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R E I Q J O U R N A L
| J U N E 2 0 1 6
P A G E 2 6
Does a tenancy have to either
be for 6 months or 12 months?
The short answer is, no.
Of course a fixed-term tenancy
does require a start date and an end
date, but no legislation requires that
the agreement has to be for exactly
six months or 12 months. Nor does
legislation require that the agreement
has to be for 26 weeks or 52 weeks.
Nor does legislation require that
the agreement is for exactly any
particular number of days!
Whilst signing up tenancies for six
months or 12 month durations has
become an industry standard, this
has not resulted from requirements in
legislation. In fact, the length of the
tenancy could be for seven months,
or nine-and-a-half months, or 12
months and three weeks. The length
of the fixed term can be as agreed
between the lessor and tenant, as
long as the start and end date are
shown in Item 6 of the Form 18a to
define the tenancy fixed term.
Establishing a tenancy end date
According to the REIQ Essential
Terms 8.9 and 8.10 on the Property
Occupations Form 6 for residential
property management, agents are
authorised to negotiate and sign
the tenancy agreement on behalf
of the lessor. The lessor is then
bound by the agreement entered
into with the tenant on their behalf.
Accordingly, before establishing a
tenancy agreement with a tenant, a
prudent agent will always provide
relevant information and advice to
the lessor to enable them to make an
informed choice and give their agent
appropriate instructions. This relates
to all aspects of the negotiation,
including the start and end dates of
the tenancy term. It is best practice to
seek and establish a client’s written
instructions.
When choosing an end date for a
fixed term tenancy, the applicant
(or existing tenant) might propose
particular dates that suit their
circumstances. The agent then
presents the offer to the client (lessor)
and seeks their instruction.
When negotiating a tenancy
agreement with any tenant, the agent
would always take into account
any special requirements the lessor
has advised, such as requiring their
property to be vacant by a certain date.
Additionally, the agent would discuss
any relevant variables with the lessor,
including the following examples:
The silly season
Consider the consequence of a six
month tenancy being signed up
towards the end of June – it’s going
to expire around Christmas time.
At that time of year it can prove
challenging to achieve normality
because of business closures, and
many people being unavailable, or
busy with Christmas and end of year
distractions. Should the tenant of a
property decide to vacate just before
Christmas, it might prove difficult
to re-let the property, which could
lead to a longer vacancy for the
lessor than would otherwise have
been the case. It might also entail
having to reduce the rent to secure a
tenant. Even if the same tenant does
decide to stay for a further term, the
tenant could well be in the stronger
position in that lease negotiation and
they may seek terms that are not as
favourable to the lessor. Because of
this, there might be a preference that
June tenancies are to be signed up for
seven month tenancy terms instead
of six month terms, just to carry
through to January before they expire.
Supply and demand
The same principle applies when
considering any other anticipated
slow letting periods, whether
they are related to public holiday
periods or just seasonal variations
in supply and demand. If an agency
recognises that certain months of the
year tend to mean high vacancies
and fewer applicants in their area,
then lessors might prefer tenancies
to be established to avoid having
agreements expire around those times.
Instead, the choice might be to select
times of high demand for tenancy
expiries – that way the lessor will be
in a much stronger position when the
time comes to re-let or renew.