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person in gray tshirt signing lease- Fixed term or periodic term tenancy/

Fixed Term or Periodic Term Tenancy?

As a landlord, it’s necessary to specify whether your tenant is signing a fixed term or periodic term tenancy. Although there are similarities to each there are also some profound differences.

What is a fixed-term tenancy?

A fixed-term tenancy specifies a pre-determined tenancy date such as  six months or 12 months duration.

Although its good practice to remind your tenants that their lease is ending in 30, 60, 90 days, you are not required to provide any notice to your tenant at end of their fixed term lease.

What happens if you forget to notify your tenant of the end of their tenancy and the tenant stays beyond their 12 -month lease and you have not signed a new lease?  The lease automatically defaults to a periodic month to month tenancy.

What is a periodic tenancy?

Like a fixed term lease, a period tenancy specifies tenancy for a period of time such as week to week, month to month or even year to year.

Unlike fixed term tenancies where there is a definite end date, a periodic tenancy can carry on indefinitely until either party gives notice that is in alignment with the Residential Tenancies Act (RTA).

However, unlike a fixed term lease, of you decide you do not want the periodic tenancy to continue at the end of the lease term, you are required to provide the tenant with acceptable reasons for terminating the tenancy. Those reasons include:

  1. A relative is occupying the premises
  2. You are selling property
  3. You are demolishing the property
  4. You are making major renovations
  5. You are intending to use it for non-residential purposes

You and the tenant are also required to provide acceptable notice – this is where it gets a little bit complicated.

Acceptable notice periods for period tenancies

Notice periods vary considerably and it’s important to understand and follow the notification periods for the termination to be valid.

Weekly tenancy :

  • The tenant must provide one week of notice on or before the 1st day of the tenancy week for the termination to be effective on the last day of the tenancy week
  • The landlord must also provide  one week’s notice on the 1st day of the tenancy week for the notice to be effective at the month’s end

Month-to-month notice:

  • The tenant must provide 30 days notice on or before the 1st day of the tenancy month for the termination to be effective on the last day of the tenancy month
  • The landlord, must provide 90 days notice on or before the 1st day of the tenancy month for the termination to be effective on the last day of the tenancy month

Yearly notice:

  • The tenant must provide 60 days notice to be effective on the last day of the tenancy year
  • The landlord must provide notice on the  90th day to be effective on the last day of tenancy year

Which is better fixed or periodic?

For long-term rentals, many landlords prefer fixed-term tenancies because of the ease of terminating the tenancy. Some landlords prefer starting new tenants with a six-month fixed term lease to assess the tenant’s character, reliability, whether their payment behaviour matches their credit report, etc.

Since periodic leases offer greater flexibility than fixed leases, they work well if the landlord wants the property to be vacated and doesn’t want to wait out the fixed term agreement. Periodic tenancies work well for tenants who are buying a property or moving and don’t know the exact dates they will be vacating. Periodic leases are also popular in rooming houses where tenants do not plan to stay for years to come.

Overall, depending on the circumstances of the landlord and tenant, fixed or periodic may be advantageous. With both leases, tenants/landlords and have the right to change the lease term before renewing.

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Nelda Schulte is a property investor who is passionate about helping investors who self-manage have profitable investment properties through resources and education. If you struggle with the wrong landlord forms, or worse yet, no landlord forms check out Nelda’s 10 Essential Editable Landlord Forms that help you separate the good tenants from the bad and increase your property’s profitability.

I’d love to hear your comments about which leases you prefer, please share them.

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