Statutory Periodic vs Contractual Periodic

Upon the expiration of the fixed-term of a Tenancy Agreement, the Tenancy will continue unless the relevant notice is given by either party. In the latest update to our ASTs, some of you will have noticed that you will have the option of allowing the Tenancy to become a Statutory Periodic Tenancy or continue as a Contractual Periodic Tenancy.

The following post highlights some of the key factors of, and differences between a Statutory Periodic Tenancy and a Contractual Periodic Tenancy, in order to assist you in choosing the most appropriate option for yourselves.

Statutory Periodic Tenancy

This occurs where a new contract is not signed upon the expiration of the fixed-term of the original Tenancy; creating a new tenancy on a rolling periodic basis, with the obligations from the previous Agreement still binding.

The “period” is dependent on how frequently the rent was paid under the previous fixed term. For example, if the rent is paid on a monthly basis, then the Periodic Tenancy will run from month to month. At any point during a Statutory Periodic Tenancy, the landlord and tenant can agree to a new fixed-term tenancy.

Termination:

When an Assured Shorthold Tenancy becomes Statutory Periodic, any break clause included in the original Agreement becomes unusable. In order to terminate a Statutory Periodic Tenancy, the landlord must still give the usual two months’ notice in the form of a Section 21 Notice (currently, due to the Coronavirus pandemic, the notice period is 3 months). Following the decision in Spencer v Taylor (which we blogged about in January 2014 here https://painsmith.co.uk/section-21-news-and-comment/ ) this notice does not need to expire at the end of a rental period.

Should a tenant wish to terminate a Statutory Periodic Tenancy, they will need to give one period’s notice which expires the day before the rent falls due.

Rent Increase:

Should the landlord wish to increase the rent during a Statutory Periodic Tenancy, they will be able to do so either through enforcing a term included in the original Agreement which concerns a rent increase, or by serving the tenant with a Section 13 Notice.

A Section 13 Notice will inform the tenant of the new rent increase and will have to include one period’s notice before the increase can take effect. Should the tenant deem the rent increase too high, they reserve the right to refer this to the First Tier Tribunal.

Points to Note:

As a Statutory Periodic Tenancy creates a new term and so the landlord will often need to comply with new safety requirements as has been seen most recently with Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020.

Contractual Periodic Tenancy

This only occurs where the landlord and tenant have previously agreed in contract that upon expiry of the fixed-term, the contract will become a periodic tenancy (as opposed to allowing this to occur naturally, as with a Statutory Periodic Tenancy). Mostly commonly, there will be a term in the Agreement stipulating that upon expiry of the fixed-term, the tenancy will become periodic on a month to month basis. A key difference when compared with a Statutory Periodic Tenancy is that a new tenancy is not created, the existing contract is merely continued on a previously agreed contractual basis until determined by either party. Moreover, the term of the period does not necessarily have to be the frequency of when the rent is due (unlike with a Statutory Periodic Tenancy), this may be longer if included in the contract.

Termination:

Should the landlord wish to terminate an Contractual Periodic Assured Shorthold Tenancy, they will have to serve the relevant Form 6A (Section 21 Notice) as usual.

To enable the tenant to terminate a Contractual Periodic Tenancy, the parties will have to give relevant notice as set out in their original contract. It is crucial that a relevant termination clause is included in the original contract, or any notice served could be seen as defective.

Rent Increase:

A clause can be included in the original contract stipulating that on the anniversary of the start date of the Tenancy, there will be a rent increase for the Contractual Periodic Tenancy which will then be binding on the period. If such a clause is not included in the original Agreement, you will be unable to increase the rent unless formally agreed by both parties. PainSmith Tenancy Agreements include such a clause. As the original contract is still continuing, you need to rely on that contractual right to increase.

Points to Note:

As a Contractual Periodic Agreement is a continuation of the original contract and does not create a new contract, the landlord will often not need to comply with the various electrical regulations straight away. It is, however, always important to check with each new regulation to be certain.

Council Tax and Periodic Tenancies

For a tenancy with a fixed-term of at least 6 months, the tenant will be liable for the council tax for the entire time they are in that contract.

If, upon expiration of the fixed-term of the contract, the tenancy continues as a contractual periodic tenancy, then the same rule as above applies and tenant will be liable to pay the council tax until the end of their notice period (even if they leave the property before the end of the notice period). This is because they are still in that original contract which is at least 6 months long.

For a statutory periodic tenancy, because a new contract is created upon the renewal of each period, which if rent is payable monthly as is most commonly the case would result in a term of less than the required 6 month rule set out above, the council can pursue the Landlord directly for unpaid council tax.

For further details of council tax liability, our blogs on the cases of Leeds v Broadley and MacAttram v London Borough of Camden, can be read at

https://painsmith.co.uk/council-tax-liability-when-the-tenant-has-gone-awol/ – Jan 2017

https://painsmith.co.uk/council-tax/  – April 2014

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