Any benefit to a new letting agreement contract for after first year?

electrofelix

My wife and I are simultaneously both tenants and landlords, living in rented accommodation while renting out our own home due relocating for a couple of years.

Recently the lease on the place we're renting came up to the end of the 1st year and the rental agency asked us to sign a new contract. As the rental would automatically roll over to a part 4 tenancy in the case of wishing to remain we were naturally a bit confused, though on review there wasn't anything in the contract that contravened the requirements of a part 4 tenancy. It's a rolling monthly rather than yearly so we can exit if we need to move provided we give the correct notice without being penalized.

However we are left scratching our heads as to the benefit and general point of going to this effort if there was already a standard legal basis for the tenancy to continue without requiring another contract. We didn't spot anything in the contract that was different to a part 4 tenancy, so what was the point?

Why is this relevant? The rental agreement for our own home, between ourselves and the tenants is due to reach the end of it's 1st year soon. Originally this was set for one year, so obviously the tenants could just decide to leave once it's up. Assuming the tenants are happy to remain, we're happy for the tenancy to continue. In such a case, is there any benefit to drawing up a new contract for either party, or is it just a case of make work and we could just provide the tenants with a document that explains the part 4 tenancy and notice periods relevant?

There may be a requirement at some point over the next 12 months where we'll be looking to move back, and would need to provide sufficient notice based on the length of time the tenancy has lasted, but either way that would need to match the periods listed under a part 4 tenancy.

dubrov

I can't see any benefit unless you wanted to implement a fixed term.

Maybe the letting agent charges a fee for lease renewal?

circular flexing

Yes the only benefit to the tenant is if a new fixed term is created as this is extra protection. If it's just repeating what you are already guaranteed by law I would question the benefit of signing it.

Unless your tenants come looking for a new lease, I wouldn't give them a new one. And I wouldn't sign the one from the agency either.

dennyk

A fixed term lease can only give a tenant additional rights. Generally it just means the landlord can't terminate the tenancy during the fixed term even for a reason that would be allowable under Part 4. As a tenant, it would be to your advantage to sign a new fixed term lease if you plan to remain in the property for at least another year, but if you think you might want to leave in less than a year, a fixed term lease would make that harder (not impossible, but you would need to find another tenant to assign the lease to yourself, and only if the landlord refuses permission to assign could you could break the lease without penalty). If there's a good chance you'll be leaving within the next several months, I'd say you probably wouldn't want to bother with a new fixed term lease.

Do note that you must notify your landlord of your intent to remain in the property under Part 4 at least one month before the end of the fixed term lease. If you don't, it doesn't affect your rights under Part 4, but you might have to reimburse the landlord for any costs they incurred as a result of your failure to notify them of your intent to remain (e.g. listing costs because they relisted the property for rent assuming you'd be leaving, booking fees for cleaners or other services they arranged for an anticipated vacant property, etc.).

As for why you'd be offered a new fixed term lease for the property you're renting, estate agents managing rental properties often charge the landlord a fee for "processing" a new lease, so they're just looking to pad their own pockets. Some landlords don't really know better and assume a new lease is somehow required or advantageous, so they just take their agent's word for it (or the agent might be doing it without the landlord's direct involvement, having tucked away some clause about automatically "renewing" tenants' leases for an extra fee somewhere in their initial agent agreement's fine print...).

From the landlord's perspective, a second fixed term lease is less desirable. It completely removes your ability to terminate the tenancy at all during the fixed term, unless you add a clause specifically allowing you to do so (in which case the tenant wouldn't have any incentive to sign the thing anyway). The only thing you'd gain from it is some assurance that the tenant will remain in the property for another year, and even that is rather limited, since they can always request to assign the lease or sublet the property to another tenant and if you "unreasonably" refuse (and your definition of "reasonable" might be quite different from the RTB's), they can terminate their lease with no penalty anyway. The only thing a fixed term lease would really do for you is allow you to retain their deposit in full if they just up and left in the middle of their lease without attempting to assign or sublet. You could maybe pursue them for additional rent owed if you were somehow unable to re-let the property quickly, but you'd have to do that in court at your own expense, so it might not be worth the bother.

All of the other tenancy agreement terms that were in your initial fixed term tenancy agreement (e.g. "no pet" rules, etc.) will remain in effect when the tenancy converts to a periodic Part 4 tenancy at the end of the fixed term, so there's no reason to have the tenant sign any new agreement on that basis. The statutory information about a Part 4 tenancy should really have been included in the original tenancy agreement you offered your tenants, but there's actually no legal obligation for the landlord to provide that information in a written tenancy agreement anyway, so there's no need to offer them a new agreement just to include that information.

electrofelix

dubrov wrote: »

Maybe the letting agent charges a fee for lease renewal?

dennyk wrote: »

As for why you'd be offered a new fixed term lease for the property you're renting, estate agents managing rental properties often charge the landlord a fee for "processing" a new lease, so they're just looking to pad their own pockets. Some landlords don't really know better and assume a new lease is somehow required or advantageous, so they just take their agent's word for it (or the agent might be doing it without the landlord's direct involvement, having tucked away some clause about automatically "renewing" tenants' leases for an extra fee somewhere in their initial agent agreement's fine print...).

I think these replies both hit the likely core reason, agent gets to charge the landlord a fee. Given as we're doing our own, this obviously isn't necessary and of course would be something we'd have benefited being aware of had we engaged a agent.

Thanks, it seems like best that I just reach out to our tenants and confirm whether they are happy to remain or planning to move on. They may well want to only extend by a few months as I recall they were looking at buying previously and given we may well be relocating back we can probably just suggest that they let us know and we can try to work out something that avoids unnecessary notice periods as a long as it works for both sides.

The_Conductor

The letting agent gets to bill the landlord for the pleasure of you signing a fresh lease- nothing more, nothing less.
There is no benefit to the landlord, or you.