How long should I grant an assured shorthold tenancy agreement for?
It’s possible to grant an assured shorthold tenancy (AST) for a fixed period, say 6 months. These tenancies are referred to as Fixed Term Tenancy’s. At the end of the term if the tenancy is not renewed, it then becomes a Statutory Periodic AST. The terms of the original tenancy agreement still apply, but the tenancy continues on a period by period basis. For instance, if the agreement required rent to be paid monthly, then a monthly Statutory Periodic Tenancy would result. The other type is called a Contractual Periodic Tenancy where no term for the end of the let is set and the tenancy agreement simply continues until either party decide to bring it to an end.
Fixed term tenancy agreement vs periodic tenancy agreement
I had always assumed that a fixed tenancy agreement would have been better for a landlord. However, having looked closer at the legislation, in reality there is very little difference in merit between the Fixed tenancy agreement and the Periodic AST, Assured Shorthold Tenancy Agreement. The fixed term tenancy has the advantage for the landlord and the tenant of implying certainty in respect of occupation dates. However, in both cases the landlord still has to give two months notice (s.21) to the tenant and can’t obtain possession (before 6 months of the tenancy agreement has elapsed) other than by satisfying certain of the prescribed grounds. Many landlords are under the impression that getting the tenancy agreement even slightly wrong or granting the tenancy incorrectly has potentially dire consequences for obtaining possession. Some of these concerns are fuelled by professionals such as lawyers and letting agents who have an interest in getting you to use their services or their very reasonably priced ‘tenancy agreements’.
Don’t be complacent!
This concern is no longer valid. A residential tenancy since the introduction of the 1996 Housing Act is now assumed to be an Assured Shorthold Tenancy Agreement (AST) and therefore the worry that you will end up with an Assured Tenant by accident has gone. The bottom line is that legally you can get your property back after 6 months by giving the tenant 2 months notice (providing of course you hadn’t granted them a longer tenancy) Having said all that; don’t be complacent. The law is all about detail and procedures. Whilst now if you get these wrong it won’t be catastrophic; any subsequent action will still be more difficult and expensive. Therefore, it’s always best to ensure that you know the legislation and that you get it right.
How long should I grant a tenancy for?
Assuming you go for a fixed term tenancy agreement. In my experience most landlords do; the vast majority of Assured Shorthold Tenancy Agreemnts (AST’s ) being for periods of between 6-12 months. I would recommend 6 months, particularly if the tenants are new to you. This way it is easier to ‘get them out’ if problems arise. There may be some advantages to a longer let, say 12 months where the property is being managed. This is because the agent could charge you a fee for renewing the tenancy agreement. It is also possible to draw up a tenancy agreement for longer or shorter periods; however there are implications in both cases.
If the tenancy agreement was for substantially more than a year and the tenant remains for a long period. Unless specific steps are taken to increase the rent, it will fall below the market level which generally increases as a result of inflation and rental growth. If you wish to let for a shorter period, such as three months, remember that; under an Assured Shorthold Tenancy (AST) the courts cannot order possession to take effect until after 6 months from the start of the tenancy. It could therefore be many months after the end of the fixed term before you finally get possession. This however does not preclude possession being sought on the following prescribed grounds – 2,8,10-15 or 17 – as long as the terms of the tenancy agreement makes provision for it to be ended on any of these grounds.
Alternatively if you have no fixed time when you want possession, you can let on a Periodic Tenancy Agreement. This can be either weekly or monthly and will go on from period to period, unless either the landlord or tenant serves notice to bring it to an end.