Tenancies at Will v Periodic Tenancies

Jasmine Keeble, Legal Assistant | 10th May 2023

What Are Tenancies At Will:

A tenancy at will arises where the occupation of a property has been granted on the basis that either party may terminate the agreement at any time.

Tenancies at will are often used for short-term tenancies or as an interim measure if the occupation is to be granted whilst lease negotiations are ongoing.

Advantages And Disadvantages:

There are many advantages to utilising a tenancy at will, including that tenancy at will provide greater flexibility when terminating the agreement.

Unless the agreement states otherwise, a tenancy at will can be terminated by either party at any time with no minimum notice period required. This also means that where a Tenant has breached any obligations of the agreement, it is simpler for the Landlord to reclaim possession of the property. In this instance, the Landlord is merely required to state that the tenancy is at an end and possession must be given back.

A tenancy will also provide no security of tenure. This means that upon the expiry of the term, the tenant will have no statutory right to call for a new tenancy.

However, due to either party being able to terminate the agreement at any time, there is a risk that a tenancy at will could cease to provide a secure source of income for the Landlord if a Tenant were to terminate the agreement with little to no notice.

This can also put a Tenant in a precarious position where they are operating a business out of the premises. If either party is able to terminate the agreement at any time, this provides little security and certainty to a Tenant who may be trying to build their business and goodwill at the property.

What Are Periodic Tenancies:

Under a periodic tenancy, a Tenant is granted the tenancy for a term which is framed by reference to a time period, such as weekly, monthly, quarterly or annually.

The tenancy then continues until either party terminates the agreement; this may be done at any time however longer periods of notice are required than with a tenancy at will.

Periodic tenancies can be created in the form of an express agreement; however, they can also be created unintentionally. This can arise when a tenancy agreement creates a Landlord and Tenant relationship, and rent is demanded and paid by reference to a particular time period.

As such, if a Tenant is given exclusive possession of a property in exchange for a periodic payment of rent there is a risk that a periodic tenancy may have been created.

Advantages And Disadvantages:

As with tenancies at will, there are advantages and disadvantages to consider with periodic tenancies. The termination of a periodic tenancy can usually be done at any time by either party which provides flexibility.

However, a longer notice period is usually required for periodic tenancies. This notice period is usually by reference to the rental period, for example, if the tenancy is granted on a monthly basis, then at least one month’s notice would be required for termination.

Security of tenure also cannot be excluded from a periodic tenancy. This is because a periodic tenancy has a rolling end date, whilst the security of tenure requires a set end date of the term or an end date which can be easily ascertained. This means that if a tenancy at will is deemed to confer a periodic tenancy the Tenant will still retain the ability to call for a new tenancy at the end of the term, even if this ability was not intended by the Landlord. Where this occurs, the Landlord would only be permitted to refuse the request for a new tenancy in a limited range of circumstances such as where the Tenant has not paid rent or where the Landlord is intending to redevelop the property.

Risks:

You should also note that while a document may be expressed to be a tenancy at will, it could still be held to be a periodic tenancy or lease.  If the document provides for occupation with rent paid at set intervals, such as monthly, this could fit within the criteria of a periodic tenancy, unless there is evidence to demonstrate that the intention was to the contrary.

If this occurs, additional rights and obligations may be imposed on the parties involved. For example, if the tenancy at will is deemed to be a periodic tenancy, it will become a protected tenancy under the Landlord and Tenant Act 1954 which will provide security of tenure from being excluded.  If it were deemed to be a lease, the tenancy would also become protected tenancy, as it would not have a set end date or one which could be readily ascertained.

Terminating a periodic tenancy or lease is also much less simple and more time intensive than with a tenancy at will. Whilst a tenancy at will may be terminated by at any time, a periodic tenancy or lease will a minimum notice period and additional steps include the service of a notice to quit.

If a tenancy at will was deemed to be a periodic tenancy or lease, this may also result in stamp duty land tax becoming payable. As stamp duty is not payable on a tenancy at will, no return would have been submitted when the tenancy was granted and so penalties could be imposed for late payment.

How We Can Help:

As noted above, labelling a document as a tenancy at will or periodic tenancy does not prevent the agreement from being deemed an alternative type of tenancy, and this can have serious consequences on the rights and obligations created.

Whether you are a Landlord or a Tenant, you should ensure that you obtain legal advice before granting or taking a tenancy over a property. If you would like any further information or advice, please contact our Commercial Property team.