An industry group is emphasizing the need for landlords and letting agents in England to understand the distinctions between statutory and contractual tenancy agreements. This call to action comes from Paul Offley, Compliance Officer at The Guild of Property Professionals. Offley’s remarks follow a recent incident that brought attention to the potential risks stemming from confusion between these types of agreements among agents.

The complexities between statutory and contractual tenancy agreements underscore the importance of clarity in legal frameworks within the rental sector. Offley’s advocacy aims to mitigate risks for both landlords and tenants by ensuring that agents are well-versed in the nuances of these agreements, thereby fostering smoother transactions and reducing the likelihood of disputes arising from misunderstandings.

“We recently encountered a scenario where a tenant contested a section 13 notice, raising concerns about their periodic status,” Paul Offley explains. “Upon thorough investigation by the letting agent, it became apparent that the tenant had misconstrued the terms of their contractual and statutory tenancy agreements.”

Offley elaborates further: “In instances where a fixed-term tenancy is initially established for a period of six months, the transition to a periodic tenancy occurs at the end of the fixed term. However, the type of periodic tenancy depends entirely on the specifics outlined within the Assured Shorthold Tenancy agreement (AST),” he underscores.

“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. This means that both the landlord and the tenant have agreed, in writing, to continue the tenancy on a periodic basis after the initial fixed term expires. 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 without signing a new agreement.”

Offley highlights two key differences between the two types of tenancies, particularly regarding rent increases and council tax obligations. In a contractual periodic tenancy, the terms for rent adjustments are typically outlined in the original AST agreement, allowing for clearer communication and agreement between the landlord and the tenant. However, in a statutory periodic tenancy, the rent may be subject to change according to statutory regulations, which could lead to potential disputes between parties if not clearly understood from the outset.

Understanding these distinctions is crucial for both landlords and tenants to ensure clarity and compliance with legal obligations throughout the tenancy period. By being aware of the type of tenancy agreement in place, both parties can navigate issues such as rent adjustments and council tax responsibilities more effectively, ultimately fostering a smoother and more harmonious landlord-tenant relationship.

“Many ASTs include a rent increase clause, allowing landlords to potentially raise rent annually. In the case of a contractual periodic tenancy, this clause, if deemed fair, permits a rent increase without the necessity of a section 13 notice. However, if the AST lacks a rent increase clause, serving a section 13 notice becomes imperative,” he explains.

“In the instance of a statutory periodic tenancy, landlords should refrain from incorporating a rent review clause, as the fixed term and statutory periodic tenancies are distinct agreements. In this scenario, landlords must adhere to the statutory procedure outlined in serving a section 13 notice, without the presence of a rent increase clause.”

Offley stresses the importance of updating tenants with any revisions to the ‘how to rent’ guide if changes occur during a fixed-term lease, subsequently transitioning into a statutory periodic tenancy, thus establishing a new tenancy.

Moreover, he highlights the nuanced implications regarding council tax responsibilities for landlords. “In a contractual periodic tenancy, tenants are liable for council tax until the tenancy concludes, regardless of vacating without notice,” he explains. 

“In contrast, under a statutory periodic tenancy, tenants are responsible for council tax only while residing in the property, as these are considered new tenancies. Therefore, if a tenant vacates or abandons the property without notice, the landlord may become liable for council tax payments.”

“Although most ASTs likely contain clauses or wording that establish contractual periodic tenancies, it’s advisable for agents and landlords to review agreements for clarity,” Offley concludes.

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