Nowadays, extending tenancies can feel like a lengthy process. (If you pardon the pun). With the Coronavirus Act 2020 in full swing and a slow burn of evictions expected to take us well into next year, both landlords and tenants are seeking stability. 

One way to achieve this is by extending the tenancy. Not only does this offer greater financial security, but it’s a great way for landlords to attract and retain great tenants. It’s a win-win for all involved. 

But, considering there are a few different ways you could do this, the process may seem a little confusing. But luckily, HomeHero is here to demystify it. 

So, here’s a handy guide on how you can extend the average tenancy on your rental property. Not only will we tell you all there is to know, but we’ll also outweigh the pros and cons to all your options, so you don’t have to. 

No stress, we’ve got this! 

Your Options:

Before we get into the nitty-gritty, it’s worth noting that although a tenancy agreement will have an end date, the contract will only officially terminate once the tenant vacates the property and returns it. 

So, until that happens, both the tenant and landlord will have a window of opportunity to extend the tenancy. The main two options are: 

  1. Renew your fixed term contract
  2. Move to a rolling tenancy 

It takes two to tango, so you’d obviously need to speak to your tenants about this, preferably in writing and sooner rather than later. 

Both processes are relatively straight-forward, so rest assured, it won’t be a stressful experience. Let’s go through this together. 

Renew Your Fixed Term Contract

So, renewing your fixed-term contract is pretty simple. All it means is that a new, written agreement will formally extend the contract, where a further period is agreed on.

Usually, the contract will mirror that of the original agreement, both you and your tenant signed. 

For example, if your previous contract was for 12-months, then the new agreement will follow suit. 

The same goes for any clauses regarding breaks or rent increases. All you’ll need to do is get another copy printed and authorised.

Now would also be an excellent time to re-tweak the tenancy agreement and address any clauses that didn’t work as well previously. (It happens!) You’ll need to include any updates in the new tenancy agreement. 

You could also use a memorandum to do this. It’s a one-page document that extends the contract’s terms and conditions and details clauses such as rent increases.

What About Rent Increases?

Speaking of which, a renewal of a fixed-term contract will only allow for rent increases annually, and that’s typically once the term has finished. 

Unless, of course, you include a rent review clause in the tenancy agreement or your tenant agrees to one. 

In all cases, the tenancy agreement should clearly outline how and when you’ll review the rent to avoid any unnecessary disputes. 

The Advantages

So, there’s plenty of pros to extending the average tenancy by renewing the fixed-term contract.  

The first, and arguably the most important, is that it gives landlords the ultimate financial security. The rent will be coming in regularly for the whole fixed-term period, which is great for cash flow.

There is also little risk of the property being unoccupied and not producing income. 

On the flip side, tenants can rest assured they have tenure security for the entire tenancy period, whether that’s for six or 12-months. 

This will help attract and retain good tenants, and as a landlord or property manager, who wouldn’t want that? 

Did we forget something? Oh, yeah. Here are a couple of other advantages to extending the average tenancy via a fixed-term contract: 

  • Enables the landlord to calculate and budget accordingly for any expenses or refurbishment required on the property.
  • It saves the landlord time, hassle and money over looking for a new tenant.

The Disadvantages

Of course, it’s not all sunshine and roses. Whichever way you decide to extend your average tenancy, it’s going to come with its cons. It’s part and parcel of being a landlord, after all!

One of the main disadvantages of fixed-term tenancies is the risk of ending up with a problem tenant. It can take months to evict a tenant on this type of contract, which could leave you with a lot of stress. 

If a tenant stops paying their rent or causes damage to the property, you could end up with hefty repair bills while you wait for the eviction process to complete. 

While it’s unlikely for this to happen, it’s always worthwhile to mitigate risk and weigh up your options, which leads us to your second option; a rolling tenancy. 

Rolling Tenancy

A rolling tenancy, also known as a statutory periodic tenancy, is arguably the easiest. All you’ll need to do is sit back, relax and let the tenancy roll. 

Extending your average tenancy via this method means it rolls each month, according to the rent period. So, if your tenant pays rent monthly, the contract will proceed on this basis. 

No paperwork is needed, and neither you nor the tenant needs to sign anything. If you’d prefer to have something in writing, you could also extend your average tenancy via a contractual periodic tenancy.

This is essentially the same as a rolling tenancy, but both you and the tenant sign off the terms in a written contract. 

It’s worth noting that with rolling contracts, the tenancy can be brought to an end by either party at any time, as long as you give the required notice period. This is usually two-months. 

What About Rent Increases?

As always, if the tenancy agreement outlines a rent review clause, then landlords must abide by this. However, if you choose to increase the rent on a rolling tenancy, you must: 

  • Give a minimum of one months’ notice to your tenants. If your tenant pays rent annually, you must give them a minimum of six months’ notice.
  • Produce a written document which states a rent review clause and have your tenant agree on it in advance. 
  • Provide your tenant with a ‘Landlord’s notice proposing a new rent’ form. You can find the form here

The Advantages

The pros of periodic tenancies allow for greater flexibility; if landlords want to remove a rogue tenant or serve a notice of possession, you can do this swiftly without waiting for a fixed term to finish.

This is mutually beneficial as the tenant or landlord won’t need to do anything unless they want to end the tenancy. 

And since periodic tenancies are so adaptable, it’s also pretty easy for landlords to add any new clauses as the tenant will be paying every month. 

Another advantage is that landlords won’t have to pay for a tenancy renewal fee, but we’ll get onto that a little later. 

The Disadvantages

Although it’s helpful in certain circumstances, this type of tenancy doesn’t give you or your tenants the security of knowing how long their extended tenancy will last.

Therefore, putting good tenants on periodic tenancies is risky as they can choose to leave the property pretty quickly. 

And since one month’s notice is the general rule of thumb, you may struggle to find a new tenant in a comfortable amount of time. If the property needs a little TLC, this can become extra stressful. 

Tenancy Renewal Fees

If you want to extend your average tenancy, there’s a chance you’ll have to pay a renewal fee—especially if you renew the contract on a fixed-term basis and a letting agent finds your tenant. 

The exact amount the letting agent will charge you depends on what you signed in the agency agreement, so be sure to check this. 

It’s also worth remembering that the tenant is no longer legally obliged to pay any renewal fees. The ‘Tenant Fees Act 2019’ introduced this, and it came into full effect on 1st June 2020. 

While some landlords may find renewal fees unnecessary, as the letting agent isn’t technically finding another tenant on their behalf, they do need to deal with regulatory updates, which can take time. 

But if you’d rather not pay these fees, then a rolling tenancy may be your best bet—they’re not applicable in these types of contracts!

Protecting the Deposit

Lastly, we’re going to cover whether you need to protect your tenant’s deposit once you’ve extended the tenancy. 

In the Tenancy Deposit Scheme (TDS), you do not need to protect the deposit again if the tenancy continues periodically and on the same terms.

However, landlords need to protect the deposit again if they enter a new fixed-term agreement or the periodic tenancy agreement has material changes, such as rent or tenants.

So, there you have it—an ultimate guide on how to extend the average tenancy on your rental property. Good luck! 

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