Landlord Products / Services
I’m surprised I haven’t covered this incredibly mundane issue already. But anyways, better late than never. I guess.
So, if you’re approaching the end of your tenancy agreement with your tenant(s), and you’re both happy to continue with your arrangement (congrats, btw), then you might be wondering how to properly and seamlessly renew/extend your tenancy agreement.
In this blog post, I go over the best and most common options for renewing tenancy agreements!
Page contents
- Tenancy renewal options available
- The less common options
- Tenancy renewal fees
- Changing the terms and conditions / rent increases
- Deposit Prescribed Information
- I prefer periodic tenancies
- Do you really want to renew the tenancy?
Tenancy renewal options available
There are generally two common ways of renewing an existing tenancy. The good news is both processes are relatively straight forward, so even if you aren’t the sharpest tool in the shed, you should be okay.
1) Sign a new tenancy agreement
It’s really as simple as it sounds. Just get a copy of a tenancy agreement and get it signed, and date it from the day the old tenancy ends.
Many landlords assume that this is the only way to renew a tenancy. It’s not, but it’s probably the most common.
This maybe the perfect time to re-tweak your tenancy agreement if the current one failed you by containing insufficient clauses (for whatever reason).
Oh, and just as a crucial reminder – if a new version of the Right-to-rent guide has been issued by the GOV since the previous tenancy was signed, you will need to serve the latest version to your tenants.
2) Do nothing, let it roll
Yeah, seriously, do nothing, just let the good times roll.
When a tenancy isn’t terminated and new contracts aren’t signed while the tenant remains in the property, the tenancy becomes what is known as a periodic tenancy (or “rolling tenancy”). It’s perfectly legit.
All the same terms and conditions in the expiring tenancy agreement will still apply, but the only difference is that the new tenancy agreement becomes periodic. The “period” is dependent on how frequently the rent is paid. For example, if the rent is paid on a PCM (Per Calendar Month) basis, then the contract will run on a month-by-month basis. Same principle applies if the rent is paid on a weekly or bi-weekly basis.
This essentially means the tenant and landlord are NOT tied into a long-term contract e.g. 12 months. Once the tenancy has become periodic, the tenant can give 1 month’s notice (assuming it’s a monthly rolling contract), and the landlord is allowed to give 2 months notice (landlords are always required to give a minimum of 2 months notice by law).
One thing I will say is that there is a small nuance when it comes to periodic tenancies, because it comes in two flavours:
- Statutory Periodic Tenancy
- Contractual Periodic Tenancy
It is important to know the differences between the two and which one type of periodic tenancy you will be jumping into after your fixed term expires. I won’t go into the details here, but if you want more information, you can read my guide on periodic tenancies.
But for all intents and purposes, a type of periodic tenancy will automatically commence after the fixed term expires if you “do nothing”, and of course, it’s in your best interest to know which type you’ll be subject to from the offset.
So that pretty much sums up the two options.
You still with me? Good. Let’s keep going…
The less common options
There are a few other ways of renewing a tenancy, which are just as legitimate as the 2 approaches listed above, but perhaps not as commonly used.
1) Memorandum
You can also use a Memorandum which is a 1 page document, which extends the contracts terms and condition (the new end date should be specified) but can also include clauses such as rent increases and break clauses.
2) Sign a Contractual Periodic Tenancy (if you haven’t done so already)
Once again, I can only point you in the direction of my guide on periodic tenancies for further details on this option.
In short, this is when both landlord and tenant contractually agree before the fixed term expires to allow the tenancy to roll onto a “periodic tenancy”. A new tenancy is NOT created – all the terms and condition of the original tenancy agreement still apply as it is a continuation of the tenancy – and the tenancy term is based on the rent frequency (most commonly on a monthly basis), as opposed to the fixed term in the tenancy agreement (e.g. 6 or 12 months).
Tenancy renewal fees
If you used a high-street letting agent to find your tenant and you’re wanting to renew a tenancy, the odds are the agency is rubbing their grubby little mitts together because they’re on the verge of slapping you with what is known as a tenancy renewal fee. In “theory”, the fee covers the admin costs for renewing the tenancy and retaining your tenant.
Agents typically charge anywhere between £100 – £200 for the tenancy to get renewed. Some agents even calculate the fee based on a percentage taken from the rental income (the fees some landlords have been subjected to by that formula is actually terrifying).
