In the past it has been a common practice for New South Wales Real Estate Agencies to commence a new Tenancy with a Fixed Term Tenancy Agreement and at the end of the term, simply continue the Tenancy as a Periodic or Continuing Agreement.
When changes occur within the Residential Tenancies Act, Agents must review systems and procedures to cater for the new laws. New practices include a change in the management and control of Tenancies at the end of a Fixed Term Tenancy. The following case study will highlight the reason for the change.
Case Study:
The Tenancy rolled over to a Periodic Agreement and the Landlord was not advised that it was no longer a Fixed Term. After a period of time the Landlord had reason to terminate the Tenancy without grounds and notified the Agent to issue a Termination Notice. 90 days Notice was provided by the Agent and the Tenant promptly moved out and handed in the keys. Under S110 of the Residential Tenancies Act, in respect to a periodic tenancy, the Tenant is not required to provide any notice once in receipt of a Termination Notice and can end the Tenancy at any time during the 90 day Notice period. The Landlord was expecting at least another 90 days of rent and was upset with the Agent for not advising him of the pitfalls of a Periodic Tenancy Agreement.
Renewing a Tenancy
When a Fixed Term lease is coming to an end, we recommend considering signing a new Fixed Term lease so that you don’t find yourself in a situation similar to the case study above.
There are pros and cons for both a Fixed Term and a Periodic Agreement that affect a Landlord.
Fixed Term Agreement – Benefits to a Landlord:
- Provides security and peace of mind to the Landlord knowing they have a fixed income for the period of the Agreement.
- Enables the Landlord to forecast and budget accordingly for any expenses or refurbishment required.
- Rent increases can be written into Tenancy Agreements.
- The Term of the Agreement can end at a time where the market is at its premium, therefore giving greater control to the Landlord and Agent.
- To end a Fixed Term Agreement, a Termination Notice of 30 days is required to be provided to the Tenant. A Tenant cannot leave prior to the end of the Fixed Term but does need to give 14 days Notice if they are ending the Agreement.
Periodic Agreement – Disadvantages to a Landlord:
- The Tenant is in control and can dictate when they wish to end the Tenancy.
- The Tenant can leave at ANY time after receiving an Agent issued Termination Notice and only pay rent until the day they hand in the keys or vacate the premises whichever is the later.
- The option of increasing the rent is often missed as the Tenancy continues unless the Agency is particular about following through with monitoring all Periodic Agreements.
- Tenant may terminate the Tenancy at a ‘slow’ time therefore the Property will be vacant longer. This equates to loss of income to the Landlord.
- The Landlord/Agent has to provide 90 days Termination Notice if vacant possession is required. Once notice is received by the tenant they can move out at any time without notice.
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