Welcome to episode one of Property Management Q & A with Sam Price from Templeton Property. This week’s question is, What is the Difference Between a Fixed Term Tenancy, Fixed Term Lease, and a Periodic Lease? This is quite a common question we get asked. I heard it being asked once or twice today already, by owners and tenants alike.
In Queensland, there are two types of leases, there’s a fixed term lease, fixed term general tenancy agreement, or a periodic lease. Both have benefits dependent on the desires of both the tenant and the owners. It’s important to understand the intricacies of both so that you could make the right decision on whether you choose to have your tenants, or you choose to sign a fixed term lease, or a periodic lease.
A fixed term lease, first of all, as the name suggests, is a lease for a fixed period of time so it has a definite start date and a definite end date. This allows the tenant to have surety of tenure for that period and they have a home that they can’t be moved out of. Even, if the property is sold they are allowed to reside there until the end of the lease or the end of the contact.
It’s the most common in Queensland and, indeed, Australia. This gives a lot of security to the tenants, of course, for tenure, as well as the owner, that they have a regular income during that period and there’s no changing of tenants during that period, no wear and tear with changing of occupants and so forth.
A periodic lease, the difference being, whilst it does have a definite start date like a fixed term tenancy, there’s no end date. It’s just open, there’s no physical end date written into the lease. This gives a lot of flexibility to both the tenant and the owner. Cases where it’s most popular is if a property is for sale. The owner might choose to keep the tenants on a periodic lease so that they’re not tied in with a long term lease, in case they sold it to an owner occupier, that hasn’t got eight or 12 months lease in place that can’t be severed unless upon mutual agreement.
It allows them to market the property more widely. Also, if the property is being developed. We have two properties currently on our portfolio, which are periodic leases. One we inherited from another agency whereby the tenant and the owner came to a mutual agreement, or understanding, that it would be a periodic lease. That’s been that way for quite a long time. There’s another property that’s currently for sale, has been for some time, with another agency. It’s also went through a development approval, a building approval, and so forth.
The owner wanted to keep the options open with regards to selling the property. The tenants were happy with that, they’ve been there for another six months whilst it’s been on periodic lease and everyone’s happy. We recommend, however, to most owners, that they only entertain fixed term tenancies. Most tenants also like a fixed term tenancy as well, which makes lot of sense.
One of the big drawbacks of a periodic lease is that it can jeopardise your landlord insurance, so that’s really important, that we educate homeowners as to the positives and negatives for both types of leases, and as I said, we only have two properties on periodic. I think that’s a good number, in that it should be a very small percentage of the portfolio that is actually on a periodic lease, for the betterment of the owner and indeed, the tenant as well.
With periodic tenancies versus fixed term tenancies, one of the most important factors, other than the landlord insurance and the security of tenure, is the notice periods required from either party to end the tenancy. As we know, with a fixed term lease or indeed a periodic lease, the owner is required to give two months’ notice to the tenants, that the lease isn’t being renewed or that the periodic lease is indeed coming to an end. Two months in writing on the appropriate form, a Notice to Leave Form. With regards to a tenant on a periodic lease, they’re only required to give two weeks’ notice to the owner or property manager.
We are in the marketing game here, we’re in rental marketing, therefore, if we have a tenant advise us or the owner that we’ve got two weeks’ notice, in two weeks we have a property becoming vacant, that could cause issues. In a normal period of marketing we like four weeks at least, four Saturdays prior to the property becoming available to market the property. In this market, we’ve actually going for five weeks. Five full Saturdays to market the property before it becomes available, which we find is required.
For some properties in this current market, two weeks’ notice doesn’t give us much time at all, so we jeopardise, or the owner jeopardises having the property vacant for a period of time. That’s a big reason.
I think that’s covered the basic in’s and outs of the fixed term lease and periodic lease. If you have any other questions, please don’t hesitate to give me a call, or email me at any time or if you have any other questions just let me know. I’d be happy to answer them. Thank you for visiting. My name is Sam Price from Templeton Property. We’re Brisbane’s favourite property managers and buyers agents.
At Templeton Property, our property manager’s and buyer’s agents go above and beyond to secure the best outcomes for our clients. Discover more about we can assist you by calling us today on 07 3368 1988 or Sam Price directly on 0418 159 993 to discuss your needs.