Fixed-term tenancies are disappearing – What it means for you

An End to Fixed-Term Contracts

If the Bill passes in its current form, fixed terms will be abolished. This means the Assured Shorthold Tenancy will be scrapped and replaced with a new periodic tenancy agreement.

The Government stated:

“Fixed-term tenancies mean renters are obliged to pay rent regardless of whether a property is up-to-standard, and they reduce flexibility to move in response to changing circumstances, for example after relationship breakdown, to take up a new job or when buying a first home.

Instead, all tenancies will be periodic, with tenants able to stay in their home until they decide to end the tenancy by giving 2 months’ notice. This will end the injustice of tenants being trapped paying rent for substandard properties and offer more flexibility to both parties to respond to changing circumstances.”

Key changes once the legislation comes into force: 

• Landlords will no longer be able to require tenants to commit to a fixed term.
• Tenancy contracts will be rolling periodic agreements.
• Tenants will be able to give two months’ notice at any point from the start of the tenancy.
• It will become mandatory to have written terms – currently this is not a legal requirement (although it is highly advisable and best practice).
• At the same time, the maximum rent that can be taken in advance will be limited to one month’s rent.

What This Means for Landlords

A fixed term gives the landlord security of rental income, as the tenant is legally committing to pay for the whole fixed period. Currently, it’s common for landlords to require a 12-month fixed term, sometimes with a ‘break clause’, which allows either party tenant to end the tenancy early, usually after the first 6 months.

When fixed terms are scrapped, longer-term rental planning will become more challenging for landlords as a tenant could leave at any point (giving two months’ notice).

More frequent tenant turnover could mean: 

• More void periods during the year.
• Higher management/re-letting costs (advertising, tenant vetting, tenancy paperwork, property cleaning, etc.).
• On the plus side, greater flexibility to adjust rents upward based on market demand.

However, it’s worth bearing in mind that the vast majority of tenants would be unlikely to leave a rented home in the first 6-12 months unless there was something wrong with the accommodation or their circumstances unexpectedly changed.

Currently, according to the govermment’s English Housing Survey, the average tenancy is just over four years.

Note that it will be an offence to give a tenant a fixed term in any new tenancy, for which a landlord can be fined up to £7,000.

Steps for Landlords to Stay Ahead

Even before the RRB proposals come into force: 

• At the start of every new tenancy, check that the rental agreement complies with current legislation.
• Implement robust tenant screening to be as sure as possible that they are a good match for the property and therefore less likely to leave.
• Ensure your accommodation remains of a good standard and continues to meet tenants’ expectations in terms of facilities.
• Check your tenants’ future plans every 6 months to reduce the likelihood of being surprised by them giving notice.
• Consider keeping more money in reserve, in case you have more frequent tenant turnover and increased annual voids.
• Stay informed on current rental prices so that if you need to find a new tenant, you charge a realistic rent.

What This Means for Tenants

Tenants will have more freedom to move if they want or need to, certainly in the early stages of their tenancy. The main reason for ending fixed-term contracts is to ensure tenants aren’t ‘trapped’ by being obliged to pay rent for the whole fixed term if, for example:

• The property is sub-standard.
• Their circumstances change – e.g. they have to relocate for work.
  
  

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FAQs

1) What will replace fixed-term tenancies?

All new tenancies will be periodic, meaning they roll from one rental period to the next, until either the landlord or tenant ends them. We don’t yet know what the new rental contract will be, only that it will be mandatory to have written terms.

2) Could a landlord request a longer-term commitment from tenants?

No, landlords will no longer be able to require tenants to commit to any fixed period. If a landlord is found to have issued a fixed-term tenancy agreement, the local council will be able to issue a penalty notice of up to £7,000.

3) What will happen to existing fixed-term tenancies when the new legislation comes into force?

Although nothing has been confirmed yet, it is likely that all tenancies will automatically convert to periodic assured tenancies on the relevant date. Transition regulations will probably include a prescribed notice that landlords will need to serve on existing tenants within a specific time limit - probably one month.

4) How does this impact student tenancies?

As the proposals currently stand, student tenancies will be the same as all other tenancies - there will be no fixed periods and students will be able to give two months’ notice at any point. However, this may still be amended. If a student rents from a landlord who has Purpose Built Student Accommodation (PBSA), this change will not apply.

5) Will break clauses still be relevant?

No, as there will no longer be a fixed-term commitment to ‘break’. 

6) How much notice will a tenant have to give to leave?

Tenants must provide at least two months' notice before leaving the property. They can give this at any point from the start of the tenancy.

7) Will a landlord still be able to evict a tenant?

Yes, but only if there is a legal ground for eviction under the revised Section 8 regulations and the required minimum notice is given.

8) What happens if a tenant refuses to leave?

Just as is the case now, landlords must follow the legal eviction processes under Section 8.

9) Will this change impact rental prices?

Possibly. It is likely that landlords will be more concerned about letting at market rent, as they will have less flexibility to increase rent if costs change – e.g. if mortgage rates rise.