Join Australia's most dynamic and respected property investment community

What happens after lease contract ends?

Discussion in 'Property Management' started by world2160, 29th Aug, 2015.

  1. world2160

    world2160 New Member

    Joined:
    28th Aug, 2015
    Posts:
    4
    Location:
    Sydney
    I am the owner.

    What happens after the lease contract with the tenant ends? I am happy with the rental income so my preference is to renew the contract for as long as possible. My agent also charges a week's rent to renew a contract so it is in my best interest to renew for as long as possible.

    Should I call the agent and ask them to renew the contract with the tenant for another 5 years? Do people usually extend the contract for that long?

    What are the pros and cons?

    EDIT: In NSW
     
    Last edited: 29th Aug, 2015
  2. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,976
    Location:
    Brisbane
    I believe a residential lease cannot run for more than two years, but happy to hear I'm wrong.

    I wouldn't sign up a tenant for that long. What if you decide to sell, if they turn out to be not the best, if the rent rises sharply? You can write in rent rises, but if rents go up faster than anticipated, a five year lease could see you losing money every week for the remainder of the lease.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,598
    Location:
    Adelaide, SA
    Varies by state. In WA with new rules that came in this month its very easy to renew. In most other states it automatically goes onto periodic if no action taken. You want to prevent this.

    In most states the max lease is 2 yrs, most won't do more than 1 yr in reality.
     
  4. SeafordSunshine

    SeafordSunshine Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    376
    Location:
    Sydney
    Hello World,
    if the property is in NSW, after the lease has expires your tenants remain on a month to month basis. That means that all the terms and conditions continue just as they were, only , you guessed it monthly. Check what the comparable rents are for similar properties in your area, ( this is the fun bit!!) if they are higher you could ask for a rent increase with 60 days notice ! However if there is a glut of rental properties, you may find that your tenant want to move because they have found a cheaper place??? (downside) I agree with you , to sign a new lease,
    I hope this helps ( I'm not a lawyer though)
     
  5. WestOz

    WestOz Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    626
    Location:
    WestOz
    Wish we could subscribe to be emailed any changes/updates etc, how did you find out @D.T. by chance?
    Do you have a link?
     
  6. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,598
    Location:
    Adelaide, SA
    I get updates because I'm in the industry.
    Basically what happened is you can just agree to renew if all other stuff is staying the same, rather than go through another lease etc. Exact wording is:

    Regulation 5AB - Exemptions from section 27A of the Act — residential agreements not required to be in prescribed form. This regulation has now been amended by adding section (c) to allow for renewals of an existing agreement between the same parties at the same premises to be conducted in writing e.g. an exchange of letters rather than requiring a new residential tenancy agreement.

    The existing Regulation and the new section (c) are set out below:

    5AB. Exemptions from section 27A of the Act — residential agreements not required to be in prescribed form.
    Under section 6(a) of the Act it is provided that section 27A of the Act shall not apply to the following:

    (a) a residential tenancy agreement in relation to premises to which a housing management agreement applies;

    (b) a residential tenancy agreement if:
    (i) the Housing Authority is a party to the agreement; and
    (ii) the agreement provides that, or is deemed to contain a provision to the effect that, the tenant may sub-let the premises; and
    (iii) the agreement is entered into by the Housing Authority on the basis that the premises will be sub-let;

    (c) a residential tenancy agreement if:
    (i) the agreement is renewed or extended; and
    (ii) there has been no change to the parties to the agreement; and
    (iii) any material changes to the agreement are agreed in writing between the parties to the agreement.
     
    WestOz likes this.
  7. WestOz

    WestOz Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    626
    Location:
    WestOz
    Thanks you
     
  8. Nick Valsamis

    Nick Valsamis Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    504
    Location:
    Sydney
    Yes you can do a 5 year lease.

    Cons:
    - Virtually no one would agree to a 5 year lease in Sydney anyway.
    - More of the property condition will be classified as wear and tear due to the extended period of stay.
    - Have to wait long if you want to move in.

    Pros:
    - You can increase the rent every 12 months.
    - You also have a longer time for eligibility of the full break lease fee.
     
    Redom likes this.
  9. world2160

    world2160 New Member

    Joined:
    28th Aug, 2015
    Posts:
    4
    Location:
    Sydney
    Thanks for all the feedback!

    I will give the agent a call next week and get them to extend for as long as possible. Sounds like 2 years is probably more realistic though.