Advantages/ Disadvantages to Long term Lease?

[shanti]

We have a rental on the North Shore that has attracted some interest. Some of the prospective tenants are interested in a lease longer than 1 year.
1. Please can i have some advise as the the advantages and disadvantages of this -or is this just an attempt for a prospective tenant to to give themselves an advantage?
2. Can a long term (24 months) TA incorporate rental increase e.g. an annual increase of X amount?

All advise welcome.

Thanks

[brendan]

We have a rental on the North Shore that has attracted some interest. Some of the prospective tenants are interested in a lease longer than 1 year.
1. Please can i have some advise as the the advantages and disadvantages of this -or is this just an attempt for a prospective tenant to to give themselves an advantage?
2. Can a long term (24 months) TA incorporate rental increase e.g. an annual increase of X amount?

All advise welcome.

Thanks

We have all our tenants on fixed term tenancies, but usually 12 months so we don't increase the rent during the tenancy, instead offer the option to resign a new tenancy at a new rate.

To increase rent during a fixed term tenancy, Residential Tenancies Act 1986 (Oct 2010 version) section 24 (page 45) says you need to add a prevision to you tenancy agreement to allow the rent to be increased, and gives you 3 options in schedule 1 (page 173).

[buxlo122]

I don't like the fixed tenancies as they are more advantageous to tenants the landlord.

You just need to explain to the tenant that you are a long term investor that want a tenant in for as long as possible. A fixed or periodic tenancy does not change that fact. However you also want a good tenant that pays rent on time, doesn't damage the property etc... and if the tenant does not make the grade you need the power to evict them.

The other factor is if a tenant wants early out of a fixed tenancy realistically you will let them break it and get new tenants rather than fight them in court.

While it is possible a 24 month tenancy sounds good on paper. But imagine a 24 month tenancy with a slow paying B grade tenant.

[shanti]

We have all our tenants on fixed term tenancies, but usually 12 months so we don't increase the rent during the tenancy, instead offer the option to resign a new tenancy at a new rate.

To increase rent during a fixed term tenancy, Residential Tenancies Act 1986 (Oct 2010 version) section 24 (page 45) says you need to add a prevision to you tenancy agreement to allow the rent to be increased, and gives you 3 options in schedule 1 (page 173).

Thank you Brendan. The attraction to have a fixed income for a long term is attractive but i was worried as to whether the rent could be increased.

[shanti]

I don't like the fixed tenancies as they are more advantageous to tenants the landlord.

You just need to explain to the tenant that you are a long term investor that want a tenant in for as long as possible. A fixed or periodic tenancy does not change that fact. However you also want a good tenant that pays rent on time, doesn't damage the property etc... and if the tenant does not make the grade you need the power to evict them.

The other factor is if a tenant wants early out of a fixed tenancy realistically you will let them break it and get new tenants rather than fight them in court.

While it is possible a 24 month tenancy sounds good on paper. But imagine a 24 month tenancy with a slow paying B grade tenant.

Thank Buxlo122. I was under the impression that a 12 month tenancy is desirable but yes I would NOT want a B-grade tenant who made life difficult. Any tips on how to vet out the prospective tenants? We have sent out a TINZ-like application form and tried to invite just those who made the short list to come and view ( non smokers, no pets, good jobs etc).

[Keys]

But imagine a 24 month tenancy with a slow paying B grade tenant.

Easy enough to get rid of them, if a bit time consuming. Say 4 months.

[buxlo122]

Ask for annual income, number of dependants, place of employment, part time / full time / contract, current level of credit card debt or HPs.

finding out how they will service the rent is more important than historic credit checks.

[brendan]

I don't like the fixed tenancies as they are more advantageous to tenants the landlord.

You just need to explain to the tenant that you are a long term investor that want a tenant in for as long as possible. A fixed or periodic tenancy does not change that fact. However you also want a good tenant that pays rent on time, doesn't damage the property etc... and if the tenant does not make the grade you need the power to evict them.

The other factor is if a tenant wants early out of a fixed tenancy realistically you will let them break it and get new tenants rather than fight them in court.

While it is possible a 24 month tenancy sounds good on paper. But imagine a 24 month tenancy with a slow paying B grade tenant.

We love fixed term tenancies as they are win-win for the landlord and the tenant. The tenant get's security, and as the landlord I know that provided the tenant is good, I have them locked in for a fixed term. 5 of our properties are on the North Shore.

If the tenant doesn't pay the rent on time, we give them a 14 day letter the day after the rent is due. We haven't had to take anyone to tenancy tribunal in about 10 years, but if they were behind we could get tenancy broken same as a fixed tenancy.

If the tenant want's to leave before there tenancy agreement, "Fixed-term tenancies may be ended early by the agreement of all the parties to the tenancy" (see http://www.dbh.govt.nz/prevention-ti...d-term-tenancy). We always allow tenancy to end their tenancy early, provided we have found another tenant, and the tenant pays for the advertising on trademe. Until those two conditions have been met, we don't agree to the fixed tenancy being ended.

Using fixed term tenancies, we haven't had a vacant day in many years in our North Shore properties (unless we deliberately wanted a gap to do improvements).

Brendan

[mattinvestor]

I only rent out my property for up to 12 months with the possibility to resign the lease. I think it is the best option since than I will know for sure if tenants are good and can pay their rent on time.

[buxlo122]

We love fixed term tenancies as they are win-win for the landlord and the tenant. The tenant get's security, and as the landlord I know that provided the tenant is good, I have them locked in for a fixed term. 5 of our properties are on the North Shore.

If the tenant doesn't pay the rent on time, we give them a 14 day letter the day after the rent is due. We haven't had to take anyone to tenancy tribunal in about 10 years, but if they were behind we could get tenancy broken same as a fixed tenancy.

If the tenant want's to leave before there tenancy agreement, "Fixed-term tenancies may be ended early by the agreement of all the parties to the tenancy" (see http://www.dbh.govt.nz/prevention-ti...d-term-tenancy). We always allow tenancy to end their tenancy early, provided we have found another tenant, and the tenant pays for the advertising on trademe. Until those two conditions have been met, we don't agree to the fixed tenancy being ended.

Using fixed term tenancies, we haven't had a vacant day in many years in our North Shore properties (unless we deliberately wanted a gap to do improvements).

Brendan

Awesome, two oppersite strategies yielding similar results. I guess it comes down to personal preference and how you want to manage your tenancies.