Periodic tenancies under the Renters' Rights Act: what agents need to know

One of the things that's caught a few of our customers off guard is the switch to periodic tenancies. Under the Renters' Rights Act, fixed-term tenancies are being abolished entirely. Every new tenancy will be a rolling periodic tenancy from day one, and existing fixed-term tenancies will convert to periodic once the transitional provisions kick in.

If you've been in the industry long enough, you'll remember when six or twelve-month fixed terms were basically the default. The idea was straightforward: the tenant commits to a set period, the landlord has certainty of income for that duration, and if things don't work out, the tenancy either rolls over or ends at the fixed term. Simple enough.

That model is going away. Here's what's replacing it and what it means for the way you manage your portfolio.

How periodic tenancies will work

Under the new rules, a tenancy starts and simply continues until either the tenant or the landlord ends it. Tenants can give two months' notice at any time, for any reason. Landlords can only end a tenancy by using one of the specified grounds under Section 8 - rent arrears, antisocial behaviour, the landlord wanting to sell or move in, and so on.

From the tenant's perspective, this is a big improvement. They're no longer locked into a property for six months if their circumstances change - a new job in another city, a relationship breakdown, whatever. They just give two months' notice and leave.

From the landlord's perspective, it means less certainty. A tenant who moved in last month could serve notice tomorrow and be gone in eight weeks. That's a legitimate concern, and we've heard it raised by quite a few landlords.

What this means for void periods

The honest answer is: void periods could increase, at least initially. When tenants had to commit to a fixed term, they thought more carefully about whether a property was right for them. With rolling tenancies, the barrier to moving on is lower. We expect some tenants will be more willing to try a property and move on quickly if it doesn't suit them.

For agents, this means two things. First, getting the right tenant match becomes even more important - not just financially sound, but someone who's genuinely likely to stay. Previous landlord references are particularly useful here. If a tenant has a history of short tenancies, that's worth knowing about.

Second, you'll want to be able to turn around new references quickly when a tenant does leave. Our typical turnaround of 48 hours means you're not losing weeks between tenancies waiting for referencing to complete.

Rent increases under periodic tenancies

Without a fixed term, there's no natural point at which rent can be renegotiated. Instead, rent increases will need to go through the Section 13 process. Landlords can propose an increase once per year by serving a formal notice, and tenants can challenge it at a First-tier Tribunal if they think it's unreasonable.

The tribunal will assess the proposed rent against open market rates. This isn't a new process - it already exists for periodic tenancies - but it's going to become much more widely used. Agents will need to be comfortable with the Section 13 procedure and be able to evidence that proposed increases are in line with the local market.

Do you need to re-reference existing tenants?

This is a question we've been asked several times. The short answer is no - there's no legal requirement to re-reference a tenant when their fixed-term tenancy converts to periodic. The existing reference remains valid.

That said, if a tenant has been in situ for several years and you have concerns about changes in their circumstances, there's nothing stopping you from running an updated credit check. Some of our customers do this as a matter of routine for long-term tenancies, particularly if the landlord is considering a rent increase and wants to understand the tenant's current financial position.

Practical steps for agents

If you haven't already, now's the time to review your tenancy agreements and make sure they're compatible with the new periodic model. Your legal advisors should be able to help with this. On the referencing side, we'd recommend:

• Running comprehensive references on every applicant, not just credit checks
• Paying particular attention to previous landlord references and tenancy history
• Discussing with landlords the reality that void periods may be shorter but more frequent
• Having a referencing provider that can turn things around quickly when vacancies arise

If you want to talk through how any of this affects your agency specifically, give us a call on 01630 318181. We've been having these conversations a lot lately and we're happy to share what we're hearing across the industry.