When setting up a tenancy, one of the first decisions you’ll need to make is whether a fixed-term tenancy or a periodic tenancy is the better fit for your property.
Both options have their advantages, and the right choice often comes down to your circumstances, your future plans, and the type of tenancy you’re hoping to create.
Let’s look at what each option means and where they tend to work best.
What Is a Fixed-Term Tenancy?
A fixed-term tenancy has a defined start and end date agreed to by both the landlord and tenant.
For example, you might sign a tenancy agreement that runs for 12 months. During that time, both the landlord and tenant are generally committed to the agreement, providing a greater level of certainty for everyone involved.
Many landlords like fixed-term agreements because they know the property is likely to remain occupied for a set period, helping provide consistent rental income and reducing the risk of unexpected vacancies.
Why Some Landlords Prefer Fixed-Term Agreements
Fixed-term agreements can provide:
- Greater certainty around occupancy
- Consistent rental income for the agreed period
- Reduced turnover costs
- Fewer vacancy periods
For many landlords, knowing a property is occupied for a set period can make planning much easier.
What Is a Periodic Tenancy?
A periodic tenancy has no fixed end date.
Instead, the tenancy continues until either the landlord or tenant ends it in accordance with the Residential Tenancies Act and the applicable notice periods.
Periodic tenancies are often chosen when flexibility is important, either for the tenant, the landlord, or both.
Why Some Landlords Prefer Periodic Tenancies
Periodic tenancies can offer:
- More flexibility when circumstances change
- Easier transitions for tenants who aren’t sure of long-term plans
- Greater adaptability for property owners
- Simpler arrangements after long-term tenants have proven reliable
They’re particularly useful when a landlord’s future plans for the property may change.
Things Don’t Always Go Exactly to Plan
One of the reasons tenancy structures are worth thinking about carefully is that circumstances can change unexpectedly.
A tenant might receive a job offer in another city. Family situations can change. Landlords may decide to move back into a property, renovate, or adjust their investment plans.
While tenancy agreements provide structure and certainty, real life doesn’t always fit neatly inside a contract.
That’s why it’s important to think beyond the next few months and consider how flexible you’ll need your arrangements to be in the future.
Don’t Forget About Rent Reviews
Another factor worth considering is how the rental market may change over time.
While Wellington’s rental market moves in cycles, it’s still important to regularly review whether your rent remains in line with current market conditions and legislative requirements.
Understanding how rent reviews work under your tenancy arrangement can help ensure your investment continues to perform as intended.
So, Which Option Is Better?
TThe honest answer is: neither.
A fixed-term tenancy isn’t automatically better than a periodic tenancy, and a periodic tenancy isn’t automatically more flexible in every situation.
The best choice depends on:
- Your investment goals
- Your future plans for the property
- The type of tenant you’re looking to attract
- Current market conditions
At Manage My Property, we help landlords weigh up the options and choose the tenancy arrangement that makes the most sense for their property and circumstances.
Need Advice on Managing Your Rental?
Choosing the right tenancy agreement is only one piece of the puzzle.
From tenant selection and routine inspections through to maintenance coordination, compliance, and day-to-day tenancy management, we’re here to help make property ownership simpler.
Get in touch with the team at Manage My Property to discuss your Wellington rental property and how we can help you get the most from your investment.