What's the difference between a fixed-term and periodic tenancy?

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Once you’ve found a great tenant for your property, it’s important to understand the different tenancies available and consider which will best suit your investment needs, before signing a tenancy agreement.

Tenancy agreement types

In simplest terms, the types of tenancies are as follows:

A periodic tenancy is one that continues until either the tenant or the landlord gives written notice to end it. 

A fixed-term tenancy only lasts for a set amount of time - for example, one year. The amount of time must be written on the tenancy agreement.

A short fixed-term tenancy is one that lasts for 90 days or less, and these have their own special characteristics.  

Renewing a tenancy

Periodic tenancies continue on indefinitely without needing to be renewed. 

While a landlord is not legally obligated to renew or extend a fixed-term tenancy, they can be renewed or extended for a further fixed term if both landlord and tenants are happy with that arrangement.

This agreement must be in writing, and either party needs to be clear on what their intentions are no later than 3 weeks before the end of the fixed-term tenancy.

Ending a tenancy

With a periodic tenancy, tenants must give 21 days’ written notice to end the tenancy, whereas landlords must give either 42 days' or 90 days’ written notice depending on the circumstances. 

Neither landlord nor tenant can give notice to end a fixed-term tenancy early, so both parties must be sure they want a fixed-term before they sign the tenancy agreement.

Tenants should also carefully consider who they choose to live and share a fixed-term tenancy with, as they may not be able to get out of the tenancy if they fall out with one of the other tenants.

If either party wants to end the fixed-term tenancy early, there are a couple of options:

  1. Tenancies can only be changed if the landlord and all the tenants (everyone named on the tenancy agreement) agree. So if either party wants to end the fixed-term early, they can approach the others to see if they’ll agree. Any agreement should be in writing, clearly stating what’s been agreed to, and each party should keep a copy

    The landlord may charge a fee for ending the fixed term early. These fees should only be their actual and reasonable costs. The landlord may also require you to continue in the tenancy until a suitable replacement tenancy has been secured.

  2. If an owner would like the fixed term tenancy to finish early - for example, if they wanted to sell the property as vacant possession - then they would need to consult with the tenants. The tenants are not obliged to move, however they may be able to come to an arrangement.  

Short fixed-term tenancies

Short fixed-term tenancies and fixed-term tenancies - there is a big difference! It is important that if you are entering into a short fixed-term tenancy, both the owner and tenants need to know what the implications will be. 

For example, as it is for a short period of time, the property does not need to be a fair representation of what the market rent should be. The rent cannot be increased, and neither party can provide notice. 

At the outset of a short fixed-term tenancy, both parties must agree in writing that the tenancy will not go beyond 120 days. If the fixed-term is extended or renewed and the total term exceeds 120 days, the tenancy automatically becomes a periodic tenancy when the fixed-term expires.

In summary

Often, determining whether a periodic or fixed term tenancy is best suited to you can come down to the area, situation of both parties, or even timing in the year.

This is where a property manager can use their local knowledge to provide you with the correct guidance, helping you to make an informed decision.

Need help managing your rental property?

Whether you have a periodic or fixed-term tenancy arrangement with your tenants, you can be confident that Barfoot & Thompson will take the utmost care of your property. Find out how easy it is to get started.