5 Reasons To Offer A Fixed Term Lease
New landlords are usually at crossroads as to exactly which tenancy model between fixed-term lease or month-to-month lease to opt for when intending to offer their premises to let to third parties and the general public. However, this ought not to be the case anymore. That’s because the gist of the following discussion is centered on demystifying this issue by highlighting and explaining the pros of offering a month-to-month lease as opposed to a fixed term lease.
Definition of Terms
For a start, the term “fixed-term lease” simply refers to a tenancy arrangement in which the landlord and the tenant agrees on a fixed tenancy period beforehand. “Month-to-month lease” on the other hand refers to a tenancy arrangement in which there is no predetermined tenancy period and the lease is automatically renewed at the end of each month.
Pros of Fixed-term Lease
The following are the top 5 reasons to offer a fixed term lease as opposed to a month-to-month lease:
The fixed-term lease tenancy agreement by nature is very binding and has a relatively longer lifespan than its month-to-month lease arrangement counterpart. That is partly due to the fact that it involves a lot of paperwork as well as the green-light of several stakeholders within the real estate sector such as city authorities, rental tribunal, landlord, and the tenant. This binding nature coupled with its longer lifespan all combines to confer more stability and peace of mind to the landlord. The landlord who opts for this tenancy model is therefore assured of plenty of time at his disposal which he may devote to other areas of life that equally matter.
Stabilized Revenue Inflows
Fixed-term lease tenancy is cheaper since they do not require rental deposits in many cases, holds for a longer duration of time and is generally very difficult to nullify or breach. All these three factors combine to offer stabilized revenue inflows to the landlords in the long run. Month-to-month lease arrangements on the other hand are easier to nullify or breach, are more expensive, require rental deposits at all times, and hold for a very short duration of time (usually one month). Operating on a month-to-month lease arrangement model is therefore risky and less financially-rewarding in the long run. The fixed-term lease tenancy model is thus very suitable for new landlords since it enables them to recover their money very fast.
Easier Premise Management
Pieces of property that are occupied under a fixed-term lease tenancy agreement are rarely vacated. They generally remain occupied uninterrupted for a very long duration of time. This longer occupancy period allows those pieces of property to be managed with ease and maximum convenience as opposed to the month-to-month lease arrangement in which they are occupied and vacated every quite often. Consequently, it follows that a piece of property that is rented out on a fixed-term lease tenancy costs less to maintain which leads to higher profit margins to their landlords in the long run.
Improved Competitive Edge
On the whole, rental rates under a fixed-term lease tenancy agreement are generally lower than for a month-to-month lease. This low rental rates give the landlord a competitive edge over and above those other landlords who own property within the same geographical area but opt for the month-to-month lease arrangement. This improved competitive edge has the resultant impact of improving property occupancy and increasing rental revenue inflows.
As has already been alluded to above, fixed-term lease tenancy is very binding in nature i.e. it holds for longer duration and is also difficult to nullify or breach. Consequently, the tenancy agreement is highly enforceable. It is very difficult for the tenant to breach the terms of the tenancy and should such a thing happen, the various law enforcement agencies may easily intervene if notified in time. This form of tenancy agreement is therefore very secure on the part of the landlord.
The benefits of offering a fixed term lease as opposed to a month-to-month lease extend beyond the five reasons discussed above. Owing to the limitations of space, quite a number of equally important reasons had to be inevitably left out. Fixed-term lease is the tenancy arrangement that any landlord who is keen on maximizing his returns has to settle for.