I've been renting for 20 years, always kept a tidy place, paid on time, never broken a lease etc.
I've been at my current address for three years and have been pushing for a long term lease (3 years).
The real estate agent has tried to tell me that a long term lease is "unusual" and that the landlord is concerned that something could happen that would make me break the lease such as a job change or DEATH (actual quote).
I told him that it's a bit silly to assume this when every landlord is in the same boat, if everyone thought this way then what would be the point of a long term lease as a concept to begin with?
All I am looking for is a bit of security, especially in the current rental market. I can't afford to move, love the house and when it nears the end of my 12 month lease they usually give me, I start to sweat.
So I argued my case and they've agreed, finally, which is a relief.
I read an article on The Guardian about this and this quote shocked me - "Some 83% of renters in Australia have no fixed-term lease or are on a lease of 12 months or less, while 62% feel they’re not in a position to ask for longer-term rental security." (2017)
Wow, incredible.
So what's the go landlords? Why so afraid of long term leases? Particularly if your tenant is actively pursuing one I would think it would be in your best interest to do this if they're a good tenant.
Why Are Landlords Really Afraid of Long Term Leases?
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My tenants have a two year lease and that works fine. They love the house and are good tenants so I'm happy. The real estate agent insisted on putting in a CPI rent increase in the middle.
Did you even read the topic or comments OP posted there?
You mean this:
My case was about $1800
Was from when I was a student and working casually then I think got a full time job the same financial year. So they would have averaged my full time earnings over to the part of the year I was declaring casual income, and decided I was paid too much from C'link.
@deme: Do I need to spell it out for you?
Three years ago OP received a Robodebt notice - Robodebt notoriously went back five or six years using despicable shoddy income averaging tactics.
OP received a notice from when they were a freaking uni student. That time could have been anywhere in the last ten years.
You're the one who said weren't you on Centrelink recently? with imputation that OP shouldn't have an investment property.
Dunno what your point is
You sound like you might be our landlord - we have a 2 year lease, love the house and are good tenants - we also have an increase half-way through the 2 year term! 🤔
If we take in a million migrant workers and rents go up $300 a week then any landlord locked into a three year lease under the old prices will lose out on a fortune. Landlords, or property investors more like, are convinced prices are going to go up. If they thought prices could go down then they would lock in huge leases.
Ask any kid in the country where the ez fast gains are at and they all "know" it's in housing.
Good answer, I can definitely see this being the case. They're putting in a CPI Rent clause in the contract like @Quantumcat mentioned above too.
Why not make the clause "CPI adjustment"? Not that it will ever do (or maybe it would), but in case CPI went down it will be adjusted down… Risk should be shared both ways! Especially if the chance of one happening is slim.
I hate how everything in housing is a one way street, auctions the owner can decide to not sell if the price doesn't reach their expectations, here they want to only increase based on CPI. What the (profanity) is wrong with our housing market…
To the people asking its $. I thought you could build in per annum increases in the long term lease contracts anyway. I guess the risk is the contractual increases may be out of whack vs. market.
Ultimately, I think the downside is more with the landlord in terms of long term contracts. The tenant can get out of it easier compared to a landlord enforcing an eviction. If I was a landlord, I would not want longer than 12 month leases either.
Most likely find it's the real estate. If my tenants wanted to sign a 3-, 5- or 10-year lease I'd let them.
Do you have to pay for the lease renewals every time it happens?
Ooh someone's a bit of a grumpy bum!
Some people like renting. If something goes wrong with the house, it's the landlord's problem. If bad neighbours move in next door, you can just move somewhere else.
I haven't signed a renewal for 5 years since my 12 month finished.
If you're a good tenant and the owner is reasonable there's not much point to any lease as either of you can invalidate it at any time with notice.
That's what I am afraid of, I don't know what the landlord is like, they've never even physically been to the house before and own lots of properties. I guess what I'm saying is it's a bit impersonal. I don't like the unknown. Maybe some people can live with it in the back of their mind but I struggle.
Long leases give less flexibility to landlords. In a market where the vacancy rate is low, there's is no point in landlords agreeing to long leases because they can always find tenants relatively quickly.
You can see that the opposite is true for commercial leases, where the landlords will push for as long a lease as possible, because the demand for commercial locations fluctuates greatly and it can take a long time to secure the next tenancy.I find it depressing when I see posts about "tenants from hell" that they desperately need to evict. It's no wonder when you churn through tenants that that kind of thing could happen.
