Tenancy Agreements 33 days of tips – Day 31 – Renewals

Tenancy agreement renewals

There seems to be a general fiction that tenancies need to be actively ‘renewed’.

For example, it is customary for letting agents to arrange for a new agreement to be prepared and signed at the end of the fixed term – and to charge a fee for this.  This fee forms a substantial part of many agents’ income and is, one suspects, the main reason why this fiction exists.

However although renewals can be a good idea, they are not actually necessary.

This is because section 5 of the Housing Act 1988 provides for all assured and assured shorthold tenancies to continue through a new ‘periodic’ tenancy which will be created automatically immediately after the fixed term ends.

So the tenancy will carry on anyway.  The tenant will not suddenly turn into a squatter the day after his fixed term ends.

When are renewals appropriate?

Generally in the following circumstances:-

• If the landlord wants to increase the rent: This is the most important reason for getting the tenant to sign a new document, as once this is done he cannot challenge the new rental figure – as he has agreed to it.

• If the landlord (or the tenant) wants the security of a fixed term: Although this may be illusionary – for example, if a tenant falls on hard times and fails to pay rent they will turn from an asset into a liability.

It may be better to allow the tenancy to roll on as a periodic if:-

• Either the landlord or the tenant’s future plans are uncertain and they want to retain the flexibility of a periodic tenancy

• If the landlord is unhappy about the tenant.  Here it will often be better to allow the tenancy to continue as a periodic as it will allow the landlord more flexibility if the tenant’s behaviour deteriorates.  The last thing the landlord should do is give a new fixed term of 12 months to a tenant whose behaviour is unsatisfactory.

Renewals forms

If you do decide to renew the tenancy, it is not necessary to have a whole new agreement. You can use a short ‘renewal form’.

This will provide details of the new fixed term and rent, and state that all the other terms and conditions of the preceding agreement will apply. Provided you are happy with the original agreement, renewal forms are a good idea – they are simpler and use up less paper (so are better for the environment).