Deciding the best tenancy length is crucial for long-term landlords who rely on a steady rental income for day-to-day living costs, retirement plans, or supporting their family.
In this post, we’ll cover the legal minimum and maximum tenancy lengths in the UK, followed by the key factors landlords should consider when setting the duration of their agreements.
As we’ll explore, finding the right tenancy length is all about balancing security with flexibility, and reward with risk.
- Understanding tenancy length laws in the UK
- Pros and cons of long-term agreements
- Pros and cons of short-term agreements
- Find the right tenancy length for you
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Understanding tenancy length laws in the UK
The rules on tenancy length vary across the UK, with England and Wales following different regulations from Scotland. Here’s a breakdown of the key laws landlords need to know:
England and Wales
In England, most landlords opt for an Assured Shorthold Tenancy (AST), while in Wales, since the introduction of the Renting Homes (Wales) Act 2016, they use an occupation contract.
Both typically start with a fixed term, which is usually 12 months, though it can extend to three years or more, in the form of a deed.
Tenancy agreements are a bit complex to end before the fixed term expires, so when people refer to tenancy length, they usually mean the fixed term.
Once the fixed term ends, tenants can choose to move out, or you might agree on a new fixed-term contract, ranging from six months to three years.
Alternatively, you can let the tenancy become periodic, also known as a ‘rolling contract’. In this case, there’s no fixed end date, and the tenancy continues on a month-by-month basis, with either party able to serve notice to end it.
Scotland
In Scotland, landlords use a Private Residential Tenancy (PRT) agreement instead of an AST. The key difference is that PRTs are open-ended, meaning the tenancy has no fixed term, and a landlord cannot ask a tenant to leave just because a set period has ended.
However, the rules outline 18 specific circumstances (AKA grounds for eviction) where a landlord can regain possession of the property, such as deciding to sell or if the tenant has breached the terms of the agreement.
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Deciding the best tenancy agreement length
For landlords in England and Wales, the key decision is how long to set the tenancy agreement.
Since most landlords see their property as a long-term investment or income source, the obvious choice might be to opt for a longer fixed term. However, while longer terms offer more security, they also have downsides.
It’s a balancing act between choosing a longer term, which ensures steady rental income and opting for a shorter term.
Shorter agreements give you more flexibility but may lead to vacant periods and potentially higher costs for frequent rental advertising. However, this isn’t the case for our landlords, who can advertise their properties for just £49 on OpenRent and across major property portals.
Pros and cons of long-term agreements
✔ Tenants feel more invested in the property: Long-term tenants tend to see the property as their own long-term home, treating it with greater care and respect. This can lead to fewer repairs and maintenance issues, as tenants feel a deeper sense of ownership and responsibility.
✔ Reduced admin and renewal costs: Drafting a tenancy agreement for several years is cheaper than renewing every six months or a year. While some agents charge significant fees for renewals, we offer free contract renewals, helping you keep costs down and simplify management.
✔ Fewer void periods: Longer agreements reduce the likelihood of vacant periods, ensuring more consistent rental income.
✔ Lower tenant-finding costs: It’s more cost-effective to find and vet new tenants less frequently. Even though OpenRent’s tenant-finding services are affordable, it’s cheaper to do this once every 3+ years than every six months.
✔ Improved landlord-tenant relationship: A long-term tenancy often results in a stronger landlord-tenant relationship. This stability helps in addressing and resolving issues more smoothly, leading to a more harmonious rental experience and potentially fewer disputes.
✔ Predictable financial planning: Long-term tenancies allow for more accurate financial forecasting and budgeting. With a stable rental income over an extended period, landlords can plan their finances with greater certainty and avoid the unpredictability associated with frequent tenant changes.
Assess the financial stability and rental history of potential tenants, reducing the risk of late payments or defaults. Order Tenant Referencing
✘ Dealing with ‘difficult’ tenants: Issues with problematic tenants, though rare, can persist for the duration of the long-term agreement. Plus, some long-term tenants may be more demanding despite taking good care of the property.
✘ More complicated rent reviews: Increasing rent for existing tenants on a long-term agreement is challenging. Rent cannot be raised during a fixed term unless specified in the contract. To adjust rent at the end of a fixed term, you must notify the tenant before the current term ends, allowing them time to decide whether to accept the new rent or move out.
Keep in mind, in Scotland, rent increases are typically limited to once a year and require at least three months’ notice to the tenant.
Pros and cons of short-term agreements
Long-term tenancies aren’t suitable for every landlord. While everyone wants to maximise returns from their property investment, some need the flexibility to act quickly if circumstances change.
Short-term lets provide the agility to sell the property or increase the rent more easily. They are also ideal for landlords who plan to move back into the property by a specific date, such as those renting out their home while travelling or living abroad.
Also, in some areas, there may be higher demand for short-term tenancies, allowing you to be more selective with tenant references and choices. This is particularly true in towns with large student populations.
Find the right tenancy length for you
When it comes to renting out your property, doing a bit of homework can make all the difference. Think about the pros and cons of different tenancy lengths, and weigh them up carefully.
Of course, balancing financial costs and savings is important, but don’t overlook the time and effort you’ll put in.
A troublesome tenant on a two-year contract can be just as draining as dealing with new tenants every six months.
Being a landlord isn’t always smooth sailing. Sometimes, having fewer hassles and less admin to handle can be more valuable than chasing every penny.
So, take the time to find a tenancy length that suits both your financial goals and your peace of mind.