True, when you find a good one, why would you not grab on with both hands
I think there are consent laws that you would have to consider beforehand
The reason that commercial leases are inevitably long term is that there just aren't that many owner occupiers looking for retail or commercial properties.
Having a long term tenant is actually a selling point if you want to sell a commercial property, because it's a guaranteed income stream. Almost nobody buys a commercial property to occupy for their business. If they have the kind of capital that would take they're better off investing that cash back into their business, not locking it down in the commercial property market.
Selling a house that is currently being rented out is different, because owner occupiers are a significant proportion of the market, and owner occupiers will often not even look at a property if someone else is living in it with 8 months left on their lease.
The other reason that commercial leases are longer is that businesses invest significant capital in fitout. They simply aren't going to rent and then spend money on a property if there's a chance that the landlord will ask them to move out after 12 months.
That's not the reality. Even in commercial you will find it hard to negotiate with the landlord something longer term unless the property was something highly proprietary or has little potential.
The idiocy of this is that there are huge vacancies in places like the CBD combined with rising cost of property ownership (ie interest rates and land tax induced by property prices). Someone is going to get margin called and it's not going to be pretty.
Those tenancies are empty because the landlords are asking for too much money. Also, CBD premises are not as attractive as they once were because of working from home.
"if i had a fixed rental contract for my rental property (which I paid $40,000 cash for in 1983) then will how will I be able to massively increase the rent to absorb the interest rate increases?" —Facebook - A group where we pretend to be Aussie boomers
Because the system in Australia is biased towards mom and pop investors. People who have a property or two as their primary investment don't want to lock themselves in because they may need to liquidate the asset.
If the owner dies and the house needs to be cashed in for the estate, or loses their job and needs the money from the house to live on, or gets divorced and actually needs a second house to live in, this is it.
This is also why they don't want to spend money on the house. It's seen as a short term and not long term investment.
Overseas most rental properties are owned by corporations who own hundreds of properties. In that case a long term stable lease is a good investment for them. As is actually maintaining their properties to a reasonable standard. The system in Australia however is stacked against renters, and against owners actually investing in the quality of their property.
I want to move into my house. A years worth of rent helps.
I read an article on The Guardian about this and this quote shocked me - "Some 83% of renters in Australia have no fixed-term lease or are on a lease of 12 months or less, while 62% feel they’re not in a position to ask for longer-term rental security." (2017)
The year of the article and you not linking the source PLUS your querying this in 2023 makes it seem like you could be living in a bunker with no means of knowing current world events yet you obviously have internet access.
I bet you're a landlord too (or rather, your parents are) and you like taking the mikey.
You're right, I'm not aware of current housing market values and such as it's not something I enjoy reading about knowing it is highly unlikely I will be purchasing a house soon.
Source:
https://www.theguardian.com/australia-news/2017/oct/14/insec…It must have been rough for you reading the ANCIENT article you now link when it mentioned housing affordability.
Well my point without stating it is that if it was that bad in 2017 I can only imagine how horrifically worse it is NOW.
Edit And those are the last figures I could find.@MasterOfJuggling: Gosh, if you're haven't caught up with things since 2017 then you dodged a bullet with COVID - that would have knocked you for 6. Don't google it now as it could be very triggering.
@MasterOfJuggling: Quite the contrary, the mack truck sized holes in certain creative posts amuse me much.
I dont get it….
If you have been renting for 20 years, you have pretty much paid someone's mortgage off. Why not buy and lose this "uncertainty" you talk of.
If it were that simple I would've already done it. Had 40k in savings a few years ago and the bank basically laughed at me, savings didn't matter as they determined I couldn't service the loan. And for reference I don't live in a major city and I am not on minimum wage, work full time.
@MasterOfJuggling: Apologies, I keep forgeting about the upfront 20% requirement.
have you tried alternative banks or going via a broker?
@Bargainitis: Yes I tried other banks with the same result. I don't know much about brokers and it didn't occur to me at the time. That money has been basically whittled away to nothing now due to unforeseen expenses.
@MasterOfJuggling: hope you find your feet again.
its hard - as its now a landlord's market, they just do what they want. I have seen 30-40% rent increases in the last 6 months. Just makes it even harder to save for a deposit. Hence why so many rely now on their parents to help them get their foot in the door.
@Bargainitis: Thanks, I appreciate that.
Both my parents are dead and didn't have a cracker to spare when they died so that's out of the question.
