costs due to the tenants failure to provide proper information.

However if the tenant then stays on, even by one day after the fixed term has ended, the periodic tenancy will kick in and they will have to give not less than one months notice if they want to leave.  If they don’t then the landlord WILL be entitled to claim rent in lieu of notice.

But not if they leave on the last day of the fixed term tenancy.

Conclusion

This is the end of this short series of articles on tenancy agreements.  I hope you have enjoyed it.

If you want more, note that I have a lot of guidance in my free Tenancy Agreements 101 which you can sign up for here.

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