Kinds of Lease Agreements: A Comprehensive Guide

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For many people, having a place to call home is a fundamental human need. However, in today’s challenging economic climate, owning a home may be out of reach for many of us. 

As a result, renting has become a popular option for those seeking the comforts of a home without the high cost of ownership. But how can renters ensure they won’t be unexpectedly evicted? Understanding the different types of private tenancy agreements is key. 

Let’s take an in-depth look at a few of the most common options.

Assured shorthold tenancies (AST)

This is the most common and popular lease agreement used in the UK and Australia. This type of agreement offers the landlord the most flexibility, and it usually lasts for a minimum of six months, although it can be longer.

The key feature of an AST is that the landlord can evict the tenant at the end of the tenancy period without giving any reason, provided they give the tenant two months’ notice.

The tenant is responsible for ensuring that the property is left in a satisfactory condition, including end of lease cleaning, before leaving. On the other hand, the tenant can leave the property at the end of the tenancy period without giving any notice.

Pros:

  • Provides flexibility for landlords;
  • Short-term leases allow for easy turnover of tenants;
  • Suitable for landlords who want to maintain control over their property.

Cons:

  • Tenants can be asked to leave at the end of the tenancy period;
  • Lack of security for tenants who want to stay in a property for an extended period;
  • Rent increases can occur at the end of each tenancy period.
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Assured tenancies

The assured tenancy helps many renters to feel more comfortable and secure. Practically it’s very close to the assured shorthold tenancy, but the only difference is that the landlord doesn’t have the right to give you an eviction notice for no reason.

The assured tenancies are usually offered to people who have lived in the property for some time and have proven that they can take good care of it. This agreement practically means that the tenants can live in the property for the rest of their lives.

Pros:

  • Provides tenants with more security;
  • Allows tenants to stay in a property for an extended period;
  • Landlords cannot evict tenants without a valid reason.

Cons:

  • Less flexibility for landlords;
  • Rent increases can be limited;
  • More difficult to evict problem tenants.

Fixed-term tenancies

A fixed-term tenancy agreement lasts for a set period, usually six months or a year. Once that tenancy period ends, the tenant can choose to renew the agreement or move out (provided that they leave the property in good condition, including end of lease cleaning).

A fixed-term tenancy agreement benefits people who want to stay in a property for a set period and landlords who want to maintain control over their property. It also allows landlords to review and increase the rent at the end of each tenancy period.

Pros:

  • Provides security for tenants for a set period;
  • Rent can be reviewed and increased at the end of each tenancy period;
  • Provides landlords with the flexibility to set the terms of the tenancy agreement.

Cons:

  • Lack of flexibility for tenants who want to leave before the end of the tenancy period;
  • Rent increases can occur at the end of each tenancy period;
  • Limited security for tenants who want to stay in a property for an extended period.
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Periodic tenancies

A periodic tenancy is an agreement that rolls weekly or month-by-month. This type of agreement is ideal for tenants who want flexibility and landlords who do not want to commit to a fixed term.

A periodic tenancy can be ended by either the tenant or the landlord by giving the required notice period, usually one month for a month-by-month tenancy or one week for a week-by-week tenancy. The rent can also be increased during the tenancy, but the landlord must notify the tenant of any rent increase.

Pros:

  • Offers flexibility for both landlords and tenants;
  • Tenants can give notice and move out at any time without penalty;
  • Landlords can adjust the rent according to market conditions.

Cons:

  • Less security for tenants, as the tenancy, can be ended at any time;
  • Rent increases can occur with little notice;
  • Less control for landlords, as tenants can leave at any time.

Fixed-term with the option to renew the tenancy agreement

A fixed-term with the option to renew a tenancy agreement is similar to a fixed-term one, but it allows the tenant to renew the lease once the fixed term is over.

This type of agreement is typically used when both the tenant and landlord want some level of certainty and stability. The fixed term of the lease can range from a few months to several years, depending on the agreement between the parties.

Pros:

  • Provides both tenant and landlord with certainty and stability;
  • The tenant can choose to renew the lease at the end of the fixed term;
  • Protects the tenant from rent increases during the fixed time.

Cons:

  • Tenants may be responsible for rent even if they move out before the lease ends;
  • Landlord may have difficulty finding a replacement tenant if the current tenant moves out before the end of the lease;
  • Landlord may decide not to renew the lease at the end of the fixed term, even if the tenant wishes to stay in the property.
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Periodic with a fixed-term tenancy agreement

This lease starts with a fixed term and then reverts to a periodic tenancy agreement once the fixed term has ended. 

The agreement benefits tenants and landlords who desire a balance between a fixed-term lease’s security and a periodic lease’s flexibility.

During the fixed term, the tenant and landlord have certainty and stability, while after the fixed term, they have more flexibility and can negotiate new terms or renew the lease.

Pros:

  • Provides both tenant and landlord with certainty and stability during the fixed term;
  • Provides more flexibility for both tenant and landlord once the fixed term has ended;
  • The tenant may be able to negotiate a lower rent for the fixed term compared to a periodic tenancy agreement.

Cons:

  • Tenants may be responsible for rent even if they move out before the fixed term ends;
  • Rent may be subject to regular increases if specified in the agreement;
  • The landlord may be less inclined to make improvements or repairs during the fixed term if they know the tenant will leave at the end.

Key takeaways

A lease agreement can include many different hooks and weird rules, but these are the basic kinds.

Also, it’s essential to note that each territory has its own tenancy laws and regulations. Therefore, it’s crucial to familiarise yourself with the laws that apply to your area before entering into any tenancy agreement.

It’s highly recommended to seek professional advice from a solicitor or a letting agent to ensure you fully understand all the terms. That can ensure a comfortable and secure living arrangement with the kind of tenancy agreement that fits your needs and preferences the most.

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