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Tenants refusing to renew lease (Sydney)

Discussion in 'Property Management' started by chylld, 15th Jun, 2016.

  1. chylld

    chylld Well-Known Member

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    I have had this multiple times now... tenants refusing to renew their fixed-term lease and PM has let them roll over to a periodic lease. At least once this has resulted in trying to find a new tenant at a bad time of the year with obvious consequences.

    Is this normal behaviour for tenants, or is my PM too soft in getting them to renew? I am not seeking a rent increase, nor have any significant problems been relayed to me.

    I read in another thread that some PMs issue a notice to vacate soon after or together with the notice to renew. This seems a bit harsh to me but if that's what is recommended by the more astute investors on this forum then I need to change my approach.
     
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  2. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Tenants have the right under the act to run on a periodic lease. You cant force them, you can only refuse to renew from your end and hope the tribunal doesnt see it as retaliatory.
     
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  3. Mumbai

    Mumbai Well-Known Member

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    I would look beyond just 'tenants not renewing and have to roll on to periodic'. If it has happened with same property and different tenants, it could pay to have a look at what is stopping them from renewing the contract. There could be things at the IP that they don't like, could be things that are not fixed after repeated requests, things that are fixed ONLY after repeated requests, increase in rent on every renewal, etc.
     
  4. twobobsworth

    twobobsworth Well-Known Member

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    Yes
     
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  5. chylld

    chylld Well-Known Member

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    Not sure my post came across correctly. I'm saying that I've had multiple tenants rolling over to periodic as they did not want to renew their fixed-term lease for another 6/12 months. I want them to renew... I don't want to kick them out.

    Different tenants, different IPs, different PMs.

    So tenants in general tend to favour periodic leases over fixed-term ones?

    I guess my question now is: Is it worth risking vacancy in order to keep tenants on fixed term leases?

    @Xenia mentioned in another thread: "Definately do not just let it go to periodic, get fixed term lease or terminate."
     
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  6. Wall Street

    Wall Street Well-Known Member

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    When the tenant move to periodic lease, there may be an issue with LL insurance (as there's no current written lease)?

    Although I could be making this upo_O
     
  7. thatbum

    thatbum Well-Known Member

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    I don't think there's much you can do if you don't want to kick them out.

    On the other hand, I don't really see much problem with tenants on periodic. All other things being equal, not as good as having a fixed term lease - but not worth terminating over.
     
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  8. chylld

    chylld Well-Known Member

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    Just called my LL insurer (Westpac) and they confirmed that with no written rental agreement (i.e. periodic lease) the policy covers absolutely zero.

    Does EBM / Terri Scheer / etc cover tenants on a periodic lease?
     
  9. Barny

    Barny Well-Known Member

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    Terry Scheer will cover it. Had similar experience with one tenant. No issue with terry
     
  10. Nick Valsamis

    Nick Valsamis Well-Known Member

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    They could have given you incorrect information because you do actually have a written agreement except there that the fixed term has ended.
    Also there is nothing about this in the PDS, and provided you have a tenancy agreement with the tenant then you meet the requirement of having a written agreement as their PDS says.

    To the periodic issue. Some tenants will just want to be on a periodic lease for more freedom and that is just how it has to be sometimes.

    The problem of giving the tenants notice is that they can move out anytime during the notice period and that it would be an inconvenience for the tenant making them unlikely to cooperate.
    So not only are you guaranteed to pay letting/advertising fees again but it will also be harder to find new tenants and the property may even be vacant before you can start showing new tenants through.

    Outside of the fixed term, the notice period is 90 days which gives the tenant ample time to move out and if the tenant does not tell you before they move then it will be vacant when you start advertising.

    Before the end of the fixed term, the notice period is 30 days which is good timing to find a new tenant however, if the current tenant does not allow any open inspections then you will have to wait until the last 2 weeks of the notice period to do inspections.
    The tenant may also not be able to move out in time creating problems if you have a new tenant lined up that can't move in.

    It is also possible that the tenant will apply to the tribunal to revoke the order if you don't give the tenants a legitimate reason to look for another tenant.
     
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  11. wylie

    wylie Moderator Staff Member

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    When my son worked in PM business, they issued notice to leave with the new leases, so that the tenants either signed up for the new lease, or had been given notice to leave. It gives them incentive to sign up again.

