What are the disadvantages of a Periodic Tenancy?
Many Landlords are unaware that their current tenants contract will automatically run as a Periodic Tenancy once the Assured Shorthold Tenancy agreement end date passes and is not formally extended either by AST or memorandum. At this stage we are unable to action any rent increases whilst on a periodic contract, there is no long-term surety with the tenant able to give one months’ notice at any time and the original AST contract may become outdated if there have been any legislation changes.
Putting good tenants on periodic tenancies is risky because they can unexpectedly vacate pretty quickly. Tenants typically only need to give one month’s notice when they’re on a periodic tenancy, which may not allow a comfortable amount of time landlords to find new tenants if the current tenant gives minimal notice. The issue can become extra stressful if the property requires cosmetic work in order to attract new tenants.
Over the years, new regulations have been passed through into the BTL industry (e.g. Tenancy Deposit Scheme). These new regulations should be mentioned in the tenancy agreement as statutory clauses. Point being, if you allow a contract to continually be periodic for a long period of time, it can slowly become out of date. It’s important to keep tenancy agreements in line with the law, so the T&C’s are always clear in black and white.
Finding new tenants can be expensive, so if you’re a landlord that prefers using 6-12 months fixed term agreements, and always allows the tenancy to go periodic, you’re leaving a big window of opportunity for a high tenant turnover rate. It can often be more cost-effective to fix tenants for long term.
Of course, that’s largely dependent on your own judgement to decide on whether you have good tenants or not that are worth the commitment.