Surprise surprise, settled on an ip in Rockingham area last week and the property manager rings to inform me the tenants would like to leave as the house is now too small for them (just had twins) There lease expires late February and it looks as though they have gone ahead and leased a place somewhere else from early December..... The property manager is suggesting that we let them walk away from the lease as we will be able to increase the rent from $300 to $320 The extra $1000 a year would be nice but i am nervous about letting the property go vacant in December. She also said that if we didnt let them walk we would be forced to readvertise @$300 per week. Is there any reason why we couldnt just advertise from December to Feb @$300 and just build in an increase after? Not sure what to do here, im sure we are missing a lot of potential issues Thanks for the help
You are right to be concerned about vacancies in December and your PM is a knob! Yes, people have to move sometimes before then end of a fixed lease, but your PM should be pro-active and advertise it for lease at the earliest possible time at $300pw. The shortfall if they break lease should come from the bond. The new lease can incorporate an increase from March 2021 or anytime after (if agreed prior to sign up). Even if the increase comes after 6 months you will be better off. (6 mths @$20pw is only $520). Your tenants are liable for rent and pro-rata costs up until you get a new tenant (or late Feb per the lease).
What about the vacancy risk i would be taking on ? I would have thought less people move around december sonthe chances of being left without a tenant for 5-6 weeks would be high - even in a tight rental market Im failing to see the upside other than i did the 'right' thing by the tenant and if im lucky i might come out a few hundred in front? Another downside is that my new lease becomes renewable in December so not great for negotiations if the property manager insists on a 12 month lease
Thanks Jaydee This is kind of what i was thinking but i wasnt sure if the built in rent increase was legal Its kind of worrying that the property manager came to the conclusion that letting them walk is best for us as we could 'test' the market at a higher rent. I will see what they come back with
I always make my leases end January/February and explain to tenants why this lease is an unusual length. Most have no issues.
Hang on - what vacancy risk? Are you talking about the new tenancy ending? All you have to do is take reasonable steps to find a new tenant. It doesn't mean it has to be at the same rent. I think you're getting dud advice from your PM as to what your options are.
Are people not able to move in December? Where did this myth originate anyway? I have moved in December, and the only problem I've come across is the dearth of listings because nobody lists rental properties then. Apparently nobody wants to move when schools are out and people are often off work anyway, so now its become some sort of self fulfilling prophecy? The problem with your proposal is that is a potential tenant sees it as an eager attempt to keep increasing the rent, however true or not it may be. It's just poor marketing. It sounds like rents are going well in Perth so maybe let them move on, pick up a new lease at higher rent, and you might even feel charitable as the icing on the cake. Win-win.
vacancy risk- in the past if one of our tenants has left in december it has left us without a tenant until mid- late january
Small sample or is it typical across a wider market - could it be more closely related to agencies closing for 2-3 weeks over Christmas? People generally want to be in by Christmas but beyond that there's no impediments.
Just treat it like a normal break lease and take steps to find a replacement tenant. You can advertise at market rate and still make the usual claims. You just have to remember to reduce the claimed amount by the increased 'profit' by getting a new tenant at a higher rate. Does that make sense? Honestly you're worrying about something that isn't even an issue.
That makes sense what worries me is that the property manager has pretty much just said you have to advertise at the same rate - not provided any options like you did above she came back to me today and said she can do a rent review after 6 months
No its a bit of myth that it legally has to be the same rate. Often its somewhat risky to not do so, but where the market has clearly moved on and its easy to prove, then its fair game to increase the rent.
People rarely move over the festive season, it's been my experience for the last the 30 + years too. Most people change jobs after the festive season, and they're busy with holidays during that period.
@thatbum I am actually under the impression that you can't change any material lease terms which would make it more difficult to re-rent the property, because that would be failing your obligation to mitigate the tenants loss? Respecting your knowledge because you're usually right , my only concern is that the property will probably sit vacant over December and the tenants will be able to use the increased rent as a tasty excuse for the extended vacancy in tribunal instead of the fact that they were jerks who decided to miff off at Christmas time. I suppose there would be nothing wrong with offering a lease at $300wk till the end of the current tenants lease and then increasing to $320? Likely to annoy a prospective tenant who will feel like it's bait advertising, so your PM would need to be very upfront and good at their job, but an option? _______________________________________________________________________ Based on my current perspective, the simplest/safest option I'd say would be to break the lease, advertise at $300wk and increase in six months. I disagree with the PM's advice that you'd easily get $320wk in December, unless the property is actually worth even more than that. My experience is that enquiry in December, particularly from the second week, is about 30% or less of what you'd get at normal times.
November is a great time to advertise a property in Perth. I found January was better for my Brisbane property.
I would probably compromise and say they can leave after January 15 when it will be easier to lease at $320pw
So the general legal rule is that there needs to be "reasonable steps to mitigate their loss" - so in this content, reasonable steps to find a new tenant. Often that does mean the same rent amount, but not always. For example, in Perth right now the rental market is super crazy and it would almost certainly the case that what would be considered market rent would have moved up. But I generally do caution lessors from increasing rents on trying to find a new tenant, without being prepared with actual proof from comparables.
