The rental or lease agreement establishes the terms that enable the tenant rightful use of the property. In property management, it is important to understand the different types of leases or tenancy agreements. There are mainly two types of tenancy agreements:
Lease with a Fixed Term
The lease with a fixed term is the most common tenancy agreement. Such a lease will state the duration the tenant is allowed to use the property, and the time when the lease expires. The tenant may continue to use the property on renewal of such a lease. Typically, fixed termed lease is for a year or two years duration, but longer durations are also possible. Sometimes the fixed term lease can be for certain number of months to suit the needs of property management.
For instance, the lease might be for 14 months instead of the usual 12, so that the termination date coincides with termination date of other tenants. This is quite useful in property management, since all tenants will have a common termination date, on which the lease can be renewed or the tenant can vacate the property. Another consideration for property managers is to take advantage of the peak demand period for rentals. In such instances, the termination date of the lease will be during such a peak period, where it will be easy to obtain a new tenant.
In this type of tenancy agreement, the lease initially is for a definite period, and is automatically renewed if it is not terminated by the tenant or the property owner. The duration can be for a period for a week, month, or year; however, such leases are usually for month-to-month. The automatic renewing can go on indefinitely, until the tenant or property owner formally terminates the lease.
Month-to-month rental agreements are usually favored by many tenants as it is quite flexible and they do not have to worry about breaking the lease before the termination date, as it can prove to be costly. However, this type of lease works in favor of property manager or property owner as well. If the tenant is causing problems, then a notice of nonrenewal can be served, which is much easier than giving reasons and terminating a lease in the middle.
Some other types of tenancy agreements are:
Tenancy at Will
In tenancy at will, the lease will be in force until the tenant or property owner terminates the agreement. The lease can be terminated whenever either party serves a notice. However, a reasonable period is usually mutually predetermined for serving such a notice. In tenancy at will, the notice can served at any time, whereas in period-to-period agreement there is a fixed duration for giving the notice.
This is not actually a type of lease agreement, but occurs due to circumstances. This happens when the tenant continues to live on the property after the lease agreement has expired, and has not renewed the lease. This type of tenancy is quite similar to trespassing, the only difference being the person had previously held the right to use the property.