As a landlord, one of the most important decisions you'll make when a lease expires is whether to offer a new fixed-term lease or allow the tenancy to continue on a periodic basis.

While both options have their place, understanding the advantages and risks of each can help you make an informed decision that protects your investment.

What is a Fixed-Term Lease?

A fixed-term lease has a defined start and end date, commonly 6 or 12 months. During this period, both the landlord and tenant have certainty about the arrangement.

Benefits for Landlords

• Greater security of rental income.

• Reduced vacancy risk.

• Clear lease expiry date for future planning.

• Tenants are generally more committed to the property for the agreed term.

Benefits for Tenants

• Security of tenure.

• Protection from unexpected changes.

• Confidence to settle into the property long-term.

What is a Periodic Lease?

A periodic lease is an agreement with no set end date and often follows the expiry of a fixed date lease. The tenancy simply rolls over from one rental period to the next.

While this provides flexibility, it can also create uncertainty for both parties.

Benefits of a Periodic Lease

• Greater flexibility for landlords and tenants.

• Suitable when future plans are uncertain.

Potential Risks for Landlords

One of the biggest considerations is that tenants can provide short notice if they decide to move out (14 days as per legislation in Tasmania). This can leave landlords facing an unexpected vacancy and the costs associated with finding a new tenant.

Vacant properties not only mean lost rental income but can also result in additional advertising costs, cleaning, maintenance and letting fees.

Is a Shorter Fixed-Term Lease a Good Compromise?

For landlords who want some flexibility without the risks associated with a periodic tenancy, a shorter fixed-term lease can often be an excellent middle ground.

For example, a six-month lease provides security of income while allowing landlords to review market conditions and future plans sooner than a traditional 12-month agreement.

What Should Landlords Consider?

When deciding between a fixed-term and periodic lease, consider:

• Your long-term plans for the property.

• Current market conditions.

• The quality and history of the tenant.

• Potential future renovations or sale plans.

• Your tolerance for vacancy risk.

Our Recommendation

Every property and tenancy situation is different. However, for most landlords, a fixed-term lease provides greater certainty and helps minimise the risk of unexpected vacancies.

If flexibility is important, a shorter fixed-term lease may provide the best balance between security and adaptability.

If your lease is approaching expiry and you're unsure of the best option, our team would be happy to discuss your circumstances and help you develop a strategy that protects your investment while maintaining a positive relationship with your tenant.

Thinking about renewing a lease? Contact MIX Property Group for tailored advice on your investment property.