Periodic tenancies: How to prepare for the Renters’ Rights Bill

Periodic tenancies: How to prepare for the Renters’ Rights Bill

The Renters’ Rights Bill will abolish fixed-term tenancies and make all tenancies periodic. While this could cause problems, it’s not all doom and gloom…

While the abolition of Section 21 has grabbed the headlines, it’s not the only significant change proposed by the Renters’ Rights Bill.

The move away from fixed-term and towards periodic tenancies also has some key implications for agencies.

Increased tenant churn is a possibility, which could result in more viewings and more admin.

Still, the changes are unlikely to have the drastic effect many fear. This is something Scottish agents can attest to, following the country’s abolition of fixed-term tenancies in 2017.

In this blog, we’ll help you prepare for the changes

• The current state of play: Fixed-term tenancies vs Periodic tenancies
• How will periodic tenancies change under the Renters' Rights Bill?
• Why is the Government proposing tenancy reform?
• What challenges do these changes pose to letting agencies?
• Conclusion

The current state of play: Fixed-term tenancies vs Periodic tenancies

For landlords, fixed-term tenancies are a win-win.

On the one hand, they offer the security of long-term revenue. On the other hand, they have clear end dates, triggering renewals making it easy to update and plan in.

By contrast, periodic tenancies offer less security of income in the current landscape.

They function as a default option when a new contract between the landlord and the tenant isn’t agreed upon, but both parties want to continue their arrangement on a rolling basis.

However, the status quo is about to change…

How will periodic tenancies change under the Renters' Rights Bill?

As part of the Renters’ Rights Bill, which the Government wants to become law in the first half of 2025, fixed-term tenancies will be abolished. In other words, all tenancies will become periodic, regardless of whether tenants and landlords prefer longer-term contracts.

That means any tenancy you sign now will immediately become a periodic tenancy once this happens, rather than running for the duration agreed in the contract.

Alongside the Renters’ Rights Bill’s other reforms, including the abolition of Section 21, this makes it the most significant change to housing law since the Housing Act of 1988.

For agents and landlords in England, the changes are the biggest since the Tenant Fees Act in 2019.

Why is the Government proposing tenancy reform?

According to its Guide to the Renters’ Rights Bill, the Government’s primary motivation for tenancy reform is to “end the injustice of tenants being trapped paying rent for substandard properties and offer more flexibility to both parties to respond to changing circumstances.”

59.8% of letting agents believe that abolishing fixed-term tenancies will have a negative impact on the sector.

Meanwhile, 58.5% of tenants said they preferred a fixed-term, renewable tenancy agreement, and 29.7% preferred open-ended agreements with 4-12 weeks’ notice.

62.1% of tenants also disagreed that they felt trapped in their current homes by fixed-term agreement.

Despite these feelings, the legislation is still going ahead, although some tweaks could be made as the Bill progresses through parliament.

What challenges do these changes pose to letting agencies and private landlords?

Without the security that fixed-term tenancies provide, the question of increasing workload looms. Here’s a look at the issues you’ll be contending with:

1 - More potential admin and viewings

If more tenant churn is a result of the incoming legislation, agents and landlords could become bogged down by viewings, while they’ll also have to re-list the same properties more frequently.

Serving Section 13 notices and processing right to rent documentation and tenant deposits will further add to their paperwork, which is a significant concern.

Conclusion

The shift to periodic tenancies is arguably the biggest single reform proposed by the Renters’ Rights Bill.

If more tenant churn is a result of the incoming legislation, agents and landlords could become bogged down by viewings, while they’ll also have to re-list the same properties more frequently.

Despite the above, the legislation is still going ahead, although some tweaks could be made as the Bill progresses through parliament.

Paul Flitter MNAEA