A fixed term agreement has a definitive start and end date while a periodic tenancy is known typically as a ‘month-to-month’ arrangement and does not have an end date. There are pros and cons for both a fixed term and a periodic agreement that you should consider as they may affect you as the landlord.
- Provides security and peace of mind knowing you have a fixed income for the period of the Agreement.
- Enables you to forecast and budget accordingly for any expenses or refurbishment required.
- Rent increases can be written into Tenancy Agreements.
- The Term of the Agreement can end at a time where the market is at its premium, therefore giving you greater control.
- To end a Fixed Term Agreement, a Notice to Leave of 2 Months is required to be provided to the Tenant. A Tenant cannot leave prior to the end of the Fixed Term but does need to give 14 days Notice if they are ending the Agreement.
- The Tenant is in control and can dictate when they wish to end the Tenancy.
- The Tenant is not committed to a period of tenancy other than the period required for the notice.
- The option of increasing the rent is often missed as the Tenancy continues unless the Agency is particular about following through with monitoring all Periodic Agreements.
- Tenant may terminate the Tenancy at a ‘slow’ time therefore the Property will be vacant longer. This equates to loss of income to the Lessor and to the Agent as commission income.
- The Lessor/Agent has to provide 2 Months Notice to Leave without grounds if vacant possession is required.
Consider your objectives for your investment property before deciding which term is best for you. While a periodic agreement may provide you with more flexibility should you be considering selling or developing the property, a fixed term agreement will provide you with more piece of mind, security and control of your investment.
Discuss your investment plans with your property manager and should you not have any immediate plans that require vacant possession of the property, considering aligning the lease term with the peak rental periods throughout the year.