Meg Barrett,
Investment Property Consultant at Image Property.
What is the difference between a fixed term and a periodic lease?
Queensland’s rental market always has a proportion of tenants considering leasing their first-ever rental property.
While it can be an exciting time, especially for young people flying the parental nest, there is much to learn and understand about being a tenant in Queensland.
That’s because there are rights and responsibilities that each party much abide by under the law, which is called the Residential Tenancies and Rooming Accommodation Act.
One of the questions that beginner tenants often ask is the difference between a fixed term and a periodic lease, which I outline for you below.
Fixed term leases
In Queensland, fixed terms leases are by far and away the most common and popular.
In essence, a fixed term lease or tenancy agreement is when the tenant agrees to rent a property for a fixed amount of time, such as 12 months.
The reason why fixed term tenancy agreements are the most popular for tenants and landlords is that it gives each party certainty on the length of time that the tenancy will last.
Tenants want to know that they can stay in their rental properties for agreed periods, and landlords want the security of knowing they will have a tenant for a set period.
Because of this fact, most fixed term tenancies for, say, one year are renewed for another year and so on and so forth if both parties are happy to continue with the tenancy.
So, while each year is technically a fixed term tenancy, a long-term tenant may reside in the same rental property for years and years, with a renewed lease created for each year.
Periodic leases
The other lease available is what’s called a periodic one. This is a lease with no set timeframes, which can reduce the tenant’s tenure security.
Periodic leases are often created when a fixed term lease is not organised or negotiated between the tenant and landlord, and the lease then becomes periodic in nature.
Periodic leases generally are not the ideal situation for tenants because it can mean that they may be asked to vacate after being given the legal notice period because the landlord wants to sell the property or move back into it themselves.
This could mean having to vacate within a short timeframe of notice under the rental reforms that came into effect on 1 October.
Clearly, this is not ideal for tenants who may find it difficult to secure another rental property in that timeframe.
However, with fixed term leases, the tenancy agreement remains intact throughout the agreed period (unless there have been severe breaches by either party), which means the tenant has the right to remain in the property for that period. Both parties have peace of mind over how long the tenancy will last.
