Fixed-Term Tenancies vs Periodic

by Carrie Metcalfe on Sep 03, 2024
Article appears under: iRentProperty

When drafting a tenancy agreement, the Residential Tenancies Act ( RTA) requires that it clearly specifies whether the tenancy is periodic or fixed-term. This distinction is crucial, as it impacts the rights and obligations of both tenants and landlords.

         Fixed-term tenancy: This type of tenancy has a specified end date. During the fixed term, neither the tenant nor the landlord can end the tenancy early without a valid reason (unless both parties agree). It provides security and predictability for both parties.

         Periodic tenancy: A periodic tenancy does not have a fixed end date and continues until either the tenant or landlord gives notice. This type of tenancy offers more flexibility, as either party can end the agreement with appropriate notice, but it may also mean less long-term security compared to a fixed-term arrangement.

Your iRentProperty property manager can guide you in deciding which type of tenancy is best for your situation, considering factors like the intended length of stay, flexibility needs, and financial commitments.

What are the impacts of the 2021 changes to the Residential Tenancies Act on fixed term tenancies?

The 2021 changes to the RTA were part of a broader movement to provide tenants with more security and stability in their rental arrangements. One of the significant changes was how fixed-term tenancies are handled at the end of their term.

Under these changes, when a fixed-term tenancy reaches its end date, tenants are not automatically required to vacate the property. Instead, several options are available:

• Renewal of the fixed-term tenancy: Both the landlord and the tenant can agree to renew the lease for another fixed term. This allows the tenant to stay in the property under similar conditions for a specified period.
• Automatic transition to a periodic tenancy: If neither party renews the fixed-term tenancy, it automatically rolls over into a periodic tenancy. This gives tenants more flexibility and avoids the disruption of having to move out immediately after the fixed-term agreement ends.

Once the tenancy becomes periodic, the landlord can only end the tenancy under specific circumstances, such as:

• The property owner wants to move into the rental property.
• The property requires substantial renovations.
• The property is being sold and the new owner requires vacant possession.

These changes are designed to create a fairer rental market, giving tenants more control over their housing situation and reducing the pressure to leave simply because a fixed-term lease has ended.

How to decide which type of tenancy to choose

When you join the iRentProperty team, your property manager will take the time to discuss the pros and cons of both fixed-term and periodic tenancies with you. Each type of tenancy has distinct benefits and risks that need to be considered, depending on your specific circumstances as a landlord or tenant.

Here’s a closer look at the key aspects:

Periodic tenancies:

• Pros: Provide more flexibility. Tenants or landlords can give notice and end the tenancy, provided it’s in line with the legislative requirements. This flexibility is often beneficial for tenants with uncertain plans and landlords who might want to sell or move back into the property in the near future.
• Cons: While periodic tenancies offer increased financial income security, they can also be a burden if you need to regain possession of the property quickly. For landlords, ending a periodic tenancy requires specific grounds, such as wanting to move in, renovating, or selling the property.

• Fixed-term tenancies:
  
  • Pros: Offers certainty for both the landlord and the tenant, as the terms and duration of the tenancy are clearly defined. This can be ideal for landlords who want stability and tenants who want to secure housing for a set period.
  • Cons: Less flexibility. If the property needs to be sold or the landlord wants to move back in, it can be challenging to end the tenancy before the term is up unless both parties agree or certain conditions are met.

Additionally, under the Residential Tenancies Act, the "three strike rule" for dealing with rent arrears cannot be used in a fixed term tenancy.  This could make managing rent arrears more challenging compared to a periodic tenancy, where landlords have more direct recourse.

Your iRentProperty property manager will help you weigh these factors to determine which tenancy arrangement best suits your situation. They can guide you through the complexities of rent arrears management, lease renewal, and how legislative changes impact your rights and obligations.