Keeping good tenants is easier than finding new ones: here's how to renew a tenancy.
Once you’ve found good tenants you’ll want to hang on to them, right? So with this in mind, you shouldn’t leave it too late to start negotiating an extension to their lease agreement when the initial term is due to expire.
You should aim to write to your tenants at least two months before the end of their initial fixed -term contract so they don’t even have time to think about maybe looking for somewhere else to live! Tell them you’d be delighted to extend their lease and ask them to let you know at least a month before their contract expires if they’d like to renew.
A good way to persuade good tenants to stay is to offer a rent freeze, but obviously if you do want to raise the rent, now is the time to mention it.
If the tenant would like to stay on after their initial contract has expired you have two options: you can offer them a new fixed-term contract, or allow them to switch to a statutory periodic tenancy. Both have pros and cons and which you use will really depend on yours and your tenant’s circumstances.
The advantage of issuing another fixed-term contract is that the tenants are locked in for a specific duration, but they might not want to commit to another six or 12 month period, in which case you could consider a periodic tenancy.
A periodic tenancy means that the contract rolls on from one month to the next until either the landlord or the tenant serves notice on the other party. It gives both landlord and tenant the flexibility to end the tenancy at any time.
If the landlord wishes to end a periodic tenancy they need to give the tenant with two months’ written notice, but bear in mind that when the tenant wants to leave they only have to give one month’s written notice, which might cause you some inconvenience. What if they decide to leave just before Christmas, will you be able to re-let the property immediately or will you end up with a void?
If you don’t issue the tenant with a new fixed-term contract (either verbally or in writing) and they remain in the property, the tenancy will automatically switch to a statutory periodic and all the terms and conditions of the original contract will still apply.
One thing you must remember when you issue a new fixed-term contract is to re-protect any deposit you took at the start of the original tenancy, even if none of the tenants’ details have changed. When a tenancy switches to periodic, you need to inform the scheme where the deposit is registered of the change in status, but you won’t be charged to re-protect it. As no-one seems certain whether it’s necessary to re-issue the tenant with the Prescribed Information relating to their deposit, you might as well do this, just to be on the safe side.