Are you looking to rent out your property or perhaps a Lease is coming up for expiring and your weighing up the options. Should you offer the tenant a fixed term or periodic Lease?
First up, the difference between the two type of Leases explained. A fixed term lease is one that has a start date and an end date – usually 6 or 12 months. The Lease is binding on all parties for the entire duration of the Contract and can only be terminated during the Lease with mutual agreement of all parties. A Periodic Lease is one that has no end date. The Lease continues indefinitely until it is lawfully terminated by either party. There are different rules for termination by a Landlord and a tenant. A Landlord must give 60 days notice to terminate a periodic lease with certain grounds (for example, they want to move in or demolish or substantially renovate the premises) or 90 days notice with no grounds. On the other hand, a tenant only has to give you 21 days notice to terminate the lease. And the tenant does not need any reason to do so.
So which would you choose?
Fixed Term Lease
The biggest advantage of a fixed term Lease is that you are guaranteed a fixed income for a specified amount of time and if the tenant breaks the Lease by leaving earlier than the fixed term Lease expiry, you are entitled to break lease costs.
The advantages of a periodic lease are that it gives you more flexibility to terminate the Lease. If you are thinking of selling or considering to move one of your family members into the property, then it may be a good idea to not have a tenant locked in for months and months.
The disadvantages on a Periodic lease are that a tenant has a lot of flexibility and only has to give you 21 days notice to end the Lease and move on at any time say over Christmas the most inconvenient time to have your property vacant and could potentially cost you thousands of dollars in vacancy. Another important consideration is that Landlord Insurance policy may not cover should any issues arise from the tenant on a non fixed Lease term, suggest you check with your Insurance.
Tenants are a mixed bag in what they want. Some prefer a fixed-term lease to give them stability and a sense of certainty about their Lease. Others may prefer a periodic lease so they can get out of the lease with shot notice and move somewhere else.
It is entirely your decision as to what option you prefer. At RMC Real Estate we are here to guide you on whats best for you and your investment.
Contact Elinore Rositano 0402 148 373 for a confidential chat today.