Agents urged to understand key tenancy agreement differences

A call has gone out from an industry group for letting agents to be sure they know the distinctions between statutory and contractual tenancy agreements which operate in England. 

Paul Offley, Compliance Officer of The Guild of Property Professionals, says a recent incident highlighted problems if the differences between the agreements are not clear in agents’ minds.

"We encountered a scenario where a tenant contested a section 13 notice based on their periodic status," he explains. "Upon investigation by the letting agent, it became apparent that the tenant had confused their contractual and statutory tenancy agreements."

Offley continues: "If a fixed term tenancy has been created for a period of six months, at the end of the fixed term the tenancy runs to a periodic, but which periodic? This will depend on what has been documented in the Assured Shorthold Tenancy agreement (AST)” he adds. 

“In essence, a contractual periodic tenancy ensues when the AST explicitly outlines the transition to a periodic tenancy at the end of the fixed term. On the other hand, a statutory periodic tenancy emerges when the AST makes no mention of post-fixed term arrangements, and the tenant continues to occupy the property.”

Offley highlights two key differences between the two types of tenancies, particularly regarding rent increases and council tax obligations. 

“Many AST’s have a rent increase clause included, which give the landlord the option of increasing the rent on an annual basis. Now if you have a contractual periodic then this clause, providing it is classed as a fair term, can be used to evoke a rent increase without the need for a section 13 rent increase notice. Where your AST has no rent increase clause then you would need to serve the section 13 notice,” he explains.

“If you have a statutory periodic then the landlord should not create a rent review clause as the fixed term and the statutory periodic tenancies are separate agreements. With a statutory periodic you would need to serve the section 13 notice and have no rent increase clause.”

According to Offley, if the ‘how to rent’ guide has changes since the fixed term started and the tenancy runs into a statutory periodic, thus creating a new tenancy, then it is important to issue the tenant with any revised document.

Furthermore, he emphasises the implications for council tax responsibilities for landlords. 

"In a contractual periodic tenancy, the tenant remains liable for council tax until the tenancy concludes – even if they move out without giving notice," he clarifies. 

"Conversely, in a statutory periodic tenancy the responsibility is slightly different as these are deemed new tenancies, therefore the tenants remain responsible for council tax only whilst they are living in the property. This means that if the tenant moved out or abandons the property without notice then the landlord could be liable for council tax payments."

"From what I have seen most ASTs have a clause or wording that would create contractual periodic tenancies, but it's prudent for agents and landlords to review their agreements for clarity" Offley concludes.