There has been a lot of confusion, and indeed anger, at the statement made by the Judges in the recent Superstrike case, that a periodic tenancy is a new tenancy.
I can understand that. From a practical point of view, there does not seem to be that much difference.
The tenant is still there, paying the same amount of rent. The terms and conditions of the fixed term tenancy agreement still apply.
Indeed, we often describe the tenancy as ‘running on’ as a periodic.
But it is, I am afraid, technically, a completely new tenancy.
Fixed terms and effluxion of time
When someone takes on a tenancy they do so for a period of time. Six months, a year, 3 years or whatever.
A tenancy is a type of ownership of land, and a tenancy agreement is, technically, a type of conveyance.
What it does is grant the tenant temporary ownership of the land described in the tenancy agreement, for the period of time set out in the agreement. We call this period of time, the term (or the fixed term) of the tenancy.
When the fixed term comes to an end, so does the tenancy. It ends by what we lawyers call ‘effluxion of time’.
Like the parrot in the Monty Python sketch, it is no more, it has has ceased to be and is (in short) an ex tenancy.
In the bad old days, landlords had the right to evict a tenant just because the tenancy had come to an end. They still do have this right in the case of common law tenancies. Provided they do not accept any more rent – as we shall see.
(Click the link to find out more about the >> common law).
Creating a periodic tenancy – common law tenancies
As I said earlier, a tenancy agreement is a type of conveyance, as it is a transfer of an interest (or an estate) in land.
Now normally transfers of land have to be by deed – because it says so in the Law of Property Act 1925. However the act makes an exception, in s54(2), in the case of
leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine.
What does that mean?
- ‘In possession’ means that the lease starts immediately
- The fixed term must not be for more than 3 years
- The rent must be a market rent and
- There can’t be any premium (this is a payment for a lease, like you have with long leases – it is not normal with short lets)
So therefore if you let Fred Jones into your flat on a handshake and an oral agreement that he will pay you £1,000 per month – this will be a valid tenancy. You do not need any written document (although it is advisable to have one).
It will (in most cases) be a ‘periodic’ tenancy and will run from month to month
Returning to our fixed term common law tenancies – the fixed term tenancy will end at the end of the fixed term by ‘effluxion of time’.
However if a tenant actually stays on in the property and pays rent, and the landlord accepts this – then a new ‘periodic’ tenancy will be created under s54(2) of the Law of Property Act 1925.
The law will therefore give effect to the implied agreement between the landlord and tenant, evidenced by the tenant staying on in the property and the landlord accepting the rent, that a new periodic tenancy be created.
It can be ended at any time by the landlord serving an old style ‘Notice to Quit’ but until this happens the tenant will have a tenancy and will be entitled to stay in the property.
Statutory periodic tenancies.
That is what happens under the ‘common law. Note however that under the common law, the landlord can prevent a periodic tenancy from being created by refusing to accept rent and starting proceedings for eviction.
That option is not available for landlords of regulated tenancies – those where the provisions of the Housing Act 1988 (or for tenancies created before 15 January 1989 – the Rent Act 1977) apply. Which is most tenancies today.
Here a periodic tenancy will ALWAYS be created – because the statute says it will.
For ASTs, for example this will be section 5 of the Housing Act 1988. If you want chapter and verse, here is the relevant part of s5 (slightly amended and with added notes by me in red):
2) If an assured tenancy (this includes an assured shorthold tenancy) which is a fixed term tenancy comes to an end otherwise than by virtue of— (a) an order of the court …, or (b) a surrender or other action on the part of the tenant (ie by the tenant moving out voluntarily),then, .. the tenant shall be entitled to remain in possession of the dwelling-house let under that tenancy and … his right to possession shall depend upon a periodic tenancy arising by virtue of this section.
(3) The periodic tenancy referred to in subsection (2) above is one—
(a) taking effect in possession immediately on the coming to an end of the fixed term tenancy;
(b) deemed to have been granted by the person who was the landlord under the fixed term tenancy immediately before it came to an end to the person who was then the tenant under that tenancy;
(c) under which the premises which are let are the same dwelling-house as was let under the fixed term tenancy;
(d) under which the periods of the tenancy are the same as those for which rent was last payable under the fixed term tenancy (normally this will be monthly), and
(e) under which … the other terms are the same as those of the fixed term tenancy immediately before it came to an end (ie the tenancy agreement terms will continue to apply), except that any term which makes provision for determination by the landlord or the tenant shall not have effect while the tenancy remains an assured tenancy.
