The Renters’ Rights Bill will abolish fixed-term tenancies and make all tenancies periodic.
Scotland abolished fixed-term tenancies in 2017. Letting agents in England are concerned about the changes under the Renters' Rights Bill, which will overhaul everything from evictions to notice periods and, most notably, abolish fixed-term tenancies.
Landlords are also uneasy, as the uncertainty of the proposed changes could potentially discourage new entrants to the market and, therefore, limit rental stock.
However, England isn’t the first part of the UK to face such reforms. In December 2017, Scotland introduced the Private Residential Tenancy (PRT), which also removed fixed end dates, transforming how Scottish letting agents operate.
The move away from fixed-term and towards periodic tenancies also has some key implications for agencies.
Letting agents in England must fully understand these changes to advise their clients confidently. You need to be able to "sell" these new regulations.
Practice having these conversations with landlords. Speak with confidence and authority - this will help you win more business and stay ahead of your competitors. Being the most knowledgeable agency on these changes will set you apart.
Fixed-term tenancies vs Periodic tenancies
For letting agents, fixed-term tenancies are a win-win.
On the one hand, they offer the security of long-term revenue. On the other hand, they have clear end dates, triggering renewals which agencies rely on for revenue.
As a general rule of thumb, agents also charge around an 8% fee for a 12-month contract with let-only landlords, which is the equivalent of one month’s rent.
By contrast, periodic tenancies offer less value and opportunity to agents in the current landscape.
They function as a default option when a new contract between the landlord and the tenant isn’t agreed upon, but both parties want to continue their arrangement on a rolling basis.
How will periodic tenancies change under the Renters' Rights Bill?
As part of the Renters’ Rights Bill, which the Government wants to become law in the first half of 2025, fixed-term tenancies will be abolished. In other words, all tenancies will become periodic, regardless of whether tenants and landlords prefer longer-term contracts.
That means any tenancy you sign now will immediately become a periodic tenancy once this happens, rather than running for the duration agreed in the contract.
Alongside the Renters’ Rights Bill’s other reforms, including the abolition of Section 21, this makes it the most significant change to housing law since the Housing Act of 1988.
For agents in England, the changes are the biggest since the Tenant Fees Act in 2019.
Why is the Government proposing tenancy reform?
According to its Guide to the Renters’ Rights Bill, the Government’s primary motivation for tenancy reform is to “end the injustice of tenants being trapped paying rent for substandard properties and offer more flexibility to both parties to respond to changing circumstances.”
But Goodlord’s data indicates that key stakeholders have mixed feelings about the proposed changes.
For example, 59.8% of letting agents believe that abolishing fixed-term tenancies will have a negative impact on the sector.
Meanwhile, 58.5% of tenants said they preferred a fixed-term, renewable tenancy agreement, and 29.7% preferred open-ended agreements with 4-12 weeks’ notice.
62.1% of tenants also disagreed that they felt trapped in their current homes by fixed-term agreement.
Despite these feelings, the legislation is still going ahead, although some tweaks could be made as the Bill progresses through parliament.