ADVANTAGES AND DISADVANTAGES OF FIXED-TERM AND PERIODIC TENANCY.


Valuation Request

In essence, a tenancy is the right to possess and occupy land belonging to another. A tenancy gives the occupier a legal interest in the land for a defined period of time.

A relationship of landlord and tenant is created by a contract expressed or implied, under which one person who has legal title (the landlord or lessor) confers on another person (the tenant or lessee) the right to exclusive possession of the real property, or some part of it, for a period of time which is can be defined by either party, usually in consideration of a periodical payment of rent, either in money or equivalent.

Fixed-Term Tenancies

Advantages

The fixed-term gives both parties some surety as to the length of time the tenancy will last. The landlord can rest safe in the knowledge (all things being equal) that he will have rent payments being made for the whole fixed-term period. Conversely, the tenant can rest safe in the knowledge that he has the security of tenure for the full tenancy period.

Disadvantages

In practice of course (worst case scenario) a tenant provided he meets his tenancy obligations, can be sure of a much longer period than the fixed-term. This is because if the landlord decided to seek possession at the end of the term, with a 2-month notice period, and a court application, the whole process can take several months before a tenant would be forced to leave.

Periodic Tenancies

Advantages

Most experienced landlords let their properties initially on a 6-month fixed-term. Unless there are exceptional circumstances most would feel it is not wise to let for longer than this minimum period until the tenant (usually a complete stranger and an unknown quantity) has proved herself. Only, after this would the experienced landlord consider a longer-term, say 12 months or more.

This also benefits the tenant: landlords with long-term tenants often leave the rent at the original amount for extended periods, again in the belief that increasing the rent may result in a good tenant leaving them. Landlords often take the view that losing a little each month on a lower rent, not only encourages the good tenant to stay on long-term, it is far less of a loss than the loss, expense, and risk involved in finding a new unknown quantity tenant.

Disadvantages

The main disadvantage to landlords with tenants on periodic tenancies is the fact the tenant can up and leave fairly quickly; there is no longer-term surety of income for the landlord.

With a tenancy that’s been periodic for some years, the terms of the original agreement, which could be affected by subsequent legislation, such as for example the deposit protection rules which have changed several times, could be out of date.