Conclusion
So there you are. A new periodic tenancy (normally an AST) is created.
Unlike the periodic tenancy in the common law situation, the landlord cannot prevent it arising by refusing to accept rent, and it cannot be ended by a notice to quit.
If the tenant stays on in the property, the landlord is stuck with it. The only way to end it is to serve a section 21 notice and then (if the tenants don’t move out) issue Court proceedings for possession.
But it is a completely new tenancy. So the Judges in the Superstrike case were right – in that respect anyway.
I have reservations about some other aspects of their decision – but that is a different issue and (maybe) a different blog post.
I have a lot of tenancies that are now periodic, which I now understand are new tenancies. So I could be in breach. I’m loathe to re-protect and re-serve the information as this might not be necessary if the Court of Appeal overrules. On this basis am I at any realistic risk if I await the appeal decision?
You may be, its hard to say. At the very least, if you want to serve a section 21 notice, I suggest you confirm that your deposit is still protcted and re-serve the prescribed information first as a precautionary measure.
I agree this is a highly unsatisfactory situation.
I understand the conditions described above with the periodic after the fixed term (statutory).
But, what if no AST has been signed, merely a verbal agreement is made (contractual periodic), the tenant moves in and rent/deposit is paid.
Do you think if that is the case, that the deposit is covered by protection legislation?
Of course! You can have an oral AST – as per s54(2)LPA1925, as discussed. An AST is not conditional upon there being a written tenancy agreement.
So you will need to protect the deposit.
Exactly what I and a few other lone voices have been saying for years – and usually getting shouted down for it.
I may be missing a trick here, but I thought Superstrike was a CoA decision?
If Johnson never made it to The Supreme Court, Superstrike never will. The Judges simply confirmed the obvious – that a periodic tenancy is a new tenancy.
The implications and consequences are a different matter – are they supposed to deliver a flawed judgement just because people find the Law inconvenient?
Superstrike is a Court of Appeal decision.
I don’t think any lawyers will argue with the ‘new tenancy at the start of a periodic’ part of the Judgement. We have all known this for years.
I have reservations about the need to re-serve the prescribed information at this stage however, particuarly if the information in the original notice has not changed. If there was an appeal to the Supreme Court I assume that this would be one of the points in issue.
A Supreme Court decision would be timely – particularly as the schemes own guidance recently issued makes it clear that they do not know how to advise landlords in this situation.
What about contractual periodic tenancies where the original AST creates a periodic tenancy by contract as opposed to statute. Is THAT a new tenancy?????
An interesting point. I was going to discuss this in the blog post but decided it would make it too long.
It would probably depend on the wording of the relevant clause. My tenancy agreements for example say
“If you stay on after the end of your fixed term, your tenancy will be converted into a monthly tenancy which will run from month to month, starting on the day after your fixed term ended …”
I did not draft that with any idea of preventing a new tenancy, it was done years ago before all this happened. Really it was just so landlords were aware that the tenancy would carry on after the fixed term.
However it seems to have been a happy stroke, as my landlords will avoid the statutory 6 month periodic tenancy if they ask for six months up front, and it may also avoid the Superstrike effect – what do you think?
This is a system and method we have been advocating and using for years. Miles is basically asking based on the wording of our model tenancy agreement.
Tessa in your case, with the wording “converting to a periodic tenancy” is it fair to say there is quite and argument that this too is a new tenancy. Would the wording not be better saying “continues as a monthly periodic”?
Maybe and I may consider this at the next review.
Again a very interesting article. In the Netherlands, there is a very strict protection for tenants: a contract can (there are some rare exceptions) only be for an indefinite period.
Richard why not just protect your deposits anyway? Why run the risk?
I’m going to say something here that will probably get me killed. A reminder of the true position.
A deposit belongs to the tenant, not the landlord and government brought this legislation in because it was found that in 86% of cases landlords were not returning them to the tenants at the end of a tenancy, forcing them to go through lengthy money claims.
Even if you knock off 50% of them as cases where the deposit was reasonably witheld that still leaves a significant problem for tenants
You take the deposit and you protect it. That’s all.
Admittedly Superstrike threw a different element into the mix but now everyone knows, so just protect it.
