Thursday, 27 October 2022

Should you renew your tenancy agreement?

Most tenancy agreements last for a fixed period of six or twelve months. This means the tenants are obligated to pay rent and remain in the property for that length of time, whilst the landlord can’t increase the rent or ask the tenants to leave (without applying to a court). Many take it as read that as the end date of the contract approaches they’ll need to renew it, but that isn’t actually the case.

You see, most tenancy agreements make provisions for the contract to continue on a contractual periodic basis. And even if they don’t, by law it will continue on a statutory periodic tenancy. In layman’s terms, these are both monthly rolling contracts, whereby the tenant is required to give one month’s notice to vacate the property, whilst the landlord may give two months’ notice to end the tenancy and regain possession of the property (this has been extended to three months during the Coronavirus pandemic).

Whilst some tenants like the certainty of a fixed contract, many actually prefer the flexibility of not being ‘locked in’ to a long-term rental contract in case their circumstances change. Consider the uncertainty around job security currently and tenants who can give a month’s notice to leave their current home certainly have more opportunities available than homeowners or tenants in a fixed contract.

As a landlord and letting agent I have always operated like this i.e. not re-signing contracts, finding it to be the best and easiest way to continue a tenancy, both administratively and in providing flexibility to both the tenants and landlord.

For me and my landlords, there’s also the added security that should the tenants conduct change or they start to fail in their obligations e.g. they stop paying the rent, we can regain possession with the set notice, rather than having to wait until the end of the new fixed term (or having to take them to court, which is time-consuming, expensive and uncertain).

And whilst a landlord can, if they wish, increase the rent with two months’ notice during a periodic tenancy, you may have read in my previous articles that I prefer to promote long-term tenancies by avoiding this where possible; only increasing the rent when it is significantly out of kilter from the ‘going rate’.

So why then do most letting agents insist on renewals? Well, whilst some may argue there’s more stability for their landlords that way, I think the only stability many of them are interested in is receiving their fees i.e. locking in a prolonged management fee and charging a renewal fee to both the landlord and tenant. Funnily enough, since letting agents were banned from charging fees to tenants, many have decided it might be best to just allow tenancies to continue on a rolling basis rather than renewing them like they’ve always done…

Are you a landlord or a tenant and, if so, do you prefer to renew contracts each year or let them amicably turn into a periodic tenancy? Please get in touch and let me know.

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