A Guide To Fixed Term Leases
Across Australia attitudes towards homeownership have been slowly changing. Through a combination of factors, including housing affordability in certain cities and a desire for younger people to live closer to cities, more Australian’s are choosing to rent.
For some Australians, renting is seen as a cheaper alternative to purchasing a home, offering flexibility and greater location options. This is steadily increasing the number of renters looking for rental properties across the country.
For those who have decided to forgo homeownership, whether permanently or until they can afford a home, it is necessary for them to find stability while renting. Property owners are also increasingly looking for stable tenants, reducing the length of time their property is vacant. This is why a fixed term lease has become a popular option.
What is a fixed term lease?
A fixed term lease is a tenancy lease that has a clause requiring the tenants to rent the property for an agreed upon amount of time as a minimum. For example, a fixed term lease could require the tenants to rent the property for 6 or 12 months. This term will be agreed upon by the landlord, property manager, and tenant.
The alternate is a periodic lease. These leases hold no fixed term, with no set finishing date. They can run indefinitely if so desired by all parties. While notice is still necessary when either party wishes to terminate the agreement, this can be done at any time without needing to break a contract.
What are the benefits of a fixed term lease?
A fixed term lease can have many benefits for both the property owner and tenant. It offers a period of stability that both you and your tenant can enjoy. There is more likely to be stable rent coming in on an agreed upon time. You will not have to worry about finding another tenant as long as the fixed term is in place, and your tenant can settle down making your property their home.
There are also protections in place for both tenants and landlords on a fixed term lease. As the lease is a contract it is much more difficult for either party to break, which is why these types of leases are renowned for their stability.
Rent can only be increased during the term if the amount to be increased or the way the increase will be calculated is agreed upon in the lease. This means both tenants and property owners have pre-agreed to any rent changes, leaving both parties satisfied.
A fixed term lease can also be renewed automatically at the end of the term or allow for negotiations to renew it for another term.
How long can fix term leases be?
Rules for how long a fixed term lease can run differs for state to state. In Queensland, there is no maximum length of time a fixed term lease can stipulate. However, on average most property owners and tenants tend to agree on fixed term leases between 6-15 month. The average tenancy occupation in Queensland sits at 12.6 months.
In some states, like Victoria, there previously was a maximum fixed term lease time period of 5 years. However, most tenants chose to remain at the property for an average of 2 years and 2.5 months.
It is up to the property owner and prospective tenant to discuss and agree on the fixed term in the lease before signing.
Fixed term leases are popular amongst property owners and tenants looking for stability. They allow property owners to reliably predict the income received from the property, while the tenant can avoid the stress of moving for a set period.
Even if you have secured a fixed term lease with your tenant you will still need an excellent property manager. We list out 10 reasons why in this article here.
For Brisbane’s highest-rated Inner-City property manager, talk to Link Living today.