I've never had serious trouble getting tenants (maybe went for a month between tenants once) so don't see why a long term lease is of any benefit to me.
Have never done the 'jack up the rent like crazy' thing, have not tried to shaft tenants, but the motivation for unusually long lease terms is zero.
If you have no plans to move back into the house, I don't know why you wouldn't want long term leases. You have to pay a fee to the real estate when they sign on new tenants, and there's no guarantee the next tenants won't be terrible ones. If you have good tenants who are invested in the house and want to stay as long as possible, it is less admin, less cost, less hassle, less risk to give them a long lease. And it's a nice thing to do as well.
Not really. If you renew with existing tenants, you dont have to pay renewal fees - most agents will waive it.
The flexibility is in favour of the landlord. If you're a landlord, why lock yourself in for a long term lease when you can survey the market and adjust as you need.
Don't like the tenant? you can not renew when the 12 month is up
Market rents gone up by 20%? you can follow the market and raise rent
Tenants wants to stay? no worries, renew the lease for another 12 monthsWhere is the downside for a landlord? If the tenants likes it there, they will want to stay anyway. The hassle of moving comes at a cost too.
What is the motivation for short term leases then, if being able to charge more rent between leases isn't the motivation?
Having trouble figuring out if that was asked of me or another poster.
I just prefer to go with 'whatever is standard' rather than 'short term.' Because it's standard, and there is no meaningful upside to longer or other variations. I like 'standard' because I could not be arsed thinking about property matters and go through a property manager to handle all that stuff, and my property manager probably likes keeping things standard too- she has enough to deal with before faffing about with any unusual negotiations.
I've had two instances where we discussed proper short term leases- once was because we'd just bought the place and the seller wanted to stay for a while as they looked for a new property. So we proposed a commercial lease (if that's the term) rather than a standard residential lease that would ensure that they didn't stay past rolling 3 months. They didn't take us up on the offer despite the rental amount being what their agent had quoted at market price, and despite assuring us they didn't want to stay past a couple extra months. Then more recently because we were planning to move back in and wanted to find tenants for a six month period- worked for the new tenants as they were just basing themselves back in the area to look for a purchase.
But again, because this was a departure from 'normal' it was also a bit of a pain.
I know a lot of Landlords that haven't put their prices up to the standard market rates yet .
Silly them .
I have a 5+5 year lease.
I read an article on The Guardian about this and this quote shocked me
Honestly?
Because you could end up with a bad tenant and it makes it it a lot harder to get rid of them
Culture of absolute greed has stewed in Australia for the last 2 decades, look at the price rises starting at 1998, then at around 2007 and then again at 2016. It's not really just the land lords problem doing this it's a run off of what is happening with attaching property and yield.
The 2008 financial crisis didn't reset anything as all the banks buying up properties were bailed out. However the chooks are coming home to roost and we will see a reset of rental yield soon enough starting with commercial. European bond swaps already blew up and the people of France aren't protesting just because of pensions…… as just a preview of what is to come.
Leasing agents make money on advertising and also signing of a new fixed term lease. Could be closer to $1k. Where as their monthly fee is between 6 - 9%.
I have a long term tenant, 5 years now. On yearly but basically the rent is the same as the beginning due to covid and cost of living. Lucky I got fixed mortgage until 2017. By that time I would have paid it down.
He arranges for maintenance repairs and it is deducted from the rent.
Particularly if your tenant is actively pursuing one I would think it would be in your best interest to do this if they're a good tenant.
Why? not like they want to leave. Unless they can find somewhere else offering a long lease.
Renting a home in Australia is all about making money and investment, little about tenancy or home security. Average time spend in a rental is 18 months. Then good luck finding the next place, not to mention moving expenses. There should be tenancy protection laws for those who don't specifically sign up for a x yr/month term. Those people actually live in and treat their rental like their home, care for garden, do maintenance and even do renovations - all in discussion with owner etc. And then people have certainty! In Australia we have this Australian Dream, the Australian Necessity, to own your own home. House prices and homelessness have a lot to do with how poorly our tenancy laws and taxes are structured!
