Month by month tenancy?

We have only been property investors for almost 12 months, so new at the game. We have had some good tenants in our home for the past almost 12 months and have asked what their intentions are after the twelve month lease expires. They have said that they wish to stay but would like a month by month tenancy. I'd like to know the advantages and pitfalls of agreeing to such a tenancy. We have LL insurance - will it affect that? We lease our property through an agency as well.
Thanks, in advance.
Jacinta
 
advantages, you can increase the rent given the right notice period, if it were fixed term and fixed rent then you would need to wait until the end of the term.
No lease renewal fee from the estate agent...
Disadvantages, they can give notice to vacate at a time that doesnt suit you, for most areas thats just before christmas.

I tend to prefer fixed term. When tenants ask for month to month it means they are thinking of moving on....
 
Check your insurance. Our landlord insurance requires that we have fixed period tenancy. When we have had times when tenants have wanted to look for a house to buy, or some other reason to want a short continuation of a tenancy, we have given then a three month (or whatever they want) lease. That covers the "fixed period" required for landlord insurance.
 
Make sure you look through to see what you insurers will cover for.

Of note: is you have tenants in periodic leases and you need to make a claim on loss of rent - the period covered may dramatically decrease.
 
Does the rental demand fluctuate in the area your IP is located? If it doesn't, and you can sort out the LL insurance issue, then there is no downside to keeping good tenants on their preferred month-by-month status.

It is a different story if seasonal demand varies. We have an IP on the Sunshine Coast with a pool and very close to the beach. We only lease with a finish date in January as at that time we can lock in top rental rates with minimal vacancies. It is a very different story in July.
Marg
 
I tend to prefer fixed term. When tenants ask for month to month it means they are thinking of moving on....
I definitely prefer fixed term, too, but I disagree that month-to-month means they are thinking of moving on. As a tenant I always wanted month-to-month so that I had the flexibility of leaving at a date that suited me. Even if on 15 June 2010 I knew that I'd be staying until June 2011, I wouldn't want to sign a fixed-term one-year lease because I'm unlikely to know what date next June I'll want to move out. Let's say that I'm going to find out in April 2011, which date in June I'm moving (common scenario in Defence Force).

If it turns out I'm moving on 3rd June, there's no obligation on the landlord to agree to release me early, and I'd have to pay for two weeks when I'm no longer living there. Or I find out that I'm moving on the 30th June, and the landlord might decide not to extend the fixed term to the 30th, in which case I have 15 days' gap where I have to either couch surf or pay for a hotel.

So it's the inflexibility of committing to a particular date more than a year ahead, which I found extremely undesirable with regard to fixed-term leases from a tenant's perspective, not because I was looking to move out in the near term.
 
you can increase rent on fixed term if you have the right clauses in your contract with the tenants.

There are no real benefits of periodic leases except having the ability to terminate the lease withing 60 days. Good for properties that are waiting to be redeveloped.

Most insurances do not honour rent default claims on periodic leases.
 
It depends on where your IP is located. In some places like ACT, you still have to give 26 weeks notice on a periodic lease and the tenant only has to give 3 weeks and some places you can't put a rent increase clause in the contract. Some l/l insures on periodic tenancies after they have been in a fixed term agreement. Further, in some states, you can't force them onto a fixed term tenancy if they don't want to...of course many tenants don't know that...
 
advantages, you can increase the rent given the right notice period, if it were fixed term and fixed rent then you would need to wait until the end of the term.

Actually in Victoria you can only increase the rent once every six months, even with a periodic tenancy: http://www.austlii.edu.au/au/legis/vic/consol_act/rta1997207/s44.html

No lease renewal fee from the estate agent...

Why waste money on an agent? Just fill in the form from Consumer Affairs Victoria, including any special conditions (changing smoke detector batteries, light globes, etc) and ensure both you and the tenants have signed copies: http://www.consumer.vic.gov.au/CA2...esidential_Tenancy/$file/TenancyAgreement.pdf
 
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