Prospective tenant wants 6 year lease

[Dazz]

I'd say Dazz, in this scenario (not knowing the area or the rents you are getting) you are doing way better than the tenant and they are rather silly to be locking in 6% rent increases, but well done.

Hi wylie,

The house is in a pretty average working class area, nothing flash by any stretch, a simple 3x1 brick and tile home on a big 1100sqm triplex block ....it served as our starter PPoR for 3 years, so we know it well.

It started off in Yr 1 (2010) at only $ 300 p.w. The market rate was also 300 at the time.

Since then, it jumped to $ 318pw in 2011, and we are currently getting $ 337 pw.

Next month it jumps to $ 357 pw as she enters her 4th yr of the Lease, and will finish at $ 379 pw.

Nothing stellar by any stretch, but it's OK.

Perth is expereincing some pretty crazy rent jumps, which I may be missing out on, but I'm almost guaranteed (as best as can be expected in ressy) a good rise without all of the angst and threatening to leave nonsense that goes along with normal rent negotiations.

The other good thing for me, is that the Tenant has really made the house her home, so we hardly ever hear about any maintenance problems....she just cracks on and treats the house gently. For that I am grateful.

 

[Suzy912]

Sounds unusual that they would want a 6 year lease. I guess it would be different if you knew them as an existing tenant. The worse case scenario for having shorter terms is you will loose a bit of rent for each time the agent resigns the lease, but it does give you greater flexibility.

Good luck and let us all know what you decided to do...

 

[wylie]

Thanks for your figures Dazz. I suppose the lower starting point doesn't increase as much (in actual dollar terms) and might not scare the tenant as much as the figures I quoted with our house at $525.

We once had a tenant offer to install a window air-con and make good when they took it with them. They were terrific tenants who we would have trusted to do this, but we thought it better that we install a split system for them and leave it for the next tenants. We "could" have allowed them to install the window system on the proviso that they leave it there, but I don't like them, so it is not something that would add value to the house in my opinion (especially at the front where they wanted it).

Just today I heard from a tenant who has arranged to install flyscreens to the windows (after just the other day I was saying no tenant has ever asked for flyscreens). I'm rather chuffed.

 

[Lil Skater]

Just today I heard from a tenant who has arranged to install flyscreens to the windows (after just the other day I was saying no tenant has ever asked for flyscreens). I'm rather chuffed.

Love when tenants add value on your behalf

We're in the process of getting a security door installed on the back so the cat doesn't escape if we want to air the house, and I'll be painting a few walls after the previous tenant left them a bit grubby. Landlord is quite happy, especially after the mess the last tenant did!

 

[wylie]

This same tenant called last week asking if we had a key to the triple locked security door. She wanted to check before she arranged to have a locksmith out to make it lockable.

We told her we would cover that cost, and we did that. We paid a locksmith $140 to do it on site rather than save the $60 by taking it off and getting it to their shop. She didn't mention the flyscreens at the time, and I think now she was just going to pay for it all herself.

This is the same tenant who went in a year ago and didn't want a deck built nor wanted a new kitchen we offered. She wants to stay long term, and is a fantastic tenant... a real keeper. The hard part will be to keep increasing the rent to market, but we will try to do that. If is often easier to gauge the market price when it is empty.

 

[fisherman]

That there are some exceptional tenants does not alter the fact that the owner is in effect signing away his/her few practical remedies where tenancy is unsatisfactory.

What is missing is the proved record of tenancy for long periods. If a tenant was able to provide evidence of that an owner or property manager would be more able to consider a longer term. An honest, responsible tenant would not object to shorter fixed terms to establish that record.

But at the end of the day the owner has to accept that the tenant's life circumstances can easily change. The regulations recognise that and facilitate remedies for the tenant

Whose risks are our property managers managing? The owners who they are contracted to and are paying them, most would hope. So in representing and advising the owner the property manager must be guided by best practice, whatever that is.

 

[fisherman]

[snip]
We both agreed that a new 5 year Lease would suit us both. In built fixed yearly escalations of 6% p.a.