Owning a home is equally perilous, rents can go up just like mortgages do also because our system does not provide certainty. Housing shouldn't be an investment or a gamble. Banks should be able to give life long interest rates so people know what they are in for, especially in the first 10 years when they are stretched to the max. Again, another factor that effects realestate prices. Why don't we give 10 year leases, 10 year fixed mortgage rates, etc. When i say these things people jump up and down and think i want this for all contacts, but I'm just saying these options should be offered! Maybe the 10yr or indefinite contracts will be mire expensive, but at least they are fixed. Maximum mortgage fix these days is 5yrs i believe and that is a good start, i pick that all the time so i am not taking a risk because i just want a home with certainty and not an investment.
Australia has a lot to learn from other countries. I know other countries still have problems, but why do we have such a draconian realestate system???
Vote 1 wally :)
Too right Wally.
Values in Tassie went ballistic since covid was in short-pants. Our calm oasis is now flush with big island $$$.I drove past a Bentley Continental in a Launceston suburb last Friday. A bright green McLaren went past (oncoming lane) the same road in January.
Crazy times!Good thing the prices are going down. Property managers are pushing up prices though.
Sports cars in Launnie are not an unusual site. Some of those seemingly empty warehouses have plenty of them.
There's a fair few warehouses, granted.
I'd previously seen competition specials around Targa time, and rare/exotics if there was a show or something.Spotted at "peak" times lately. There's a surprising number of Tesla3/Y and other EVs about too.
@Speckled Jim: The government rebates are the best in Tassie for EVs and there's almost no waiting list for Tesla here either.
U want security…. Buy your own place!! I'm so over renters constantly complaining that they're hard done by!
Don't you think the vast majority of people who are renting would buy if they could? Read my previous comment of having 40k in savings and not being able to get a loan.
In my experience as a landlord it has always been the agent strongly discouraging looking term (greater than 12 month leases). Also different States regulate the maximum length; for example Victoria Max is 5 year lease, whereas Queensland is a max of 2 years. In the past I have had tenants in both 2 year and 5 year leases. I have always prioritised good tenants and stability over 6 monthly or 12 monthly gains.
From the agents perspective I will likely miss out on rent increases (which means they will miss out on commission) on liner leases as predicting the rent increase over the term is impossible. From that narrow perspective we give probably lost out on every one of our long term leases. However, I've had great responsible tenants who have treated our place well and have had minimal turn over, over years. Win win in an my books. But it does end up being a trade off.Same experience here. The rental management agent literally won't do leases longer than 1 year.
OP, a long term lease is actually quite risky for a few reasons:
- if there is no mechanism for adjusting rent to at least stay abreast with market price, it's very for easy to end up losing money/incurring long term negative cashflow (made very evident by the past year's rising interest rates, but there are other ways this can happen)
- even good tenants may end up bad. It's easier to get rid of a bad tenant and do it both ethically and legally by not renewing their lease. An old Director of mine had a good tenancy go bad when they got into a new relationship and the partner didn't look after the place
- even if the tenant is good, the landlord may need to sell eventually… again, much easier and less costly to terminate a lease by letting it lapse. Also easier for both parties to work towards a known end date for the lease.
Sure, a long term lease can avoid potential vacancy risks… but with a housing crisis, vacancy is a very low risk.
Additionally, no doubt you've seen all the builders going bust over the past year or so from being locked into fixed price contracts when labour and materials cost have been skyrocketing. Same logic applies to landlords… it's just different costs and risks landlords need to manage.
The average joe blogs tends to think that landlords are swimming in money when many of us are on average salaries and only got into being a landlord when they had to move out of that property but it was not desirable to sell up. The landlord can only afford to keep the property in the rental pool as long as the cashflow works out… if not, there's going to be one less property in the rental pool.
If.you have bad tenants they still get evicted! If you want to sell house you sell as a tenanted house. And the CPI indexed rent is exactly what humans need to have permanency! It is what will keep housing costs and realestate steady, and this should attract extra tax benefits more than standard neg.gearing benefits.
So yes end result is that housing may become less of an investment option in the end, but tax incentives will steer market accordingly.
Should’ve done a poll, as private landlord I would prefer long-term tenants that look after the place.
Even if they shower in the morning? What about twice a day?
I hear of plenty of 2 year leases but only one longer at 5 years. Landlords are reluctant because of doggy tenants but also and i think if the landlord decides to sell the property the new owner/landlord may be reluctant to purchase a property with a tenant with a long lease it reduces their investment flexibility.
Basically regulations favour tenants more in long term lease and that's how the market (landlord) reacts to this. I recently stay in an Airbnb and notice how good the income is and how well-maintained the property is. The same property, if leased for long term tenant, will be downgraded quickly within a few years.
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