I know what you’re all thinking, “what admin work is actually required to renew a tenancy, which warrants that price?” That’s a good question and one I’ve also asked on several occasions. I’ve been told that walking over to a photocopy machine and pressing the ‘copy’ button isn’t as easy as it looks; pressing the wrong button(s) can lead to carnage. Not to mention, the immense strain caused by lifting the lid is unimaginable.
Poor agents, it must be exasperating for them.
Basically, the fee is unjustifiable and total bullshit, in my opinion.
If the fee applies to you and you’re reluctant to pay (which would make you relatively normal), you may want to allow the tenancy to roll into a periodic tenancy (as opposed to getting a new tenancy agreement signed), because then the agent isn’t subjected to any of that gruelling “admin” work. I’ve previously escaped from paying a renewal fee that way.
Be wary, some agents will actually try and force you to renew the contract just so they can charge the fee, implying it’s the only and/or safest option. That is of course non-sense. Stay strong and resist if you’re happy for the tenancy to roll.
It’s also worth checking your landlord/agent contract to determine if the fees apply at all, because it must be clearly stated in order for it to be enforceable.
Changing the terms and conditions / rent increases
When you renew the tenancy, you may want to make changes to the terms and conditions. For example, a common change is increasing rent.
You have a few options here…
- 1) Create a new tenancy agreement and add the new terms and conditions in there (this will create a new fixed term tenancy).
- 2) If the only change is a rent increase, you can serve a rent increase notice and the new tenancy can roll into a periodic tenancy.
- 3) Create a separate counterpart document that contains the new terms. Endure the document is dated and signed by both landlord and tenant. This can apply for both periodic and fixed term tenancies.
It’s important to note that all terms and conditions in tenancy agreements are subject to the Unfair Terms in Consumer Contracts Regulations, so don’t just add any old clause, because it may not be enforceable. If you’re unsure, check with a solicitor or landlord law specialist.
On a sidenote, in case I’ve just planted a rotten seed in your mouldy cranium and encouraged you to unnecessarily jack up your prices, you should carefully consider whether or not you really need to increase your tenant’s rent. Don’t just unfairly do it for the sake of it, especially if you have good tenants.
It’s always amazing how easily and quickly a landlord can be encouraged to increase rates.
Prescribed Information
Some of you maybe aware that due to a ridiculous case (Superstrike v. Rodrigues), landlords were required to re-serve the tenancy deposit prescribed information to the tenants when a tenancy became periodic. Thankfully, as of 30th March 2015, landlords are no longer required to re-serve the PI if the deposit was protected and the prescribed information was served during the original fixed term- once will do.
From October 2015, where tenancies in England are “renewed” (this does NOT include tenancies that roll onto a periodic tenancy), the landlord must serve the following:
I prefer periodic tenancies
From a personal standpoint, I prefer allowing tenancies to roll into periodic tenancies, as opposed to getting new fixed contracts signed. I prefer the flexibility of periodic tenancies; problematic tenants can get dealt with quicker since I’m not tied into a long-term contract. Although, I do appreciate that some landlords find great appeal in securing good tenants, knowing they won’t have to find replacements for X amount of time.
However, as I recently discussed in a blog post titled, if your tenant wants to leave early, it’s often easier to just allow them to leave if That’s their desire, even if it is during a fixed period. On that basis, it kind of makes the purpose of the new fixed term contract redundant. But it’s your call. However, I will say this, if there’s one lesson I’ve painfully learned from being a landlord, it’s that a good tenant can quickly turn into a tenant from hell at the flick of a switch. In those cases, I want to be able to serve a section 21 notice ASAP. You NEVER know what’s around the corner.
Do you really want to renew the tenancy?
Needless to say, you should always carefully consider before dishing out new tenancy agreements. Seems like such an obvious and stupid thing to say, but you might be surprised at how many landlords renew tenancies with awful tenants just for the sake of convenience. The last thing you want to do is commit yourself to a tenancy for 6+ months with someone that makes you nervous.
So what’s your preferred poison, renewing tenancies or periodic, and why? Hit me with it!
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.
Fact - Birmingham County Court, May 2014, Gardner v McCusker:
Landlord was fully compliant on fixed term but did not re-serve the
PI and was penalized. Judgement in lower courts is not precedent
though.
The fact is that the only cases that go to trial are related to
s21 Eviction Notices as the parties need a judgement to act as a determination going forward. The reason that no cases are recorded on non-compliance alone is that landlords always settle before judgement as it's a no-brainer they will lose, so that's why you never hear about them! Go figure.