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Why a periodic tenancy arising at the end of a fixed term is actually a new tenancy

ParrottThere 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.

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