Navigating property management: fixed term v periodic

11 May 2024

Whether you are a landlord or a tenant, deciding on the best lease arrangement will almost certainly depend on your circumstances and lifestyle.

In Perth’s current rental market, where there is unprecedented demand, an ultra-low vacancy rate and quality homes attracting near record rent prices, many prospective tenants are stopping at nothing just to get a roof over their heads.

Yet, for landlords, the decision about a fixed term or periodic lease will hinge on if you require flexibility or if you want financial security to ensure ongoing rental income.

Fixed term

Fixed-term tenancies, as the name suggests, are leases that are set for a specific amount of time, most commonly a year. This timeframe is set out in the lease agreement and will usually detail the price of the rental and timing of any rent increases.

Once the fixed term ends, the homeowner and tenant can agree to a further fixed term lease. However, if another term is not set, the lease will automatically revert to a periodic month-to-month agreement.

The biggest benefit of a fixed term tenancy is financial security. Both the owner and tenant have clarity on the investment’s earnings and their rental outgoings, respectively.

Under a fixed term lease, owners have guaranteed income and the peace of mind of being able to forecast and budget for any expenses. Similarly, the tenant doesn’t have to worry that the rental price will unexpectedly increase during the tenancy.

Periodic

If flexibility is important for your lifestyle, a periodic tenancy may be the preferred option. A periodic tenancy is a month-to-month agreement between the landlord and renter, with no pre-determined end date.

Periodic tenancies are generally ongoing until either party gives notice in writing and nominates a date when the arrangement will end.

In WA, periodic tenants must provide a minimum of 21 days written notice to the owner if they would like to end a tenancy. Tenants affected by family violence can give a minimum seven days’ notice to terminate either a periodic of fixed-term tenancy agreement and vacate immediately.

Owners can provide written notice of termination to periodic tenants if the property has been sold and the contract requires the property to be vacant at handover. In this case, the owner must provide 30 days’ notice. However, if the owner decides to end the tenancy without providing any reason, a minimum of 60 days’ notice is required.

Periodic tenancies may be preferable for owners who do not want to be locked in to a fixed term rental arrangement, particularly if they are looking to renovate, need temporary accommodation and want to move in themselves; or are looking to sell with vacant possession.

The trade-off may be that tenants want similar flexibility, so landlords may suddenly find themselves with a vacant property and no rental income.

Most importantly, having a trusted, efficient and knowledgeable property manager to guide your rental is key to any successful tenancy arrangement. Call the property management experts at Mont to discuss your options.

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