The end of fixed-term and assured shorthold tenancies—a new era for residential lettings
This short article is part of a six-part series exploring the key changes proposed by the Renters' Rights Bill and related reforms, and what they mean for landlords, agents, and tenants. In this first instalment, partner Stephen Small examines perhaps the most significant reforms: the end of fixed-term and assured shorthold tenancies, the shift to monthly periodic tenancies as standard, and the end of so-called ‘no-fault’ evictions.
Major reforms to residential tenancy law in England are on the horizon, with proposed legislation set to abolish assured shorthold tenancies and ban fixed terms. These changes will have far-reaching implications for landlords, tenants, and property professionals.
Periodic tenancies become the norm
When the proposals are enacted, almost all new residential tenancies will be assured tenancies and will start as periodic agreements, with rent payable monthly or more frequently. Fixed terms will no longer be legally enforceable, even if the contract suggests a fixed term was agreed between the parties, and tenancy agreements that attempt to include them will default to a monthly rolling arrangement.
This marks a departure from current market practice, where fixed terms of sometimes three or four years are commonly used to provide certainty for both landlords and tenants.
The end of ‘no-fault’ evictions
The legislation will also remove the ability for landlords to recover possession without establishing a ground for doing so. This effectively ends so-called ‘no-fault’ evictions under the current section 21 of the Housing Act 1988, which have been a cornerstone of the private rented sector since the late 1980s.
Landlords will instead need to rely on expanded statutory grounds for possession, such as the intention to sell the property or serious breaches of the tenancy.
Practical considerations for landlords
These changes will require a shift in approach:
- possession will no longer automatically be an option at the end of a fixed term by default
- standard tenancy agreements will need to be adapted to suit the new reality of periodic tenancies
- landlords must be prepared to evidence one of the updated legal grounds if they wish to end a tenancy and deal with the anticipated delays and costs that will entail
What landlords should do now
Key steps include:
- removing fixed-term provisions from standard tenancy agreements
- understanding which possession grounds might be applicable in future scenarios
- landlords should assess and, where possible, shore up their financial resilience. Periodic tenancies that can only be ended quickly by tenants mean significantly weakened certainty of income for landlords and it remains to be seen how lenders will react to this increased risk
Tenants, on the other hand, may gain greater stability, as they will no longer have to contend with Section 21 notices, which currently require them to vacate a property on two months’ notice. However, tenants may also have to contend with the spectre of rising rents, as the costs of additional regulation and the heightened risks landlords face under the new law may be passed on to tenants. This could take the form of rent increases or a shrinking rental market—both of which could further drive up rents.
Transitional arrangements
The changes will apply to new tenancies once the legislation is in force. Existing tenancies will be converted to periodic tenancies under transitional provisions, with further detail expected in secondary legislation.
Partner Stephen Small is in the property litigation team, acting for both landlords and tenants, advising on all aspects of commercial, residential and mixed use property related disputes.
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