Tenancy Agreements 31 days of tips – Day 12 – the term

This is day 12 of my 31 days of tips on tenancy agreements series. To see the rest of the series click here.

Tenancy agreement fixed term

A tenancy agreement must have a term. This is the period of time it is agreed that it shall last for.

In perhaps the majority of cases the initial term of a tenancy (in the private sector) is either six months or a year. However there is no law which says that it has to be for these periods. You can have a term for as little as a few days, or for as long as 100 years or more.

However for a general ‘bog standard’ short tenancy, six months is a good period of time to grant. Here are a few comments about different types of term:

Short lets – under six months

Often people think that a tenancy with a term of less than six months will not be an AST. However although this was once the case, the rule was done away with in the 1996 Housing Act which (in this respect) came into force on 27 February 1997. So all new tenancies (unless they are a common law tenancy as described on Day 4) now are ASTs by default, and the fact that the fixed term is for, say, three months will not change this.

The difference with a short let however is that the landlord cannot recover possession through the courts within the first six months of the tenancy. Which effectively means that if the tenant decides to stay on and continues to pay rent, there is not a lot you can do about it.

However even if the Judge could make a possession order within the first six months, practically, the time it takes to get a case through the courts would rule out, in most cases, a possession order within that time anyway.

Often tenancies are let on a periodic basis, where the tenancy is originally let for a month or week, and after that, continue as a ‘periodic tenancy’ from month to month or from week to week. These can often run on for a very long time and it is not unknown for tenants to live in the same property for 30 years or more under a periodic weekly tenancy.

Standard lets – over six months but under three years

Tenancies are often let for a term of one year, but less often for longer than this. The main problem with letting a property out for a longer term is if the landlord decides that he needs the property back again. For example because his personal circumstances change (he may want it back to live in himself) or because the tenant is proving unsatisfactory.

Outside of rent arrears cases, the best and easiest way to recover possession of an AST through the courts is via section 21, but this is not available during the fixed term.

Break clauses. For this reason landlords are often advised to include a break clause in the tenancy agreement, so it can be ended by either party if they wish, upon complying with whatever procedure the break clause specifies. Note that a break clause which can only be used by the landlord will be considered unfair and void under the Unfair Terms in Consumer Contract Regulations 1999 (discussed on Days 15 and 16).

Long lets – over three years

ASTs with a term of over three years are rare. There are changes in the legal regime depending on how long the term is:

• Long lets – over three years. This will normally still be an AST (or common law tenancy) but the  tenancy agreement has to be signed as a deed. A tenancy agreement is a ‘document of title’ and under the Law of Property Act 1925 all documents of title need to be signed as a deed. However section 54 provides that so long as the term is less than three years, the tenant is paying a market rent, and the term starts immediately, the tenancy will be valid if there is just a signature.  I will be discussing  signature of tenancies on Day 29.

• Long lets – over seven years – tenants are best advised to avoid tenancy agreements with a term of more than seven years, as the landlords repairing covenants as set out in s11 of the Landlord and Tenant Act 1985 will not apply. The lease will also probably need to be registered at the Land Registry.  Generally long leases are granted for a much longer term, such as 99 years, are bought for a premium with a low ‘ground rent’, and are considered by many people to be like buying the freehold of a property.  Technically they are quite different, but the price paid for them can be very similar.

Note that this series will not be covering leases with a term of over seven years.

At the end of the fixed term

People sometimes think that tenants who stay on after their fixed term has ended are ‘squatters’ with no right to be there. This is not correct.

For ASTs, section 5 of the Housing Act 1988 specifically provides that after the fixed term has ended, a new periodic tenancy will be created by statute, running from month to month or from week to week, depending on how the rent is paid. The terms and conditions of the preceding fixed term tenancy will continue to apply.

This is not the case with common law tenancies. However if in fact the tenant stays on and the landlord accepts rent from him, a periodic tenancy will be implied.

Drafting advice

• You should make it very clear when the term starts and when it ends so as to avoid any confusion.
• Avoid using the word ‘from’ as traditional interpretation rules say that if from is used the term will actually start the following day. Say ‘starts on’ or ‘commences’.
• It is also a good idea to state the date when the fixed term will come to an end (rather than just saying ‘six months’).
• You can also state the time of day (eg 11.00 am) the tenancy will end, if you want to create certainty.

Do you have any comments on this section? Were you aware that AST tenancies run on, on a periodic basis after the end of the fixed term? Have you experience of any tenancies with a term of over three years?

Tomorrow I will be discussing tenancy deposits.

NB Read about my tenancy agreements service here.

Related posts:

1. Tenancy agreements and Julie’s big mistake
2. Can the landlord increase the rent mid term?
3. How to create your own tenancy agreements