Being a fundamental factor in landlord-tenant relations, it’s important to understand the difference between the two agreements, so you can choose which suits your investment property best. Here we’ve outline the difference and what we recommend for most Wellington rental properties.
Periodic Tenancy Agreement A periodic tenancy has no set end date, and continues until either the tenant or landlord gives signed written notice stating the date when the tenancy will end.
How Do Periodic Tenancy Agreements End?
A landlord must provide at least 90 days’ written notice, but can give less time (at least 42 days’ notice) in certain circumstances, such as the property is sold or the property owner or a family member is moving in.
A tenant must give at least 21 days’ written notice to end the tenancy, unless the landlord agrees to a shorter time.
Fixed Term Tenancy Agreement
Fixed term tenancy agreements have a fixed end date agreed upon by the tenant and landlord. This agreement remains in force even if the property is sold.
If the fixed-term is for longer than 90 days, the tenancy automatically becomes a periodic tenancy when the fixed term expires – unless the landlord or the tenant gives notice no less than 21 days prior to the end date to confirm that the tenancy will end on the end date in the agreement. Alternatively, they could agree to extend the tenancy.
What We Recommend
Over the years, we’ve found fixed term tenancies are usually the best option for most rental properties in Wellington. It prevents tenants leaving at random points of the year, reducing the tenant turnover rate, helping provide security and a consistent rental income for landlords.
Many landlords default to offering periodic tenancy agreements to tenants. This can cost them dearly, because in Wellington as much as 20% more rent can be achieved during the peak summer period over the winter period, and tenants on a periodic agreement can leave at any time with just 3 weeks notice. Use a fixed term agreement every time and lock in your rent for 12 months or more.
Fixed tenancy agreements not only ensure you have certainty of income but you can also get better tenants, as the more transient tenants are happy to agree that the landlords can give them 6 weeks’ notice of termination whereas the better organised tenants don’t want this – they want the certainty of a fixed end date.
Interested in receiving more advice about managing properties? Contact Paula at email@example.com call her on 04 381 8202.