NSW Fixed Tenancy nearing end..

Apologies firstoff if this question has already been tackled.

Our scenario is we have a tenant in a house in Inner W Sydney - paying full pre-covid rent on time - whose fixed term lease expires mid Oct.

My understanding is:

• they're only required to provide 14 days' notice to vacate;
• landlord needs to provide min 30 (currently 90 under NSW covid - not sure if extended past 15 Oct though??) days notice to terminate lease with no grounds

Previously, they have been communicative - no longer the case. If we don't hear back, my PM is of the opinion we just allow them to go periodic. In any case, the window for 30 days' notice may have been missed anyway - which is a bit annoying as I'd expect my PM to be a bit more tactical..(!)

My concerns with periodic:

• potential impact when refinancing
• potential invalidation of property insurance
• 90 days' notice for no grounds eviction by landlord, even when NSW govt's covid measures lapse
• risk of tenants continually asking for rental reductions depending on local market conditions (which are ok now for houses, but can be variable week by week) - Xmas/Jan a big worry as is always "soft"

What are you thoughts? Should I put tenants on notice, or put-up and shut-up?

 

Depending upon what you call 'Inner West', some areas have high demand school zones and premiums are to be expected if you're in the right school zone at Christmas.

If the tenant vacates you'll get 'market' rent in an albeit softer market, if they stay and ask for a rent reduction, you'll get 'market' (or possibly slightly better as they don't need to move but you won't need to do works).

Check your insurance PDS whether you are covered for a tenant on holdover.

 

There's been no update yet on whether the 90 day NSW notice period will change in mid Oct. Either way, you've missed the window to terminate the lease under no grounds at the end of the fixed period, so you'll have to go periodic.

If the tenants are paying the original rent and not in arrears, then I don't think its such an issue, although the lack of communication is concerning. When was the last time your PM did a routine inspection?

To answer your questions:
- finance will just need landlord statements, they're not fussed with fixed or periodic lease
- depends on which insurer, but most that I've dealt with still offer coverage for periodic lease, check PDS or call your insurer.
- yes 90 days, but if there's no issues then you wouldn't need to evict, and if there were then you'd have other grounds
- if tenants want a rent reduction, you can compare it to current market conditions and determine at the time. You have a risk that they might leave over xmas, but we find the Sydney market pretty strong as soon as early Jan comes.

 

What is it you are trying to achieve?
Are you trying to get the tenants to vacate for some reason, or are you hoping to keep them on?

A periodic lease is still a lease so I would be surprised if it gave any major insurance and financing issues.

The tenants are paying precovid rent and appear reliable at doing so, so I wouldnt be loosing too much sleep.

They may ask for a rent reduction, but they can do that anyway before re-signing another fixed term.

There seems to be a great paranoia about periodic leases for both tenants but espeically landlords.
As I tenant I prefer periodic, and if I were the landlord I would rather have someone able to move on relatively easily than be stuck with a tenant who doesnt want to be there and just creates a headache.

My guess in your scenario is that they may be about to give two weeks notice to vacate in October anyway, or ask to re-sign with a discount.

Anecdotally PMs usually let the lease roll over to periodic and its up to the tenant or landlord to initiate another fixed term term lease if desired.
I personally wait until the day the fixed term expires and then re-negotiate terms to my liking or start shopping around for something else.

 

The period of the lease usually affects the duration an insurer will pay for rental loss. The PDS will mention this.

 

Thanks everyone for the feedback - good food for thought.

My principal concern is vacancy, but I note more 'affordable' houses in my Inner West pocket are in comparatively short supply, so it's not all doom n gloom.

I have been fortunate to-date that my tenants have typically renewed a month or so before lease expiry, which makes me suspect they're either teeing-up a low-ball offer or simply wanting greater flexibility to depart at will. Neither are particularly attractive changes to current arrangements from my perspective (!)

The PM is usually on the ball, but seems a bit weary of life at the moment, and probably thinks it's better the tenant remains in situ even if on less landlord friendly terms. They have inspected the place within the past 4 months.

 

You have until the day before the lease ends to issue EOL termination however the 90 day notice has been extended till March 2021.

If they are good tenants and you will be covered by insurance by a periodic lease (EBM and Terri Scheer definitely do).

21 days notice (if tenant provides notice after lease expiry) in most instances is better than the current break lease fee's anyway.

 

They're now thinking they'd like to re-sign 6m at existing rent (thankfully) as they apparently wanted somewhere bigger but transpires nothing much around... unless you're willing to fork out another $300 PW (!)

 

Glad it all worked out

 

I really don't understand the fear of a periodic lease. Most of our properties are on periodic & I like it that way. No issues with insurances, no issues with finance, and as @Mel Morgan said, if the tenancy turns bad, there's still ways to terminate if you really want to. I find most tenants prefer this as well, and many of mine stay long term.