    We are with Youi and they still cover us without a fixed term lease. They do want to be told if the lease runs into a month to month lease, but I also haven't tested this because rolling into this lease is still covered and is still a "lease" with all the rules, regulations and notice periods involved.

    Anyway, for me the downside is that if they don't sign back up, they can leave with two weeks' notice whilst I would have to give them three months (from memory). Any time within that notice period that I've given them, they can give me two weeks' notice and move.

    If I want to plan anything, sand floors, have a painter through, then I have little chance of (for example) booking a floor sander if they suddenly say "we're leaving in two weeks".

    It also avoids having a tenant leave the week before Christmas or another time that isn't best for finding a new tenant.

    The upside can be flexibility for both tenant and landlord. We have two houses on month to month leases because we will be developing the block and will need to move the houses. We've promised them we will give three months' notice but we could just as easily issue three or six months leases when we know what we are doing. We don't pay a fee to sign a new lease because I self-manage. I wouldn't want to be paying an agent to do new leases every three months if they charge a fee each time.
     
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  12. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Not exactly because if you were to give the tenants notice, then they can leave anytime during that notice period and they won't have to give any notice to you.

    If it is before the end of the fixed term you can give 30 days notice and the tenant can give 14 days notice.

    After the fixed term you will need to give 90 days notice and the tenant needs to give 21 days notice.
     
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  13. Jkat

    Jkat Well-Known Member

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    With Terri Scheer (and EBM i think) as long as you started with a lease and then it rolled over, then no problems.
     
  14. D.T.

    D.T. Adelaide Property Manager Business Member

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    Have mentioned this lots of times in other threads, don't ever enter onto periodic (every state in Australia rolls onto periodic automatically)

    The number of days varies per states, but here in SA its 28 to terminate and 28 to renew. Therefore you want to begin the process much before that, so if they don't renew on time you can still terminate. It takes good communication and negotiation skills to liaise with both the owners and the tenants (and the market) to determine what course of action should be taken and then execute it.
     
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  15. wylie

    wylie Moderator Staff Member

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    That still doesn't help if you want to arrange tradies though. And also why many PMs send both notices together. It gives both the tenant and the landlord a date to work towards.

    I hadn't checked on the notice periods before posting, so it is good to know them, but it leaves a landlord (if they allow the tenant to roll into a month to month lease situation) to have the tenant give notice on 1 December that they are leaving in three weeks.

    Nobody is going to be looking for a rental that close to Christmas unless they really are desperate. We've had a tenant move out on 22 December when my brother didn't realise the implication (and he arranged that lease). Luckily we were moving straight in to start a renovation, but even getting tradies to come and quote that close to Christmas with a view to starting work early or even mid-January was tricky.

    It is something I avoid if possible.
     
  16. bob shovel

    bob shovel Well-Known Member

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    They are still paying and happy to stay, so they may have a job that could have them up and go at any minute or a multitude of reasons. Just have the pm get decent photos so you can advertise asap
     
  17. Zepth

    Zepth Member

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    This makes no sense. A periodic lease still has a written rental agreement, the one they signed for the initial fixed term.

    Legally the only thing different between fixed and periodic is a set end date whereby you can't remove them without reason and they can't leave without penalty.

    I think you should confirm with westpac as there is a big difference between a periodic tenancy and no agreement in place.....
     
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  18. chylld

    chylld Well-Known Member

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    Yes my brain had some lugnuts loose. Just called Westpac again and they confirmed that I'm still covered after the tenant rolls over to a periodic lease. There IS a written rental agreement (the one they signed for initially, as you said); it does not magically disappear (as my post suggested).

    For now I'm happy to let them roll over to periodic, but later in the year I'll have my PM issue joint vacate/renewal notices to try and get fixed-term leases commencing at a good time of the year. (January?)

    edit: this page suggests Jan-Feb as the busiest time, followed by Jun-August. So I'll let them go periodic until mid-late October then offer 12-month renewal again, accompanied by a notice to vacate.
     
    Last edited: 16th Jun, 2016
  19. Azazel

    Azazel Well-Known Member

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    I don't think it's normal.
    PM should just be telling them it's time to sign a new lease.
     
  20. chylld

    chylld Well-Known Member

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    They did, about 3 months out from the end of the lease. The tenant didn't respond to any offers to renew, but they've always been good with payment etc....