Whenever I do presentations at landlord and property shows I can guarantee I get a couple of landlords coming up to me afterwards and asking my advice on how they can avoid protecting the deposit. My response is always the same “Just protect it”.
As a frontline housing worker admittedly dealing at the bottom end of the market, I would say even now, over 6 years in, that in at least 80% of the cases I deal with the landlord hanst protected the deposit. When I speak to them often it is by design but also a significant number still haven’t even heard of it. That goes for the tenants too I’m afraid to say.
The long story on deposit protection rules has been a very interesting and strangely bodged affair but underneath all the chaos the principle has remained. The tenants pays a deposit, the landlord protects it.
Ben your comment about deposit protection seems a little wide of the mark.
Did the CAB report that started all this not say 48% of deposits were unfairly withheld, though I am going from memory. However, much more important is the fact that all the deposit schemes run at less than 2% disputes and not all of those are decided in favour of tenants. Look at the research, you ask a bunch of people who go to CAB if they have a problem, clearly those with a problem are more likely to go to CAB than those without. Secondly they only asked the tenant if in their opinion they had had a deposit wrongly withheld. I have been involved in court cases where the tenant did not pay the last months rent and still sued in court for the deposit (and no disrepair claim or similar). Thirdly they asked if in the last 5 years the tenant had had a problem. Therefore if a tenant had had 5 one year tenancies, their own experience might be 80% good 20% bad but they counted as a bad vote.
The governments own trial of deposit protection with the IHO decided ti was not worth introducing from a cost benefit point of view. My understanding was that this was a deal done by Labour struggling to get the famously useful Home Information Pack through then engaged Lib Dem support who traded deposit protection for HIPs. We have lost the HIP now!
I fully agree the deposit is the tenant and the purpose is good, to ensure the money is refunded to the tenant when it should in all fairness be returned. however, if the rules simply said that the deposit being returned was the end of any claim then it would be more balanced. We are now in the ridiculous position that a tenant who got all his deposit back in full (regardless of the condition of the property, can still seek a penalty form the landlord. What has that got to do with ensuring the tenant gets their deposit back? The purpose has got lost in the Localism Act.
In my opinion the Superstrike case is pretty irrelevant in respect of protection (there will be very few tenancies that match the unusua circumstance of Superstike and the law does not say we have to protect a deposit (we have to comply with the initial requirements of the scheme). The real issue is not mentioned in Superstrike and that is re-serving the prescribed information. We did a webinar this week with nearly 100 agents and 95% have got SPT and 85% have not given new prescribed information. That is where the real problem lies and is this critical to the refund of the tenant’s deposit? probably not.
Ben you say “Richard why not just protect your deposits anyway? Why run the risk?”
What risk? As I understand it the offence may already have been committed if Bens periodic tenancies are more than 30 days old so the penalty will apply anyway.
Re-protecting and/or serving the PI again, out of the blue, may alert the tenants that they can make a claim, this needs to by weighed up against any lower penalty that may be awarded by the court for rectifying the error as soon as it was discovered. However if a valid claim was brought against me I would be prepared to give the tenant the full 3 x deposit to avoid court fees (about £1,000) and calimants legal fees (maybe also in 4 figures)
Dave it’s the three times penalty that worries me in Richard’s case. Although the periodic tenancy as a new tenancy issue was being pondered over at least 5 years ago in the housing law community I cant blame landlords being taken by surprise by the Superstrike case and I think judges would also have some sympathy with that position if landlords simply bite the bullet and protect them now rather than waiting around for appeals that might not happen, when the discretion of some DJs might be more stretched.
Whether it gets kicked higher or not the fact is right now it is sound law and needs to be complied with
In Tessa and Ben world (Solicitor and housing adviser) it was always inevitable that this principle would be tested at some point, it was just a question of when.
Everyone can argue about the fairness or legality of it later but right now, get it protected to avoid future hassles.
Just ought to mention here that landlords should not protect the deposit – at least not with DPS – if they are likely to want to serve a section 21 notice, as there may be difficulties in extracting the money from the DPS. At least in the short term.
Better just to bite on the bullet and pay it back.
Ben,
The point I was trying to make is that I dont see many people taking it as far as court.
These cases should not be dealt with by a small claims route where solicitors are not needed and the court fees are small, if that were the case then yes see if the DJ will award 1 x deposit, worth a bet against a small court fee.
