Assured Shorthold Tenancy with break clause vs Two-year Fixed Tenancy?

Assured Shorthold Tenancy with break clause vs Two-year Fixed Tenancy?

11:39 AM, 3rd August 2022, About A week ago 25

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We are private landlords by default. For the past 5 years we have had a couple rent our property under an Assured Shorthold Tenancy agreement which includes a usual break clause.

We are now looking to renew the tenancy agreement for another two years, but the letting agent suggests that we enter into a two-year fixed tenancy agreement. The implications of which we know little about other than we can’t end the tenancy unless the tenants are in serious breach of contract AND we have to take them to court to resolve the breach.

Question: Should we stick to a tenancy agreement with the usual break clause or should we change to a two-year fixed-term tenancy agreement?

Your advice and suggestions will be most appreciated.

Thank you.
Xiaolei



Comments

DSR

9:45 AM, 4th August 2022, About A week ago

Reply to the comment left by Robert M at 03/08/2022 - 12:55
my route exactly. Flexibility for all. At the end of the day anything that fixes anything for a tenant but gives me less flexibility in terms of getting them out (for whatever reason) brings me out in a sweat.

The other issue is if an agent is suggesting this is wont be purely for your benefit (unless you trust him/her). There must be an incentive for him to suggest it....

AP

7:33 AM, 6th August 2022, About A week ago

Just an alternative view:

I always do fixed length contract renewals. I try and let my properties in Sep / Oct as that is when the market is traditionally the strongest and try and preserve that. I want the peace of mind of not having to deal with finding new tenants for at least a year, and as the tenants have already been in the property for a year I know if I want them to stay or not (and ever since I started to interview tenants personally I’ve never wanted a tenant to leave either).

Remember if tenants are on a periodic tenancy they can leave just before Xmas when it may be harder to find a replacement tenant, leaving you with a longer void and potentially a lower rent level for the next tenancy.

And where my properties are based, all the decent agents charge renewal commission whether you have a renewal or roll over into periodic. I’ve negotiated it down and capped it at two renewal periods with the ones I use, but many agencies also refuse to do that.

There is no right and wrong, it depends on your own preferences

Crossed_Swords

8:25 AM, 6th August 2022, About A week ago

There seems to be some confusion here as to the name of the type of tenancy. A fixed term tenancy is not the same as a fixed term AST. Under the former you cannot use a Section 21 to give your tenant notice and notwithstanding the law may change on that this would be unwise. It disadvantages you as you cannot give notice during the term on that basis and if the tenant leaves early, although technically they are liable for the rest of the term this is not how the courts see it. You have to make reasonable attempts to re-let the property so really the longer term only protects the tenant.

I would ask the agent why he is recommending this option.

Go periodic.

Crossed_Swords

8:33 AM, 6th August 2022, About A week ago

Reply to the comment left by AP at 06/08/2022 - 07:33
Do you mean renewal commission (one-off charge for new agreement) or continuing management fee? If you go periodic and it's the former as far as I know they can only charge it for work done and it must be reasonable (Foxtons). The latter is reasonable as the agency continues.

Ian Cognito

9:16 AM, 6th August 2022, About A week ago

Reply to the comment left by Crossed_Swords at 06/08/2022 - 08:33Assuming that the agent found the tenant, the original contract agreed with the agent is likely to have included an ongoing letting fee payable whilst the tenant remains in-situ. In such cases, the only way to end the contract is to wait for the tenant to leave or evict the tenant.

Xiaolei

11:07 AM, 6th August 2022, About A week ago

Reply to the comment left by Crossed_Swords at 06/08/2022 - 08:25Thank you so much for clarifying the difference between a Fixed Term Tenancy vs Fixed Term AST. I had only understood the difference of the two after a bit of struggle.
The two year Fixed Term Tenancy our letting agent suggested was the Fixed Term Tenancy that we can not use Section 21 to give our tenants notice. After having considered all the responses received here, I have instructed the agent to produce a two year AST with a break clause after 6 months - i.e. the two year is not guaranteed but we are familiar and happy with the process AST contract offers.
Best / Xiaolei

Xiaolei

11:43 AM, 6th August 2022, About A week ago

Reply to the comment left by AP at 06/08/2022 - 07:33Hi there, it was great to read your response - thank you for providing an alternative view !
We have been a landlord by default and only have experiences with AST, so we don't know much about Fixed Term Contract. We understand that it provides guarantee for the term of the contract, but that guarantee removed the flexibility of serving section 21 notice. Although we don't envisage that we will serve it for the next couple of years, it is the removal of this option that made us a little uncomfortable.
Since the landlord can't just serve section 21 under Fixed Term Contract when tenants having breached contract, but only to serve s8 to take tenant to court and wait for the court decision plus the enforcement thereafter. Doesn't this nature of tenant protection inherently encourage the tenants to breach contract, e.g. not paying rent as eviction is more difficult ?
As mentioned above, we are not familiar with all the ins and outs of the Fixed Term Contract, so we will continue with the AST with break clause this time. But I am happy to learn.
Thank you and best wishes,
Xiaolei

AP

16:43 PM, 6th August 2022, About A week ago

Just to clarify, I was referring to a fixed term AST and fixed term AST renewal / or extensions. With an AST you cannot serve a section 21 during the fixed term period, only after that expires (for example after a 6 month fixed term when you have a break clause).
With an Assured Tenancy, you cannot serve a section 21 at all. I do not know of any agents who use AT over AST’s to be honest.

I meet every tenant and am very thorough before they move in. I also take out rent guarantee insurance. My only problem in 20 years of being a landlord was prior to doing these things. That tenant was on a periodic tenancy incidentally!

As far as I’m aware, the OFT ruling regarding Foxtons only ruled against them because the terms and conditions were not clear. You will find that every agent now has the renewal commission amounts in nice big print at the start of the contract you sign with them.

Xiaolei

17:12 PM, 6th August 2022, About A week ago

Reply to the comment left by AP at 06/08/2022 - 16:43Thank you AP for explaining the AT and AST - this is something new to us.
Looks like our letting agent suggested AT for the renewal as they told us that the only way we can remove the tenant from the property under the renewed terms is by us serving tenants a notice (S8?) AND taking them to court.
We didn't like the sound of it and have decided to stick to the two year AST with a break clause after 6 months.
We have no idea why they suggested AT for our renewal - we did ask why the change, the answer was ambiguous, certainly not convincing.
Best / Xiaolei

Yvonne Francis

17:30 PM, 6th August 2022, About A week ago

If the present white paper, (lots of politicians want it to go through: it was even mentioned in the queens speech) The Renters Reform Billl goes through parliament, then no one will be able to use AST's, and all leases will have to be periodic along with other horrors.

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