What’s the right tenant contract to use?

AST or SPT?

I was asked recently by a subscriber about whether their tenant would have to sign a new contract once the initial AST had expired.

It can be quite a confusing area.

AST is short for Assured Shorthold Tenancy

SPT is short for Statutory Periodic Agreement

So, here you go.  If you have a tenant in your property and the contract has lapsed, they will have automatically slipped onto a Statutory Periodic Agreement (SPT) – rolling contract.  The initial contract stands but there will be no end date. The benefit of them being on a rolling contract is that you don’t have to do any additional paperwork. 

If the tenants remain in the property, then in most cases, if no new fixed term tenancy or ‘renewal’ has been signed, then as soon as the fixed term tenancy has ended, a new ‘periodic’ tenancy will be created automatically in its place.  

Unless or until a new fixed term tenancy or ‘renewal’ document is signed, the tenancy will then continue on this basis.

This is absolutely fine to do.  Some tenancies have run on for years on a periodic basis.  You don’t HAVE to give tenants a new fixed term or renewal.  

Letting Agents sometimes try to encourage you to do another AST, but this is so that they can charge you a fee for doing so.  It isn’t necessary to do another contract if the tenant is staying.

A tenancy can be an AST if all the following apply:

• you’re a private landlord or housing association
• the tenancy started on or after 15 January 1989
• the property is your tenants’ main accommodation
• you don’t live in the property

A tenancy can’t be an AST if:

• it began or was agreed before 15 January 1989
• the rent is more than £100,000 a year
• the rent is less than £250 a year (less than £1,000 in London)
• it’s a business tenancy or tenancy of licensed premises
• it’s a holiday let
• the landlord is a local council

You can get a professionally drafted AST online, here’s a link to an online service.

Statutory Periodic Tenancy Agreement (SPT)

As mentioned before a Statutory Periodic Tenancy Agreement (SPT) gives you both more flexibility, as there is no fixed term, but this could also have its downsides too.  The SPT has the advantage that both landlord and tenant have a lot of flexibility of length of tenancy, but the disadvantage is that neither has any certainty of how long it will last.

The SPT is fixed at 1 month notice for the tenant and 2 months’ notice for the landlord.  The original contract remains in place, but the end date becomes indeterminate.

A Statutory Periodic Tenancy Agreement (SPT) (sometimes referred to as a rolling tenancy) occurs when the fixed term comes to an end and the tenant remains in the property and carries on paying the rent as before.  This automatically happens; and no additional paperwork is required.  The original tenancy agreement remains in place with the exception that the end date becomes indeterminate and can be ended by either party although tenants only have to give one month’s notice, but a landlord must give 2 months in the form of a Section 21 Notice (Housing Act 2004).

Fixed terms are often preferable as they give both landlord and tenant more security.  Plus, they give landlords an opportunity to increase the rent.  Sometimes, however, such as if either the landlord or the tenant are uncertain of their plans, it may be better to let the tenancy run on as a periodic, as this is more flexible.  

With a fixed term (FT) contract the start and end dates are specified and both the tenant and the landlord know how long they have signed up to live at the property and there is a high degree of certainty for both sides.  The landlord knows that the earliest they can get the property back is the end date of the tenancy agreement unless you need to evict them for not paying their rent for example.  Then you will have to go through the correct procedures and go to court.

I like an SPT as it allows flexibility. But don’t forget the tenant will also have that flexibility.

More information about tenancy agreements can be found on the Government website.