February 26, 2024 7:07 pm

When stepping out into the realm of property lettings, one of the decisions that both landlords and tenants face is choosing between a periodic and fixed-term rental contract.

Although each option does come complete with its own set of advantages and considerations, the location of the property can also have an impacting factor, so whether you live or England or Wales, it is time to explore which one suits your needs and requirements, and what would be the better option for you as a landlord when renting your property.

Firstly, let's explore the lettings contracts options and what they mean:

Understanding Periodic contracts:

A periodic rental contract is often known as a month-to-month rental lease, operating without a specific end date.

The periodic contract renews at the end of each rental period until either party decides to terminate with property notice. This is the ideal rental contract to offer flexibility for both landlords and tenants, allowing for easier adjustments to changing circumstances.

Pros of a periodic rental contract
  • Flexibility: Periodic rental contracts offer flexibility for tenants who may not be certain about their long-term plans, making it ideal for tenants who might need to relocate or make changes to their housing needs on at short notice.
  • Ease of termination: Both landlords and tenants can terminate a periodic contract with proper notice, this is usually a 30-day notice. This has an advantage to tenants or landlords where circumstances change and either party need to end their contract.
  • Adaptability to Market Conditions: Landlords can adjust rental rates more frequently to align with market conditions, ensuring their property remains competitive in terms of pricing.
Understanding Fixed term contracts:

A fixed-term rental contract specifies a set period during which the tenant agrees to lease the property.

The tenancy operates between specific dates as to when the tenancy starts and when it ends, this is more commonly running as a 12-month.

Pros of a periodic rental contract
  • Stability and Predictability: Fixed-term leases provide stability for both landlords and tenants, offering predictability in terms of occupancy and rental income.
  • Legal Protections: Having a clearly defined contract with a fixed term provides legal protection for both parties. It outlines the responsibilities and expectations during the lease period.
Differences in contracts and evictions in England Vs Wales

With the new occupational contracts that have taken over the ASTs in Wales, choosing between a fixed term or occupational must be looked at thoroughly as they now differ from Wales and the wrong one could end up costing you more as a landlord.

Differences in contracts and evictions in England Vs Wales

In England, whether you choose a Section 8 or 21, as a landlord, you must give your tenants at least 2 months' notice to vacate the property.

Section 21 notices can be used without providing a specific reason once the fixed term has come to an end following at least 2 month notice.

Section 8 can be used in both England and Wales to evict tenants for specific reasons, such as non-payment of rent, breach of tenancy etc.

In Wales, the Renting Homes (Wales) Act removed Section 21 with “no-fault eviction”

Contracts and evictions in Wales:

As a landlord, if you choose to place your tenants on a fixed-term contract and things go wrong unless there is a really good reason, you have no choice but to sit it out until the end of their tenancy as Wales has made it so that no evictions can be given during the term of a fixed term contract, and once the fixed term comes to an end unless your tenant has breached their contract and there is a landlords break clause written into the contract.

If the fixed term is for 2 years or more, you can not issue an eviction notice until at least 18 months into the contract.

Once a periodic tenancy has started, issuing an eviction notice can only happen after the period of 6 months and then the eviction notice is also 6 months in length in Wales.

Choosing the right options for your rental property:

As we have discussed, the decision between and periodic and fixed-term rental contract depends on various factors such as your future plans and the specific needs of the property, however, there are a few factors to consider:

  • Tenant stability: If a tenant seeks stability and plans to stay in the property, a fixed-term lease might be more suitable, or, as a lot of our Somerset Landlords prefer both the flexibility and ease of having a periodic tenancy in place with the 1 month notice period should they wish to leave.
  • Market dynamics: Landlords should consider the market conditions and rental demand when they are deciding between a fixed term and a periodic contract. For several reasons, including Optimizing rental income: Understanding the current market conditions allows landlords to set competitive rental rates. In high-demand markets, landlords may have the flexibility to adjust rents upwards, maximising their rental income.
    And of course, attracting quality tenants: Periodic leases provide flexibility for tenants, but in a competitive rental market, offering fixed-term leases might offer tenants a more secure sense of security, especially if they are new to renting. 

In summary, landlords should consider the market conditions, the rental demand and their future plans for their property, along with seeking the right tenants who are looking to make your rental property their next long-term home.

Are you sure that your property meets all of the compliance regulations? Non-compliant landlords face up to £30,000 in fines.

Check that you are fully compliant today with our free comprehensice compliance guide, helping to keep landlords, tenants and properties safe.

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