One key reform in the Renters’ Rights Bill is the change from ASTs to periodic tenancies. What will this mean for your portfolios and your tenants?
One of the most significant changes outlined in the Renter’s Rights Bill is the shift from Assured Shorthold Tenancies (ASTs) to periodic tenancies.
With the Bill looming, landlords must understand how this reform will impact their property investments and the significant impact on the student lettings market.
In this blog, we’ll discuss
- The key differences between ASTs and periodic tenancies
- How the change will alter landlord’s property management
- The key implications for landlords and the student housing market
- How you can prepare
What Are ASTs and Periodic Tenancies?
ASTs have long been the standard for private rentals in England. These fixed-term agreements, typically six to twelve months, offer landlords certainty and security. You know when a tenancy starts and ends, and you can plan accordingly.
Periodic tenancies, on the other hand, are rolling contracts with no fixed end date. Under the new Bill, all tenancies will default to this type of tenancy. Tenants will be able to give just two months’ notice at any time, introducing a new level of unpredictability for landlords and putting them at a greater risk of void periods.
While this change is designed to give tenants greater flexibility and security, it raises important questions about how landlords manage their properties and plan for the future.
The Key Implications for Buy to Let Landlords
The transition to periodic tenancies introduces some challenges for landlords.
The loss of fixed-term security
Without a fixed end date, landlords cannot plan around tenancy cycles. This could lead to more frequent void periods and a greater administrative burden as tenants come and go on their own timelines.
Rental income stability
With tenants able to leave at short notice, rental income becomes unpredictable and can seriously impact cash flow for the vast majority of landlords, who can only rely on rental income to pay their mortgages.
Mortgage criteria
If they haven’t already, lenders will reassess their criteria and how they can support buy to let landlords through this change. Without ASTs, lenders may view rental income as less secure and therefore, borrowing may become challenging for landlords.
What does this mean for the student let market?
Perhaps the sector most affected by this is student housing. Traditionally, student lets operate on fixed academic-year contracts. The move to periodic tenancies will make it harder to arrange new tenancies in time for term times. Without fixed end dates, students could potentially leave mid-year or at staggered intervals, making it far more difficult to manage the group tenancies.
Furthermore, if students decide to stay in the property after graduation, landlords cannot adjust their rent in line with market value. This makes supply much more challenging for the growing number of university students.
Moreover, this uncertainty may deter some landlords from letting to students altogether, particularly those who rely on fixed-term income to afford their monthly mortgage payments. This could drive-up competition for the remaining properties in areas with high student populations.
How to Prepare for the Transition
While the changes feel daunting, there are some steps landlords can take to prepare:
- Consider the new tenancy structures - Work out how you’ll handle shorter tenancy durations and potential void periods. This could involve adjusting rent or investing in HMO properties, for example, where you receive multiple rents that could cover a shortfall in income.
- Understand the new legal landscape – Ensure you understand the new tenant protections and eviction procedures. This will be key to managing your properties under the new schemes.
- Review your current tenancy agreements – Now’s the time to start planning how you will transition your existing tenancies onto the new schemes when the Bill comes into force.
- Work with the experts - Expert brokers, letting agents, and legal professionals can provide the support you need to navigate the change.
Final Thoughts
The move from ASTs to periodic tenancies marks a significant shift in the private rental sector. While it brings greater flexibility for tenants, it also introduces new challenges for landlords, particularly around planning, income stability, and legal compliance.
By staying informed and working with an industry expert, you can get all the advice and help you need to prepare for the Renters’ Rights Bill.
Speak to an expert
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