Allianz Home Insurance

 

Periodic tenancy vs fixed term contract – which is best for tenants?

by Chris Lang on July 27, 2009

Parking for tenants onlyWhen 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 bases. 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 bases 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 too is not required to give you more than one month’s notice. It can be very stressful for a person to suddenly find out that they need to look for another house, find one and move in a month.

I guess this comes down to your plans and choosing the kind of rental contract depends on whether you need to freedom to move out whenever you like.

You might also enjoy:

 

{ 8 comments… read them below or add one }

Wendy Ceccolini May 19, 2012 at 6:49 am

I’m renting a home and my year lease is up at the end of June. My landlord sent me a letter to the effect of renewing a lease agreement for 6 months or 1 yr. which I don’t wish to do either. She said that if I didn’t wish to continue with either lease agreements they will begin advertising on this property for rent June 1st. Do I have to sign another lease or can I tell her I would like to go on a monthly basis?I look forward to your reply so I can make an informed decision.
Sincerley
Wendy

Reply

Chris May 21, 2012 at 5:52 pm

Hi Wendy, you don’t have to sign the lease they want you to sign, you can tell them you’d like to stay on month by month basis. Even better, write to them, make it official. It doesn’t make sense to me that a landlord who already has a tenant will start throwing money on advertising, to get another tenant. They could be just playing games trying to make you believe you have to give in and sign a 6 or 12 month lease.

Reply

Margaret May 29, 2012 at 10:35 am

Morning I am wondering if you can assist me. In march 2011 we moved into a house and was paying $750 a week no bond or weeks in advance. My obligation was to pay $3,000.00 per month to remain at the house whicj I did on the 15 of every month. In November 5 2011 we moved out of the house. On the 23 October I paid $3,0000.00 in rent which was from 15 Oct to 15 Nov 2011. We again moved on the 5 Nov 2011. I have now after some months of moving from the house have been asked to find another $1,570 in rent as the lady I was paying the money too each month as agreed has all of sudden been told by her account that 2 months had 5 weeks in the month and I should be paying the difference. As we had no Tenancy Agreement signed or Periodic Lease papers am I obliged o pay the money to her. I was told this in March 2012 4 months after we had moved out of the house. On top of that we had completely cleaned the house and left it in better condition than when we moved into it. The lady I was paying the money too thanked us for ensuring the house was spotless. Can you please give me some direction on this and am I liable to pay the money to her. I feel as we moved out on the 5 Nov and on the 23 Oct I payed for the month the lady received 2 weeks payments when we were not in he house. I await your reply. Thank tyou

Reply

Chris May 29, 2012 at 11:30 am

Hi Margaret,
If your agreement was $750 per week, then to calculate the rent per month you do

weekly rent X 52 (weeks in a year) = annual rent / 12 = monthly rent.

In your case it works out 750 x 52 / 12 = $3250 a month.
So if you were paying $3000 a month you still owe the landlord $250 for each month you’ve rented the house.
Sorry for the bad news – I know this is not what you were hoping to hear.

Cheers,
Chris.

Reply

Kyra May 29, 2012 at 8:16 pm

After 6 weeks of renting a granny flat my friend wanted to move out we where both on the lease when she was replaced by a new tenent the new tenent got a seperate lease and were told that we would both have our own as this is better.
I never got a new copy of my lease
2 weeks before our lease is up they said they wanted to charge extra for elec which was previously incl an Etta $50 a week for 2 ppl and and extra $90 for three people equaling 175 ea for 2 and 130ea for 3.
I tried to talk to them about the unfair rise as am extra $50 a wk = $600 a quarter and $1080 for 3 ppl. They said that they where well within there rights to charge that amount
I looked around for another room but could t find one in the 2 weeks now my lease is up tomorrow
Also just realized our bond was never logged with the rta
What rights do I have? can I Appel the rent rise? As now that we have seperate leases and got a 3rd person to move in it appears as a decrease when in fact it’s an increase

Reply

Chris June 2, 2012 at 1:20 pm

Hi Kyra,

the property managers could be fined for not lodging the bond with RTBA. And if there are changes to the lease you definitely entitled to a new copy – in fact I think you should even sign one.

Reply

Syamhanin March 4, 2013 at 4:06 pm

Hi Chris,

My fixed term lease have end on 7/12/2012 and my agent have offered me a periodic lease which I have signed and agree. The reason they have offered me this because the owner have decided to sold the property.

The effective date of the new agent is on 1st February 2013 and I have a given a choice to renew the lease on a fixed term with rental increase of AUD 35 per week or vacate the unit.

My question is whether I can continue my periodic lease ?
If I choose to renew the lease on a fixed term with the rental increase, what shall be the effective date of the new rental charges ?

Many thanks,

Reply

Chris March 5, 2013 at 11:24 am

Hi Syamhanin, it doesn’t seem the new landlord wants to offer a periodic lease agreement. With the old agent you didn’t even need to sign the periodic one, it continues after the fixed term lease ends, by default. But if the new landlord only wants to offer a fixed term agreement, there’s no other option, it seems. The date your rent goes up will be the date of your new, fixed term lease, should you decide to sign it.

Reply

Leave a Comment

Previous post:

Next post: