A comprehensive tenancy agreement tailored to your circumstances can be key to achieving a successful and harmonious landlord/tenant relationship.
However, even the most well-thought-out tenancy agreement may need to be amended occasionally to adapt to changing circumstances. It pays for landlords to understand the laws and best practices surrounding amending and renewing tenancy agreements to ensure seamless management and informed decision-making.
In this article, we’ll explain the rules and processes surrounding amending and renewing tenancy agreements.
Importance of Tenancy Agreements
A tenancy agreement isn’t just a piece of paper; it’s an important contract between landlord and tenant that outlines everyone’s rights and responsibilities and ensures everyone is reading off the same page from day one. Should any disputes arise during the tenancy, a glance at the agreement often helps to quickly settle issues whilst safeguarding the interests of both parties.
Landlords should carefully draw up their tenancy agreement, ensuring it’s comprehensive and tailored to their requirements. This helps provide clarity to tenants and saves the landlord time and hassle later down the line.
Is a Tenancy Agreement Legally Binding?
Yes, a tenancy agreement is a legally binding document. Once both parties have signed the agreement, they are committed to carrying out the responsibilities outlined in the agreement.
There is no cooling-off period for a tenancy agreement. If a tenant changes their mind before moving in, perhaps due to a change in their circumstances, they are still liable for rent.
Amending Tenancy Agreements
After the tenancy agreement has commenced, the landlord may realise that, in retrospect, it’s missing important information, needs tweaking, or the tenant may request a change. Whilst this is not ideal, and you can’t just shift the goalposts on a whim, there is some leeway for making changes to the agreement. While it is possible to make changes, the correct processes must be followed.
Can the Landlord Make Amendments to a Tenancy Agreement?
Active tenancy agreements can usually only be changed if both the landlord and the tenant agree. Maybe the tenant wants to change their rent payment date, a new occupant is moving in, or the landlord is eyeing a rent increase. If both parties agree to the amendment, a fresh contract gets drafted and signed, or you create an addendum or amendment, which is then signed and stapled to the original agreement.
Usually, if a change is being made to a term in the existing agreement, this is referred to as a lease amendment. However, if something new is getting added to the agreement, this is a lease addendum.
It’s important to note that landlords may only charge tenants a fee for amending the tenancy agreement if the tenant requests the change.
When is the Best Time to Make Changes to the Tenancy Agreement?
Making changes to a tenancy agreement in the middle of a tenancy can be disruptive and has the potential to ruffle feathers and spark disputes, especially if the tenant didn’t ask for the change.
The best time to propose changes to an agreement is when it is winding down. At this point, the landlord can present their updated terms to the new tenants or their current ones if they wish to renew their agreement. This way, you avoid rocking the boat while still locked into an agreement.
The Ins and outs of renewing tenancy agreements
If the tenant plans to stay in the property past their initial lease term, you may wonder what happens next.
Well, there are a couple of options, and it’s up to the landlord and tenant to decide which option best fits the circumstances.
Do All Tenancy Agreements Need to be Renewed?
The answer to this question is no – there is no need to renew.
There is no legal requirement to renew a fixed-term tenancy once it ends. If the tenant stays on and the agreement is not renewed, according to the Housing Act 1988, the fixed-term tenancy agreement automatically becomes a periodic tenancy agreement (also known as a “rolling tenancy”). During a periodic agreement, all the same terms of the old agreement still apply, but the agreement runs from one period to the next – usually from month to month – until either the landlord or tenant gives notice. The length of the period depends on how frequently the tenant pays rent. If the tenant pays their rent monthly, the contract will run on a month-by-month basis. The same principle applies if they pay their rent weekly or bi-weekly.
Statutory Periodic Tenancy vs Contractual Periodic Tenancy
Somewhat confusingly, there are two types of periodic tenancy – statutory and contractual.
If the tenancy agreement does not mention what will happen to the agreement once it ends, i.e. there is nothing in the agreement about moving to a periodic tenancy, then once the agreement ends, if it is not renewed, it turns into a statutory periodic agreement.
However, some landlords write into the tenancy agreement terms that once it ends, it will become a periodic agreement. In this case, it becomes a contractual periodic agreement.
In legal terms, a statutory periodic agreement starts a new tenancy, whereas a contractual periodic agreement is a continuation of the old one.
The main difference you’ll find between the two is that opting for a statutory periodic agreement over a contractual one creates a little more admin work, and there may be less flexibility with ending the agreement.
To Renew a Tenancy or Not to Renew?
Whether you propose renewing the tenancy agreement with your tenant is up to you. There are pros and cons to both renewing the agreement and letting it become a periodic tenancy agreement instead. The right option for you depends on your circumstances.
Renewing the tenancy agreement locks tenants in for another fixed period, providing the landlord with better financial security. Once a tenant is on a rolling contract, it is much easier for them to suddenly up-sticks and leave at very short notice, which could leave the landlord scrambling to find a new tenant as quickly as possible to avoid an expensive void period. Locking tenants in for a new fixed-term agreement can help reduce the tenant turnover rate and be more cost-effective in the long term.
However, moving to a periodic tenancy gives the landlord more flexibility if they’re not getting on with the tenant too well or are unsure about their future plans for the property. Just don’t forget that this route offers the same level of flexibility to tenants too! For landlords that use a letting agency, allowing the contract to turn into a periodic one can also help avoid any potential charges for renewing the tenancy agreement.
How to Renew a Tenancy Agreement
Renewing a tenancy agreement is usually a straightforward process. The landlord or letting agent usually contacts the tenant a month or two before the agreement expires to determine whether they plan to stay on in the property.
If they do plan to stay on and are happy to renew their contract, a new contract can be drawn up and signed by both parties. If you wish to amend any contract terms, then this should be discussed with the tenant, and any new terms should be negotiated and agreed upon before presenting the tenant with the new agreement to sign.
Tenancy Renewal Fees
For landlords that use the services of a letting agency, renewing a tenancy agreement often comes at a cost. The price can vary from free to £250 depending on various factors, so always check with your letting agent what their fees are to avoid any nasty surprises!
It is the landlord’s responsibility to pay any fees associated with renewing the tenancy agreement. It has been illegal for landlords to charge tenants a fee for renewing their tenancy agreement since June 2020, when the Tenant Fees Act 2019 was introduced.
Ending the Tenancy at the End of the Fixed-term
As the end of a fixed-term tenancy nears, the landlord may see this as an opportunity to reclaim their property – perhaps they want to put the property on the market or move into it themselves. If that’s the plan, giving tenants proper notice is key.
If the landlord wants to end the tenancy at the end of the fixed term, they should give the tenant plenty of notice, at least two months, to allow them to find somewhere else to live. A well-timed and courteous heads-up can help to foster goodwill and ensure the process runs smoothly.
If the tenant does not vacate the property after the two-month notice, the landlord cannot evict them by force. Instead, they must go through the formal eviction process and apply to the court for possession.
Understanding and managing tenancy agreements is an ongoing process for landlords that can significantly impact the quality of their relationships with tenants. By taking the time to understand the ins and outs of managing tenancy agreements, landlords can make more informed decisions, reduce potential conflicts, optimise long-term efficiency, and ensure their tenancies run smoothly.