Tenant wanting to go periodic

I have a house in the southern suburbs of Brisbane where the tenant is looking to buy a house and wants the flexibility of a periodic lease (at the end of their current lease in March). Given the current market conditions and the constant uncertainty in the market, I am reluctant to leave myself in a position where they can leave with two weeks notice.

I am going to be up for the cost of finding a new tenant whether they leave at the end of their lease or if they stay for an extra few months until they buy their own house.

Overall they have been half decent tenants that usually pay on time and the house is a bit roughed up by their kids but nothing that a really good clean or a bit of bond to patch up won't fix.

I was thinking of offering them a 12 month lease with the break clause limited to only a few weeks rent. My thinking was that would incentivize them have the house clean for inspections and gives me some buffer if they choose to walk out with two weeks notice in the middle of a QLD lockdown or similar.

Am I being too picky? Should I be accommodating at the expense of some certainty or should I just offer a standard lease and let them walk out if they don't like it?

I'd appreciate some opinions because from a financial point, I'd rather just tell them to walk and get tenants while the market is hot but I don't ever want to treat people in a way that I wouldn't want to be treated.

 

South East Brisbane or South Brisbane?

 

It's in Eight Mile Plains

 

That's South East not South. SE Brisbane shares the top spot as the area with the lowest vacancy rate in the whole of SE QLD:

Brisbane Market 2021 [QLD]

Just let them do it, you won't have trouble finding new tenants.

 

Offer them 2 options. Either a 6 months lease with higher-penalty break clause, or a 12 months lease with lower-penalty break clause.

 

After exchange of contracts it usually takes 4-6 weeks to settle on a property, plenty of time to find another tenant and you will have tenants who will cooperate in making the house available for lease. Or you can be bloody minded and they will hate you ...

 

That's assuming they give me full warning. On a periodic they can get away with not telling me until two weeks prior.

 

You stated they were half decent, just ask them to let you know as soon as contracts are exchanged and wish them luck with their house hunting [with a smile] ...

 

Do the decent thing by your tenants and in 90% of cases they will do the right thing by you.

Also remember, two can play the game if they FU over, as you or or PM control the bond disposal.

 

We semi-regularly have tenants request period leases, but we strongly prefer to avoid them. I offer a short fixed term renewal (e.g. 3 months) and in 99% of cases they're more than happy with the compromise. You aren't at risk of them leaving with 2 weeks notice and they have more flexibility than a longer lease.

 

Notice periods for ending a tenancy | Residential Tenancies Authority

 

Are you at all concerned that there is a chance they will move out later? Maybe April/May and potentially have you marketing the properties when there is a slump (if that happens)?

 

My issue with doing that is that most people are always nice and cooperative.... until it comes to money. They'll PROMISE to give you a month's notice, but you wont get more than the required two weeks if it doesn't suit them.

That said, in this market, two weeks is plenty of time, so probably not an issue now.

 

I'm curious: as a PM do you get a fee if the lease goes to periodic, as you do when renewing a fixed lease?

 

Good question, I don't charge a renewal fee. My first thought is that you'd only get paid for negotiating a new fixed term renewal, but what if the lease didn't simply "lapse" periodic and you negotiated that particular arrangement, it might have even come with a change of rent or terms? I'm not entirely sure.

 

Does it really make any difference going periodic or fixed anymore? The tenants can easily break a lease at any time without much consequence or much notice. When I signed my last lease, I specifically requested that the contract doesn't end in dec or jan because this is the hardest time to look for a new tenant. The tenant agreed at the time of the contract but they decided to just use their break lease and gave me 2 weeks notice just before christmas!

I wasn't very happy because there are less people looking during this time, and secondly, the agent was closed for 2 weeks so even if people wanted to look, they can't. But what can i do, the legislation is obviously in favour of the tenants. And their consequence was just 1 week rent for the break lease fee, while I'm losing weeks of rent with the property sitting idle (can't even open house during this time!). I'm just glad I got some notice at all, under the fixed lease, they could have told me the day before vacating and I wouldn't have been able to do anything about it.

 

I thought that breaking a fixed lease would make them liable until you found a new tenant. How did you only get compensated for 1 week?