When you sign a rental contract, usually it will be for a fixed term tenancy. Fixed term means that there is a period of time where you can’t move out without breaking the lease and paying the costs associated with it. In most cases people sign such contract for a year.
Imagine that your 12 months are about to end, you’re still living in that house, unit or apartment with no intention to move out, and the estate agent calls and says: “Your contract is approaching it’s termination date, why don’t you come by the office and sign a new one”. And you know what – there is one thing he forgets to mention.
You don’t have to sign a new contract. You can stay right there, continue paying your rent and not sing anything, and still be a lawful tenant because there is a thing called “periodic tenancy”.
Periodic tenancy means you are renting on month-to-month basis. In your original contract one of the clauses is about tenancy of this nature and if there is no fixed term contract signed when the original contract expired, that’s what happens. You become a periodic tenant and it’s like your contract renews itself every month.
Of course there are pros and cons to both fixed and periodic tenancy contracts.
Fixed term contract – reasons for and against
For: When you’re on fixed contract, the landlord can’t decide he wants to raise the rent next month – he has to give you a notice of 3 months and you have more time to disagree and fight that raise, if you believe it is unreasonable.
For: Should your landlord decide he wants you out, they must give you a 3 months’ notice, which is plenty of time to go and find another place to live.
Against: On the downside, if you decide to move out in the middle of your second year of renting, that would be breaking the lease and heavy costs are often characteristic for such cases.
Periodic tenancy contract – reasons for and against
For: If you were on month-to-month basis and want to move out, a simple notice of one month should be enough for you to not owe your landlord anything.
Against: If your landlord sells the house you live in and wants you out, he/she too is not required to give you more than 60 days’ notice. It can be stressful for a person to suddenly find out that they need to look for another house, find one and move in two months.
I guess this comes down to your plans and choosing the kind of rental contract depends on whether you need the freedom to move out whenever you like.