The transition from a fixed term shorthold tenancy to a rolling contract, or periodic tenancy agreement, is a process which can be confusing to both tenants and landlords.
Tenants, in particular, can be bemused by the different types of tenancy.
Most confusion occurs at the end of the fixed term contract.
Usually, shorthold tenancy agreements run for six or twelve months. The natural assumption being that, at the end of the contract, the tenant either signs a new agreement or immediately vacates the property.
The reality is somewhat different. In fact, at the end of a fixed term contract, the tenancy is immediately, and automatically, converted into a rolling contract. Usually of one month duration but which will match the frequency of the rental payments.
For example, if the rent is paid bi-monthly, the rolling contract will be for two months. If paid weekly, the contract will run for one week and so on.
Many landlords will be quite happy for the rolling contract to come into force.
However, others will prefer to have the tenant to commit to another fixed term tenancy agreement.
There are some good reasons for this:
From the landlord’s point of view, a fixed tenancy agreement means the tenant will be paying rent for the full length of the contract.
The money will be coming in regularly which, of course, is great for cash flow and there is no danger of the property being unoccupied and not producing income.
When you find a good tenant a fixed contract ensures they will be in the property long-term. No-one wants to lose a good tenant but, with a rolling contract, they may be more likely to leave the property for the security of a long-term contract elsewhere.
With a fixed tenancy agreement you are can be fairly sure the tenant will still be in place up to the end of the contract.
This saves the hassle, and expense, of having to find new tenants.
Finding new tenants can be a frustrating and lengthy process and whilst the hunt is on, the property is empty and not producing revenue. This makes the whole thing doubly expensive.
We've looked at the benefits of fixed tenancy agreements over a rolling contract, but what are the disadvantages?
The biggest is the flexibility a rolling, or periodic, contract provides for the landlord.
It is so much easier to move tenants out as the landlord has no need to wait until the end of the fixed term before serving notice. This can be a particularly helpful if you have a rogue tenant or simply need to quickly need to retake possession of the property.
However, as we discussed above, the short notice period can also be negative as good tenants you don't want to lose can move on unexpectedly.
If you are a landlord with concerns about the benefits of renewing a tenancy agreement against a rolling contract, call us on 0333 8000 210 for more information and advice.
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