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We are often asked what happens when a tenant's fixed term lease period ends. In this post, we specifically address a number of questions relating to what happens to the tenancy agreement at the end of the fixed term (rather than discussing the rights and responsibilities of a tenant choosing to leave at the end of the lease).
Below, we will cover the following questions related to this topic:
1. Does the tenant need to move out at the end of the fixed term lease?
A tenant does not need to move out simply because the fixed term lease expires.
The fixed term lease period provides a level of security and comfort for both the landlord and tenant, providing assurances around the rental amount, the duration in which the rent will remain unchanged, and an indication of the anticipated longevity of the tenant in the property.
However, the tenant does not need to move out at the end of the lease period without this being specifically and correctly communicated. This requires that either the landlord or tenant provides a written termination notice to the other party with the applicable notice period required to end the tenancy.
A landlord is required to provide 30 days notice to end a fixed term agreement, while a tenant must provide 14 days notice. Further details around what must be included in the termination notice are outlined on the NSW Fair Trading website.
2. Does the tenant need to sign a new lease in order to stay in the property?
As indicated above, a tenant does not need to move out at the end of their fixed term lease unless the tenancy is terminated by either the landlord or tenant, advising the other party that they wish for the tenancy to end.
Without either party giving notice to terminate, the tenancy automatically continues as a periodic agreement. A periodic agreement is simply defined in the Residential Tenancies Act as "a residential tenancy agreement that is not a fixed term agreement".
Section 18 of the Residential Tenancies Act states that a fixed term agreement continues after the fixed term ends as if the term of the agreement were replaced by a periodic agreement, and on the same terms as immediately before the end of the fixed term.
So, if neither party gives notice to end the tenancy, and the fixed term ends, the tenancy continues on the same terms as it did at the time the fixed term lease was expiring.
3. What happens if a tenant stays on in the property without a new lease?
This then leads to the natural question - what's the difference between being on a fixed term lease and not being in a fixed term lease any more?
The most significant differences are around notice periods required to end the tenancy, and rules around rent increases.
Notice Period To End A Periodic Agreement
When in a periodic agreement (i.e. not a fixed term lease agreement), the landlord may give a termination notice at any time. Unlike the 30 day notice period to end a fixed term lease at the end of the fixed term, under a periodic arrangement the landlord must provide 90 days notice to terminate the agreement.
However, if a tenant wishes to end a periodic agreement, 21 days is the minimum notice period required.
Importantly, if a landlord issues a 90 day notice to terminate a periodic agreement, the tenant only needs to pay rent up until the date they provide vacant possession of the property. The tenant is not required to pay rent for the full 90 days of the notice period, and the date they choose to leave (and finish paying rent) could be much sooner!
Notice Period To Increase Rent
While in a typical fixed term lease agreement of less than 2 years, the landlord or agent can only increase the rent during the fixed-term if the agreement sets out the increased amount or how the increase will be calculated. The landlord or agent does not need to give the tenant written notice of the increase.
For agreements with a fixed-term of 2 years or more, the rent can only be increased once in a 12-month period. A landlord must also give the tenant at least 60 days written notice.
Under a periodic agreement, rent can only be increased once in a 12-month period, and the landlord must give the tenant at least 60 days written notice before the increase starts.
We trust this article has helped to clarify some common questions around what happens to the tenancy agreement at the end of the fixed term. If you would like to know more to assist in the management of your property, contact us today.
We provide expert property management in Newcastle and Lake Macquarie. Based in Charlestown NSW, we have been delighting property investors with our personal, professional service since 2011. If you found this article helpful or enjoyable, please subscribe or share it with someone else who may benefit.
Carnelian Property Management Newcastle NSW
We are a family-owned and run Charlestown real estate agent offering expert property management across Newcastle and Lake Macquarie.