How Lease Renewals Can Be Beneficial For Landlords And Tenants
While the flexibility of continuing a lease agreement might appeal to some landlords and tenants, renewing thel ease has a number of benefits for both parties.
At the end of a fixed-term lease, tenants and landlords have two options for how to proceed with the rental agreement - signing on for another fixed-term period or continuing on a month-to-month basis.
At Cohen Farquharson executive rentals, we outline the difference between the options and what the benefits are of fixed-term agreements.
What’s The Difference Between Fixed-Term and Periodic Agreements?
When a landlord and tenant are both satisfied with the rental arrangement, they’ll often choose to renew the lease for another fixed-term period, usually for six or 12 months. A new rental agreement will be signed by both the tenant and the landlord.
If no new fixed-term agreement is signed and the tenant isn’t vacating the property, the lease will automatically move to a month-to-month basis, known as a periodic agreement.The rules, rights and obligations outlined in the original lease agreement still apply, but notice periods and process for rent increases differ slightly.
In a fixed-term agreement in NSW, a tenant cannot vacate without incurring penalties, however, if they are on a periodic agreement, then a tenant can vacate any time by providing 21 days' notice in writing. Under new legislation enacted in 2020, you can only increase the rent once in any twelve-month period for a periodic agreement, but rent cannot be increased in a fixed-term agreement unless it is included in your agreement. In both cases, 60 days notice must be given for the increase and the increase cannot be unreasonable.
Benefits Of Renewing Your Lease As A Tenant
Staying on in your rental is often a much easier option, especially if you’re enjoying the property and the local area. The benefits for tenants signing a new lease include:
#1 Avoiding The Hassle Of Moving: Moving house is time-consuming and costly, as you need to find a new property, pack your belongings and transport them to your new property to unpack.
#2 Keeping The Relationship You’ve Built With Your Landlord And Property Manager: Moving to a new property with a new property management agency means starting from scratch, potentially with a property manager and landlord that don’t prioritise these relationships.
#3 Reducing Uncertainty: A periodic agreement can bestressful for tenants, as there’s no set end date and the landlord can make the rent increase and/or terminate the periodic agreement at any time.
Benefits Of A Fixed-Term Lease For Landlords
In addition to having a confirmed rental income for a set time period, there are a number of benefits to fixed-term agreements for property owners. These include:
#1 Avoiding Turnover Costs: Finding a new tenant comes with costs associated with marketing the property and loss of income from time the property is vacant.
#2 Retaining A Good Tenant: A tenant who cares about your property will look after it and let you know of any maintenance issues that have the potential to be expensive in the long run, so it’s worth holding on to a great tenant if you have them.
#3 Controlling The Time Of Year The Property Is Available: It’s possible to find tenants at any time of year, but there are periods that are more difficult and could leave the property vacant for longer. A fixed-term agreement gives you some control, as the end of the agreement will always fall at the same time.
How To Renew Your Lease
For both tenants and landlords, the first step in renewing a lease is speaking with your property manager to let them know of your intentions. As a tenant, you need to tell the property manager in writing. Once the new agreement is created, all parties should read it carefully to ensure they understand their obligations and rights, in case there have been changes since the previous agreement.
Like To Learn More?
For more information on lease renewals and fixed-term agreements, contact our team of specialists today.