Perhaps Tessa can confirm, but from what I have read these claims need to be dealt with in “big boys court” where the fees are around £1000 and legal representation is required. So even if DJ awards 1 x deposit you will still have £1k court fees and 2 legal bills to pay which unless it is a very large deposit is going to be more than settling out of court.
This post is not really about tenancy deposits but about periodic tenancies (getting people to stay on topic is like herding cats) but yes, technically the claim needs to use part 8 which is multi track and expensive in court fees.
Isn’t that all a storm in a teacup?
For ASTs s.5 of HA 1988 is crystal clear that the SPT created after the end of a fixed term tenancy, is a new distinct tenancy.
The point is well known and has been discussed ad nauseam of online forums.
The judges in Superstrike quickly brushed off the argument to the contrary, as it was obviously wrong.
Why is this making such a noise?
In my view the really important point made in Superstrike and which actually clarify something that was not really clear from HA 2004, is that when the SPT arises and the landlord continues to hold the deposit he received in relation to the fixed term tenancy, he is deemed to receive it in relation to the new tenancy (the SPT) on the day that tenancy is created.
This is key! And IMHO this is a logical, reasonable decision.
For example, the landlord hasn’t protected the deposit in relation to the fixed term tenancy, thus the tenant has a claim for non-compliance.
Now, the SPT arises and the landlord still doesn’t protect the deposit: The tenant has another claim for non-compliance.
That’s up to 6x deposit.
I agree with the principles of the deposit protection however, I have a question about the serving of the prescribed info.
All my deposits are protected via MyDeposits and the prescribed info is served to the tenant within 30 days of the deposit being taken.
MyDeposits continue to protect deposits after they become STPs (as long as you click a button on the website to “convert” the tenancy).
This has been done for all tenancies that have become STPs so all deposits are protected regardless of being AST or STPs
My reading of the situation is that, even though all deposits have been continuously protected, because:
1) the legislation says that the prescribed information must be served within 30 days of the deposit being taken
2) the STP is a new tenancy and the deposit is assumed to have been retaken on the date the STP starts
I am in breach of the legislation because I haven’t served the prescribed information to the tenant within 30days of the STP starting.
Is this correct?
Can I not argue that:
The prescribed information I was expected to serve at the start of the STP is the same as the prescribed information that was served at the beginning of the AST tenancy and (as far as I can see) prescribed information does not “expire”.
The legislation requires that the deposit be protected and the prescribed information be served within 30days of the deposit being taken (assumed to be the STP start date aka the end of the AST fixed term)
Therefore haven’t I already served the prescribed information for the STP before the 30 day limit because I served the prescribed information at the start of the AST which was before the STP started.
Right now I feel as if I’m having to play a game whose rules I haven’t been told and cannot find out, yet I may be held accountable to these rules when someone decides what they are.
@BeeBee I think you express the argument for saying that the prescribed information need not be re-served very well.
The whole tenancy deposit scheme legislation has been handled very badly, I don’t think anyone can deny this.
This is all a matter of debate until settled in court.
However, note that all the regulations, including for PI relate to the procedure that must be followed for each AST.
So the counter argument is that the deposit might still be protected and the PI might not have changed however the tenant must still be given the details via a new copy of the PI as arguably required by s.213 of HA 2004.
I was rending a property under a fixed term contract for six months. This then moved to a rolling contract. The original contract includes no information on how long we need to give notice. I have checked the housing act and it says that we need to give four weeks notice. Our landlord claims that this has to be at least four weeks and end at the end of a rental period. I cannot find where in the housing act it states this. In fact, I understand that as there are no terms related to terminating the tenancy we do not need to give notice.
I have, on the other hand learnt that you suggest “”a tenancy can end by the tenant moving out at the end of the fixed term, or, if he stays on after the end of the fixed term, after having given notice of at least one month ending at the end of a rental period””
Could you please let me know how you have come to the conclusion that it must end at the end of a rental period.
Thanks
@Zoe Its a common law rule. See these two posts:
http://www.landlordlawblog.co.uk/2010/09/18/what-is-the-common-law/
and
http://www.landlordlawblog.co.uk/2012/06/20/why-your-tenancy-agreement-is-misleading-the-secret-clauses-that-you-dont-know-about/