Lease Renewals and Notice To Leave

Lease Renewals and Notice To Leave

If you are renting a property and your lease end date is coming up. It’s very possible at the same time your agency sends you a new lease to sign they also send you a notice to leave. The natural thing is for you to be a bit shocked and maybe a little cranky. But don’t be. There’s a very sensible reason for this they would have done this.

Here in Qld Australia it’s now best practice for property managers and landlords to send a lease renewal to a tenant and at the same time to send a notice to leave & here I will explain why. The important thing is not to be offended. If the agency is sending you a new lease they clearly want you to stay. The Notice to leave would be sent at the same time as a safely net. Here’s why…

Property managers are extremely time-poor. Prior to this becoming best practice what would usually happen is a property manger would send a tenant a new lease to sign and this would be sent way before the current lease expires. The tenant would then sit on it. Not because they are naughty. Like everyone tenants are busy too. It’s also a good reminder for a tenant that it might be time to have a look around at their options for where else they may like to move too.¬† With their current lease not expiring for some time tenants usually are not in any rush to sign and return the lease until they have had some time to consider all their options and until it’s closer to the lease end date. So for a tenant it’s in their interest to not return the signed lease so they can consider alternative options. Which seems fair enough.

Woman holding document with mouth wide open

Here lies the problem.

With this all happening, the time-poor property manager then needs to remember and make time to chase the tenant up they might do this with emails, phone calls, & SMS. It’s common at this time for the tenant to ask for a week or two to get it back to them which seems fair, then after two weeks when the lease is not returned more chasing is required, this can go on and on. Until now the lease end date is very close creating stress and pressure for both the property manager and the tenant. Now times this by over 100 lease renewals the property manager is having to deal with. Yes over 100.

 

WHAT’S ALL THE PRESSURE AND STRESS ABOUT?

Well. What you may not realise is this. When a lease ends. If a tenant decides not to renew the lease and instead vacate. The tenant needs to give the property manager 2 weeks notice via a form called a Notice of intention to leave. This is an official form notifying the property manager of the exact date the tenant will be vacating. Now for a time-poor property manager 2 weeks is not a great deal of time to get everything organised and a new tenant found, approved and ready to move in the day after the current one moves out. Pressure is now on.

 

But what if it’s the other way around ? What if the lease is ending and the property manager would like the tenant to leave ? Interestingly the property manager has to give the tenant a generous 2 months notice to vacate. Yes 2 months. So a tenant can leave with 2 weeks notice but a property manager has to give a tenant 2 months notice.

You can read more about notice periods required for a tenant or a landlord here on the RTA web site.

 

This here explains why a good property manager will give a tenant a new lease to sign way before the current lease is due to expire. Because if the tenant does not plan to renew, the property manager needs 2 months notice to get organised.

Man reading papers on couch

I still have not explained how rude it seems that the property manager has sent a new lease renewal and a notice to leave at the same time. The answer is really simple. Remember how time-poor property managers are. Well it’s an automatic safely net. RTA legislation states that if a tenant is offered a new lease to sign, it’s only valid for 5 days, after that it’s void. So technically a tenant has 5 days to return the lease signed or what ? Well if they send it back after that date it’s not even valid. Which is why a good property manager will include a notice to leave at the same time. It’s simply saying we need the new lease back in 5 days or we will acknowledge the tenants¬† intention not to sign the new lease offer and instead the notice to leave we have sent you will be valid and the vacate date will be in 2 months time.

This simple process has now dramatically streamlined things, return the lease in 5 days or vacate in 2 months. Making things really simple and clear.

I know when it’s said like that it sounds so nasty & mean. But remember the time-poor property manager. Prior to this process we would be stressed to the max continually having tenants that would promise the lease to be returned over and over to them flip at the very last minute and instead move out. Then the landlord would be extremely upset with us and want to know answers on how would this happen and why are they now losing $x a week income because the property is empty.

 

WHAT IF YOU ARE NOT HAPPY WITH THE LEASE OFFER?

The new lease you are being sent should probably be fairly similar to your previous lease. It’s possible the lease end date may have changed but the most likely thing is the weekly rental amount has increased. What’s important to know is that when we send our tenants a lease renewal offer, we have not randomly picked a figure from thin air, we have researched what the current rental market is doing and what the current rental demand is. We tell the landlord two figures, a higher figure that we would advertise the property for if the tenant chose to vacate, and a figure below this that we believe is fair and reasonable if the current tenant chooses to stay. So what tenants need to realise if they are uncomfortable paying the new amount offered then landlord would probably prefer to exercise the notice to leave and secure a tenants and the higher amount we had suggested.

Now this does not mean you can’t ask about the offer. You can. But the 5 days is ticking. If you want to bounce things back and forth for 4 days you now have 1 day left to sign and return the lease. Please realise your property manager is probably juggling over 100 lease renewals.

 

WHY DO RENTS NEED TO INCREASE AT ALL?

It’s a fair question. They need to increase for so many reasons. Properties need to be maintained. Things like dishwashers, air cons, oven, carpets all have an end of life. Air cons costs about $2,500 to replace. Carpet is around $4,000. Roofs need fixing, gutters repaired. We always have over 100 maintenance jobs in our system. But on top of that insurance goes up. It currently costs around $2,500 a year to insure an investment property. Then there is council rates, water rates and of course interest on the loan. It’s surprising how many landlords have maintenance and they just can’t afford to address it straight away. They need time to get the money together. People assume maintenance is paid from the rent but usually most of the rent goes towards the interest only payments. Yes even when interest is as low as it has been recently the amount of interest investors have to pay is huge and often more than the weekly rental amount.

 

I’ve seen the opposite happen too. Where an owner has chosen not to increase the rent, but then not be able to afford maintenance that if the rent was increased they could have.

 

PERIODIC, 6 MONTHS, 12 MONTH OR LONGER LEASES

We have a policy not to offer any leases longer than 12 months. People circumstances can change. But it’s also our policy not to agree to periodic leases. Mainly because with a periodic lease a tenant can give 2 weeks notice leaving just below the low season and the property may then sit vacate for a very long time. But remember how time-poor your property manage is. With lease end dates in place your property manager can plan for when lease end and tenants vacate versus 2 weeks notice they are leaving.

One thing to know is we are in the process of structuring our lease end dates to all be at similar times because this too is assisting us with managing the entire leasing process.

WHAT IF YOU TOTALLY DISAGREE WITH THE INCREASED RENTAL AMOUNT

As mentioned above, certainly reach out to us. But at least we’ve researched it. If you are still unhappy you can contact the RTA. RTA suggest tenants sign the lease, then request mediation, then a Qcat claim. Keep in mind if you sign a lease you do not agree with and plan to go through this process you may still be stuck paying the new lease amount.

Couple talking while moving out

NOT PLANNING TO SIGN THE NEW LEASE?

Really you don’t need to do anything. After the 5 days the notice to leave will be activated and we will start to make plans around that. But it would help to have a quick email back from you conforming this. We will then be in touch about the exit process.

If you are planning on renting somewhere else you may find our article on how to get your rental application approved which you can view here

 

HERE ARE SOME OTHER ARTICLES YOU MAY FIND HELPFUL:

How to Get Your Rental Application Approved

The Ultimate Guide to Bond Cleaning a rental property in Qld Australia

Why Real Estate Agent Hate Periodic Lease Agreements?

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