She's just completing year 3 of the 5 year lease and still ticking along.

As a Tenant, it gives her security of tenure, and due to the laws, as usual, as a Landlord gives me nothing. But then, that's the same with all ressy tenancies.

Long Leases can be good. We had a 5 year 'trial period' though before signing ours up.

Dazz,

Is it possible for the tenant to lodge an appeal at any stage, even towards the end of the lease, to challenge rent increases that were 'too high'?

Under the Qld regulations for example it should work. But there are always those decisions by tribunals that seem counter intuitive.

 

[ozmale42]

If cashflow certainty is the objective then there is probably no difference in the upside or downside between offering a 6 year lease and fixing the interest rate on your loan for a similar timeframe. In each case if you bail you get penalised

The difference is, rents are probably more likely to head north than rates, so you should build in some rent increase after each anniversary. Thats assuming of course that you are able to enter into a resi lease for this length of time,

 

[Dazz]

Is it possible for the tenant to lodge an appeal at any stage, even towards the end of the lease, to challenge rent increases that were 'too high'?

I'm sure it would be well within the Tenant's rights to lodge a complaint with the authorities....after all, that is what the authorities have been set up for in the first place.

They would need to come armed with a bunch of "market rent" offset stats to back up their case.

However, to me, it makes a mockery of consenting adults entering a written agreement and/or contract voluntarily, to the mutual benefit of both parties, with both parties executing the agreement in acknowledgement that they understand and agree with everything in it....then a couple of years down the track one party has a whinge and tries to alter or anull the agreement because their circumstances have changed or they had a casual chat with their next door neighbour and suddenly changed their mind.

- Spent about 10 minutes perusing the RTA in my state and could not see any limitations on the length of tenure. Used the search function with various words and as with all computer help functions, came up with nought. Redwing will dig it up eventually !!

 

[sanj]

As mentioned above long leases are common in some countries but definitely not hear. My cousin leased an apartment in Singapore on a 3 or 4 year lease and in return for lower rent did some renovations to the place. I remember thinking there is no way this would be possible in Perth, renos were fairly significant from memory (might have been a new kitchen).

Have been helping some relatives find a new place to rent, just managed to find a home on a 2 year lease. I must say it was an absolute revelation dealing in the premium rental market (this was a home in Dalkeith), viewings by appointment, good service, negotiable terms etc. A big difference from the regular market im used to dealing in!

 

[tgan]

Ok guys, thought I keep you all up to date as the plot thickens!
My agent has done a bit of digging around to get the required background checks so that I can offer 1 yr only at this stage.
Heres the deal: Applicant owns a house in a new estate over the other side of melb and runs a small milk bar business in the suburb next to where my unit is. Doesnt have a rental history, not sure what the plan is with her house on other side of town (that is, dont know if its mortaged or if she will be selling it or renting it out), has some cash reserves in the bank (enough for probably on 6 months rent) and according to the tax figures her accountant has supplied, after she has paid my rent, she will only have about $150 to live off a week. Applicant according to accountant, is on a migrant visa. PM not really liking this application because is unable to get good solid info and is suggesting we decline. So, property is open for inspection again next few days.
Thx guys...loving the discussion!

 

[wylie]

Move along.... NEXT!!!

 

[DaveM]

Move along.... NEXT!!!

This +100000000

Long leases to strong applicants. You may still give this person a lease, but 6 months at a time

 

[Peterw]

On one of my own properties, when the tenants moved in last February, they said they would be there for years. Gave them 12 months, with a modest increase mid term, now told they have seperated, will be moving out. While I feel sad that the relationship has broken down, however that is the reality of things. Making plans longer than one year is unwise.

 

[mattysavager]

Sounds like your applicant might be planning on subletting your property to her milk bar employees.

It's fairly common, and they're usually fairly easy to weed out.

I'd definitely pass.

 

[fisherman]

Dazz,

Thanks you for your reply. I agree with the thrust of what you said.