Reasons for and against renewing your lease

As the year’s end approaches, many renters with expiring fixed term leases will need to decide whether to renew their leases, continue on a periodic (ongoing/month-to-month) or give notice. This article will run through the reasons for and against renewing a fixed term lease..

5 reasons for renewing a lease:

1. Renewing your lease can be cheaper

Renewing is often much cheaper than moving elsewhere, even when similar properties are slightly cheaper. The moving process, including paying double bonds, bond claims and moving expenses can quickly add up. It is almost always makes more financial sense to stay where you are. Tip: estimate the cost of moving and you may find staying and negotiating the same rent or a reasonable increment

2. Saves time, save stress

Moving is time consuming and stressful. Booking removalists, signing new contracts, condition reports and packing up an entire house is no simple feat. With public holidays and the financial pressures of the festive season the stress of double bonds (where you have to pay your new bond before you are able to get a refund on your previous bond) is also avoided. Having to forward mail and change your address for services and subscriptions is another tedious task that can be avoided by renewing your lease.

3. More bargaining power

Long-term renters can have more bargaining power than short term renters. When a renter vacates, the landlord can experience vacancy (lost rent) as they search for a new renter. This can often take up to 2-4 weeks and can represent a considerable loss for the landlord. If you choose to renew your lease for a fixed period, you can have reasonable bargaining power to both reduce the price and allow for minor alterations to the property, or accommodate pets.

4. Reduce the uncertainty

There are many variables when you move properties, so if you’ve got a good thing, don’t let it go. One place I rented looked perfect during the inspection but once I moved in, it only took a day to realise that the property was on a popular route for ambulances and fire-engines, leading to countless nights of being woken up by sirens. The point is that if you’re moving (especially when it’s due to some minor inconveniences), it’s important to know that there are always uncertainties of moving to another property.

5 reasons against renewing your lease

1. Rent increases

Especially in the fast-paced property market of Australian capital cities, some rent increases can be just too much of a burden. If you’ve already tried using the bargaining power of a longer-term lease to no effect, then moving might not be an alright option. Just make sure to figure out the costs of moving and check them against the expected total costs of your increased rent over the course of your planned rental period.

2. Change in lifestyle

Life changes, and as it does, so does your rental needs. This can be for many reasons, perhaps you need to be closer to your new job, need a bigger place as you plan for a family or have gotten a raise and would like to live somewhere nicer. For whatever reason, you may need (or want) to move to reflect your lifestyle changes. When signing a new lease, it’s important to consider the pros and cons of signing a month-to-month (ongoing) or fixed term lease.

3. Avoid break fees

If you think your situation might change, avoid hefty break fees when you terminate a fixed term lease early. In NSW break fees can cost you up to 6 weeks rental…

4. Follow falling rents

If market rents are falling, then perhaps wait a while before locking in a lower rental for another fixed term period.

5. Easier to swap lessees

If you’re looking to sublet or swap out your lease, it’s often easier to add co-tenants to a new lease than change out a fixed term lease.

Fixed vs ongoing leases

An ongoing lease agreement can be either a written or oral contract, although it’s recommended to have any agreement in writing. An ongoing agreement is best for tenants that favour flexibility, as the nature of the contract means that only a specified amount of days’ notice is required to terminate the agreement (this can change by state, so it’s always worth checking state law). If neither party gives notice to terminate, then the contract automatically renews for the following month.

A lease agreement is a contract between a property manager and a tenant(s) that outlines the obligations of both parties. There’s typically an amount of time related to the lease. For example, February 1st to the following January 31st. This is an example of a 12 month lease.

Although a fixed-term lease is typically 12 months, the term can be for any amount of time, provided both parties agree on the start and end date (the fixed term). In some areas, local authorities are introducing fixed term three year agreements and up to five year agreements.

Long term leases benefit everyone

Long term leases benefit both tenants and owners. Renters benefit from stability, increased ability to personalise the home and fewer rent increases, along with more bargaining power when negotiating the rent. Owners also benefit by reducing damage to the property (often caused during the moving process), reducing vacancy (1 week’s vacancy is a 2% yearly loss), and having high quality tenants that are more likely to respect and care for the property as they’re in it for the long run.

Decided on moving out?

Decided on staying?