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Drafting a new tenancy agreement

So, the first six months of the tenancy have passed. Your tenant has paid the rent on time and kept the place in good nick and you, in turn, have been a good landlord whose property they’ve enjoyed living in. In short, you’re both happy with the way things are ticking over. Time to renew the tenancy agreement, then. Right?

Not necessarily!

A tenancy doesn’t end after the fixed term. Some less-than-scrupulous agents would have you believe that it does, as it allows them to charge you or your tenant for setting up a new agreement. However, when an assured shorthold tenancy – which most new tenancies in the UK are – ends, a ‘statutory periodic tenancy’ is created and continues until either the landlord or the tenant terminates the agreement.

A periodic tenancy can be beneficial for a number of reasons, including:

  • You don’t have to evict with a section 8. A section 8 has the advantage of needing only 14 days’ notice, but they can often be thrown out of court. If you want to get rid of your tenant for any reason, a section 21 allows you to do so with two months’ notice at any point during a periodic tenancy.
  • You can still change the agreement. You don’t need a new tenancy to change the terms of an agreement – you can do so with an addendum to the original contract.
  • It keeps going as long as you want. A periodic tenancy doesn’t have a use-by date like its impatient older brother, so if you’re happy with the way things are going, you can just sit back and let it roll on.

So when is it a good idea to draft a new tenancy agreement?

Security

Security is the main reason you and your tenant might want a new fixed term in place. Just as you can evict at any time, your tenant might also give notice, leaving you very little time to re-let the property and avoid a void.

New rent

If you want to increase the rent during a periodic tenancy, you need to give formal notice and your tenant can challenge the decision by appealing to a rent assessment committee. Issuing a new agreement is a good way to increase the rent, because once the tenant has signed the new contract they can’t challenge the increase.

New parties

If another landlord is taking over the same property with the same tenancy, or if a new tenant is joining a shared tenancy, you should create a new agreement.

New terms

An addendum is fine for small changes, but if your contract has notes stapled to every page or is full of dated clauses, it might be time for a new contract. You might also have issued a different agreement on another tenancy and want to keep the same model across the board.

The process for issuing a new agreement for an existing tenancy is much the same as drafting one for a new tenancy. You can draw one up yourself (not recommended for anyone who isn’t a legal expert); use a template – from an online source (like us!) or a stationers, for example; or, for a pricier option, pay a lawyer to draw one up for you. See our blog on fair and unfair terms in tenancy agreements to be sure you avoid including any unfair clauses in the new contract.

There is one more important thing to consider when a tenancy ends…

What do I do with the old deposit?

With regards to deposit arrangements with a renewed tenancy, one of three things will be the case:

  • You took a deposit for the old tenancy and protected it

If nothing in the tenancy has changed except the end date, and you are happy to keep the old deposit in place, you need to contact the protection scheme you’re using and renew the protection. You then have to issue the prescribed information and deposit protection certificate to your tenants within 30 days, as though you were starting a new tenancy.

If parties or terms are changing or you want to take a larger deposit (perhaps to reflect refurbishments, higher rent or a higher number or tenant sharers) you’ll need to refund the old deposit and take a new one. The process in this case will be the same as for a fresh tenancy – you must protect the new deposit and issue the prescribed information within 30 days.

  • You took a deposit in the old tenancy and didn’t protect it

This will be the case if either the tenancy commenced before 6 April 2007, or you are very naughty. Whatever the case, you need to protect the deposit now. If you want to take a new one, as above, refund the old one first. Remember that your tenants can take you to court for up to three times the deposit amount if you don’t comply with deposit protection legislation.

  • You didn’t take a deposit for the old tenancy

This one’s simple enough – if you don’t want to take a deposit, you don’t need to do anything. If you do, you need to place it in a deposit protection scheme.

See our deposit protection page for more information on tenancy deposit protection law and the schemes available.

Forms and guidance

You can find forms and templates for things like assured shorthold tenancy agreements and formal rent increase letters, as well as a treasure-trove of other delights, in our forms and guidance section – ideal if you need a hand with something like renewing a tenancy agreement. They’re all free to use, too. Aren’t we lovely?

If you have further information on renewing tenancy agreements you’d like to share with us and other landlords, please feel free to leave a comment below!

NOTE: Due to a recent ruling in the case of Superstrike Ltd v Rodrigues, there is currently some confusion as to the implications of the creation of a statutory periodic tenancy upon the renewal of deposit protection and reissuing of the prescribed information. Here is a statement released jointly by the Tenancy Deposit Scheme, Deposit Protection Service and MyDeposits regarding the matter:

We have read with interest the latest judgment from the Court of Appeal on deposit protection. Whilst landlords and lettings agents need to take their own legal advice, we will be considering the implications of this judgment for deposit protection and the service of Prescribed information. We will also consult the DCLG on this and we will be issuing a further joint statement when we have fully considered the matter.

Read the court case in full: http://www.bailii.org/ew/cases/EWCA/Civ/2013/669.html

Update:

A further statement was issued by the National Landlords Association on 20 June 2013 which adds more clarity to the issue. You can read the statement by following this link: http://nlauk.wordpress.com/2013/06/20/superstrike-ltd-vs-marino-rodrigue...

Read the original blog entry...

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Amelia Vargo is an online marketing executive for CT Capital. Amelia writes for Turnkey Mortgages, Turnkey Landlords, TurnKey Bridging, TurnKey Life and Commercial Trust.