Tenancy Agreements – 33 Days of Tips – Day 13 The Term

 The tenancy Agreement and the term

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

In the majority of cases, the initial term of a tenancy (in the private sector) is either six months or a year. But actually, you can grant a tenancy for as short or as long a period as you want.  There is no law which says that your tenancy agreement HAS to give a particular period of time for the fixed term.

There are though different rules which govern how tenancies of different lengths work.  Let’s take a look at these.

The tenancy agreement and Short lets – under six months

Often people think that tenancies with a term of less than six months will not be an assured shorthold tenancy. However, although this was once the case, the rule was done away with in the 1996 Housing Act which changed the law and (in this respect) came into force on 27 February 1997.

Since that time, all new tenancies (unless they are a common law tenancy as described on Day 4) will be an assured shorthold tenancy by default.  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 using the section 21 procedure 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.

With tenancies which started on or after 1 October 2015, you can’t serve a section 21 notice during the first four months of the tenancy.  Which means that you cannot even start your possession claim (as you could before) during that initial six months period.

So effectively a short fixed term is unenforceable by the landlord.

The tenancy agreement and 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, from the landlord’s point of view,  with letting a property out for a longer term is if the landlord decides that he wants to recover possession of the property. For example

• If his personal circumstances change and he needs it back to live in himself, or to sell, or
• If the tenant turns out to be unsatisfactory in some way

The best and easiest way to recover possession of an assured shorthold tenancy through the courts is via section 21, but this is not available during the fixed term.  So you may find – unless he is willing to leave voluntarily – that you are stuck with the tenant for longer than you want.

Break clause. 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 rules (discussed later in this series).

Agent’s commission.  Be aware also that if you rent a property via an agent for a long fixed term, they will usually take their commission for the whole of this period up front, which may mean that you do not actually receive any rent for a few months.  I have known cases where these tenants have then stopped paying rent, leaving the landlord seriously out of pocket.

The tenancy agreement and long lets – over three years

Assured shorthold tenancies 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 assured shorthold tenancy (or common law tenancy) but the tenancy agreement must be signed as a deed. (I will be discussing signature of tenancies later in the series).

• Long lets – over seven years – tenants are strongly advised to avoid these, as the landlords repairing covenants as set out in s11 of the Landlord and Tenant Act 1985 will not apply. The lease will also need to be registered at the Land Registry.

Most long lets of over seven years are for considerably longer, say 99 years and are treated in quite a different way.  This series will not be covering long leases.

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.  Although the fixed term tenancy will end, under what lawyers call ‘effluxion of time’, in most cases a new periodic tenancy will arise.

For assured shorthold tenancies, 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, usually 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.

Section 5 does not apply to 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 in your tenancy agreement 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 in your tenancy agreement, 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.