Tenancy Types: Which one do we use?

When you are purchasing an investment property it is important to work out what type of tenancy will work for your plans.

Periodic Tenancy
A periodic tenancy is one that continues until either the tenant or the landlord gives written notice to end it. The tenant can at any time give 28 days notice to vacate. There is no date that the contract concludes, which has both upsides and downsides. Rather than having to worry about renewing the agreement every single time, a periodic tenancy can just keep rolling until one (or both), parties have decided that it is time to end the agreement.

An owner can decide if you want to sell the property or even take possession yourself, can do this much easier with a periodic tenancy in comparison to a fixed-term agreement. Owners must always advise the tenant the property is on the market for sale and then once they know what the new purchaser would like to do, then either advise the tenant that they are staying on or give them the required notice of 90 days. A landlord can also issue 63 days when the owner (or a member of their family), are moving into the property.

The team at Harcourts Just Rentals use both fixed term and periodic agreements for our tenancies. However, our preference is fixed term agreement as it has more security for both the landlord and the tenant and minimises wear and tear on the property with tenants staying at the property for longer periods of time.

Fixed Term Tenancy
A fixed term tenancy lasts for a set amount of time. This gives the tenant peace of mind that they have secured the property for a certain time, such as 12 months. A fixed term tenancy does not end automatically when the stated period comes up. The Property Manager or landlord must either offer the tenant another fixed term agreement in writing or if you do not it will automatically revert to a periodic tenancy.

Tenants cannot end a fixed term agreement early without the owner agreeing to it but can agree that they may leave but, they must continue to pay the rent until a suitable new tenant is secured and moves into the property plus pay costs to find a replacement tenant. Unless you come to another agreement that both parties are happy with. If the owners going to sell the property it is advisable to wait until the fixed term ends. If you do decide to sell the property during a fixed term, the new owner would need to take over the tenancy when the property settles as the tenant is allowed to stay in the property until the fixed term agreement ends unless a mutual agreement is agreed to and notice is in writing.