What is the best length for a tenancy agreement?
In theory, you could issue a tenancy for any period of time as a tenancy agreement is a contract between the landlord and the tenant. Under current legislation, both sides need to agree to the terms of the agreement.
The main premise is that:
For an agreed period of time, the landlord commits to giving the tenant private tenure of a property which complies with safety legislation.
The tenant commits to paying the landlord rent each month and, upon leaving the tenancy, for any damage and dilapidation caused to the property.
If it is beyond three years, then it must be executed as a deed.
In practice, 12-month tenancies are the norm, as they strike a good balance between guaranteeing the landlord sufficient rent and giving the tenant enough freedom to leave the tenancy after a reasonable period of time.
When we surveyed 600 tenants, the majority said they would expect a 12-month tenancy. However, we also issue six-month, two-year and three-year tenancies where landlord and tenant agree.
If the tenant wants to stay after 12 months, we recommend issuing a renewal tenancy with a revised rent, based on the Retail Price Index.
But what if I only want a tenant who will stay for five years?
Despite what you read in the national media, very few tenants want to commit for five years. Most people cannot see their future that far ahead. Something to always keep in mind as a landlord is the tighter your brief for a future tenant, the harder it will be to let the property.
How long do Finders Keepers’ tenants stay for?
This changes with economic conditions, but a rule of thumb is 18-24 months. Since the 2008/9 recession, tenants have been staying longer due to the cost of moving and the difficulty of obtaining a mortgage.
The 18-24 months average is a blunt measure: many tenants move on after a year and we have live tenancies over 20 years old. We are proud when people stay for longer as it means our property management teams are doing a good job.
This is one of the 50 most asked questions in our new book: Landlord Intelligence.