Should I fix my lease or leave the tenant on a month by month arrangement?
Before reading the pros and cons about fixing a tenancy or not, there are some other points to consider that will play a great part in your decision.
Once an original fixed lease ends you cannot force the tenant to sign another lease agreement, so if they say ‘no’ there is nothing you can do. You cannot ask a tenant to vacate a property because they choose not to sign another lease agreement.
If your lease expires your tenants will automatically roll over to a monthly lease arrangement which means that they are still bound by the terms of the original lease agreement however they are not obliged to stay in the property for a fixed period At Infolio we always try to retain good tenants on fixed leases. In conducting our re-negotiations we will look at what other properties are leasing for in the current market, if for example rents have increased by say 5 % then we would look at increasing the rent by 2-3%. This allows the landlord to stay reasonably close to market rent but shows the tenant that they are being looked after in consideration of their continuing tenancy.
Fixed Tenancy – Pros:
No vacancy periods
No advertising costs
No re-letting fees
You can negotiate a lease termination date that falls in line with peak rental seasons
Fixed Tenancy – Cons:
Rental may be under current market value is you are on a consecutive lease
Difficult to move a tenant on if you are dissatisfied with them
Not as attractive to a buyer if you wanted to sell, unless it’s a property that would only appeal to an investor
Monthly Tenancy – Pros:
Rent can be increased every 6 months so long as it’s in line with fair market value (this isn’t a recommendation)
You can ask your tenant to vacate by providing 60 days notice to vacate should you wish to move in, sell or renovate
Monthly Tenancy – Cons:
Your tenant can vacate at any time by providing 28 days notice in writing
Tenant may vacate in Winter or Christmas (not an ideal time)