Most residential leases in Australia cover a standard, year-long period, to be renewed at the end of twelve months. However, the Victoria State Government is currently evaluating a rental industry proposal that would allow landlords to offer tenants leases that extended from five to 10 years – a common practice in places such as European urban environments. The question is, however, is this a good thing for renters or property owners?
Impact on Tenants
Many tenants see long-term leases as a positive thing that ensures them stability and security as they work through their long-term lease assured that they will have a place to live
for years to come. However, this security is a double-edged sword, as if a tenant encounters a situation where they would have to break the lease, he could potentially be on the LOCKED IN for years of future rent, if a space remains unoccupied as the lease expires. Also, a ten-year lease means that a tenant would pay rent on a home for almost a decade with no progress made towards owning their own home.
Impact on Owners
Some property owners see value in long-term leases, as it guarantees income on a property for a much longer time. In addition, if a property owner is seeking to sell a home, it may make the property more attractive to potential buyers, as there is a built-in income stream included in the sale. However, long-term leases may ultimately mean reduced returns for property owners. A smaller buyer pool means less competition, which over the long term could reduce property value growth. In addition, long-term leases might mean that a tenant will be stuck with difficult tenants for long periods of time, unless they choose to go through the potentially costly process of tenant eviction.
What do you think about adopting 10 year leases? Let us know your thoughts!
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