In the dynamic landscape of property rental in England, it’s essential for landlords and letting agents to grasp the intricate differences between statutory and contractual tenancy agreements. A recent call from an industry group underscores the importance of this knowledge in ensuring smooth tenancy transitions and avoiding potential disputes.
Paul Offley, Compliance Officer of The Guild of Property Professionals, sheds light on a recent incident that brought these distinctions to the forefront. “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.”
So, what exactly sets these two types of tenancies apart? Offley breaks it down for us.
“When a fixed-term tenancy concludes, it often transitions into a periodic tenancy. However, the nature of this periodic tenancy depends on what’s outlined in the Assured Shorthold Tenancy agreement (AST),” he elaborates. “A contractual periodic tenancy arises when the AST explicitly states the transition to a periodic tenancy. Conversely, a statutory periodic tenancy occurs when the AST makes no mention of post-fixed term arrangements, and the tenant continues to occupy the property.”
But why does this distinction matter? Offley highlights crucial differences, particularly concerning rent increases and council tax obligations.
“In contractual periodic tenancies, a rent increase clause in the AST allows landlords to raise rent annually without a section 13 rent increase notice, provided it’s deemed fair,” he explains. “On the other hand, in statutory periodic tenancies, landlords must serve a section 13 notice for rent increases, as fixed term and statutory periodic tenancies are separate agreements.”
Moreover, Offley stresses the significance of adhering to any updates in the ‘how to rent’ guide, especially if the tenancy transitions into a statutory periodic one. “Issuing revised documents to tenants in such cases is crucial,” he emphasizes.
The implications extend beyond rent increases to council tax responsibilities. “In contractual periodic tenancies, tenants remain liable for council tax until the tenancy concludes, regardless of whether they vacate without notice,” Offley clarifies. “However, in statutory periodic tenancies, tenants are only responsible for council tax while they reside in the property. This means landlords could be liable for council tax payments if the tenant vacates or abandons the property without notice.”
Offley concludes with a word of advice: “While many ASTs may create contractual periodic tenancies by default, it’s wise for agents and landlords to review agreements for clarity.”
In navigating the intricacies of tenancy agreements, understanding the nuances between statutory and contractual arrangements is paramount. By staying informed and ensuring clarity in agreements, landlords and letting agents can foster smoother tenancy transitions and mitigate potential disputes.