There has been an increase in talks regarding lease agreements throughout Victoria. The continuing goal by the state government to have long-term rentals more accessible due to being priced out of home ownership. Fixed term and periodic agreements are the two leases within residential rentals. Both options come with positive and negative effects, however, neither make a dramatically differing impact for your investment property.
Fixed term leases do come with security, for both tenants and landlords. This puts both parties within an agreement that secures both the rental price and the time period allocated. This can be great as it assists both parties in planning long-term and budgeting for their rent or income. It does come with risks as some tenants may need to break lease which can involve compensation from the tenants and the landlords looking to mitigate the tenant’s loss as per VCAT/legislative guidelines.
Periodic leases can be higher risk with the tenant’s ability to give 28-days’ notice to vacate at any time. It does, however, leave you with more flexibility. This is often a good option if your plans for your investment change such as wanting to gain possession for moving in or selling the property. If a tenant decides to vacate, they do need to give 28-days’ notice which is ample time for a normal re-let campaign of a property. Therefore, no matter the time of year there is less of a risk of vacancy.
You can however not force tenants into a fixed term agreement, as the legislation allows for more periodic agreements. We recommend fixed term agreements for the security of the property, however, unfortunately, this is not always possible.
If you have any questions about what sort of lease is best applicable for your property – please contact us.
For more information regarding lease agreements, please click here to be linked with Consumer Affairs Victoria.