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Fixed-Term vs Periodic Lease: Making the Right Choice for Your Rental Property

In the current landscape of the South Australian rental market, which is experiencing one of the tightest periods we’ve ever seen, making informed decisions regarding your property leasing strategy is crucial. Whether you’re a tenant seeking to rent a property or a landlord considering leasing out your asset, one of the choices you’ll face is whether to opt for a fixed-term lease or a periodic lease. Let’s delve in:

Fixed-Term Lease:

A fixed-term lease, as the name implies, entails a pre-determined duration agreed upon by both the tenant and the landlord. Typically spanning six months or a year.

One significant feature of a fixed-term agreement is the specification of rent increase details. Depending on your location, rent adjustments may occur every six months, ranging from as little as 60 days to as much as a year. It’s imperative to seek expert advice before finalising any commitments.

You can also opt for a short fixed-term tenancy, lasting less than 90 days, which falls under its own set of regulations.

Benefits and Considerations of Fixed-Term Leases:

  1. Stability and Security: Tenants seeking stability and security will find a fixed-term lease beneficial, as it guarantees a specific occupancy period. This is particularly advantageous for those preferring longer-term commitments or planning their living arrangements well in advance.
  2. Rent Increase Protection: Throughout the fixed term, the agreed-upon rental amount remains constant, safeguarding tenants from unexpected rent hikes. This offers improved financial planning and budgeting.
  3. Limited Flexibility: While a fixed-term lease provides stability, it may impose limitations on flexibility. Terminating the lease prematurely might lead to penalties or financial obligations, contingent on the terms outlined in the agreement. Prospective tenants should carefully assess their future plans before committing.

For landlords overseeing tenants on a fixed-term lease, adhering to specific rules regarding rent increases is crucial. These guidelines vary across different states and involve factors such as notice periods and timing. It’s important to note that even with a fixed-term tenancy, there are provisions to address unruly tenant behavior. Instances like non-payment of rent, malicious property damage, criminal activities, or unauthorised housemates can warrant eviction.

Periodic Lease:

A periodic lease, commonly referred to as a month-to-month lease, lacks a predefined end date. Instead, the tenancy continues on a rolling basis until either the tenant or the landlord provides notice to terminate. This lease type is ideal for scenarios where major renovations are planned, you intend to move into the property yourself, or you’re considering selling with vacant possession.

Benefits and Considerations of Periodic Leases:

  1. Flexibility: Opting for a periodic lease grants tenants greater flexibility, as they can terminate the tenancy with appropriate notice, typically around 30 days. This level of adaptability accommodates changes such as job relocations or shifts in lifestyle.
  2. Rent Increases: In a periodic lease, landlords have the authority to raise the rent following due notice, typically about 60 days in advance. However, these increments adhere to local rental market regulations to ensure they remain reasonable and within legal limits.
  3. Uncertain Tenure: The inherent uncertainty of a periodic lease arises from its potential termination with proper notice from either party. This lack of stability might not suit individuals seeking long-term housing security.

Similar to the guidelines for rent increases, the rules regarding advanced termination notices also differ across states for both tenants and landlords.

Choosing Your Lease Type:

The decision between a fixed-term and a periodic tenancy hinges on what aligns with your needs and those of your tenant, the specific location of your property, and even the time of year. This is where the expertise of a seasoned property manager becomes invaluable. Leveraging their local knowledge and experience, they can guide you through the decision-making process, ensuring that you make an informed choice that caters to your unique circumstances.

Whether you’re looking for renting or leasing? Contact our OC real estate experts to better understand the current market today. 

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