One of the most common questions among tenants is whether to opt for a long or short-term lease. Let’s look at some of the benefits and differences of each to help you make an informed decision.
A lease is an agreement between tenant and landlord regarding the occupation of a property. If you are a tenant looking for rental accommodation, one of the first decisions you will need to make is regarding the duration of the lease, i.e. will it be the short or long-term?
A short-term lease generally refers to a lease that is either month-to-month, for three months or anything up to six months, while a long-term lease is anything longer than six months. A good quality lease depends on the relationship between you and your landlord, so it is in both party’s interest to compromise and negotiate terms that will suit you both.
Short Term Leasing
Short-term lets can be a cost-effective alternative to staying in a hotel, guest house or serviced apartment. A short-term lease can be for anything from a few weeks up to six months. Short let properties can come furnished and ready to move into, partly furnished or unfurnished. Tenants will usually find short-term rental options in areas where the demand for space exceeds availability, giving landlords a large pool of potential renters to choose from when the short-term lease is over. This increases the landlord’s chances of maintaining occupancy of the premises and enjoying ongoing rental income. Landlords will also be more willing to agree to short-term leases when demand is high as this will enable them to increase the rental cost with each new lease.
Short-term leases are ideal for tenants who are:
- in an area for business reasons and need temporary accommodation
- relocating for a job
- visiting friends or family for an extended period
- moving around the country for different work projects
- overseas travellers on a short or medium-term visa
- awaiting the completion of a sale
- renovating a primary property
Short-term leases may be more suitable for tenants who are:
- Looking for flexibility – For tenants who are not sure of their future plans or who do not plan on staying in an area for too long, short-term leases offer flexibility. Tenants are able to scale up or down or move locations sooner than if you were locked into a long-term contract.
- Trying to limit costs – If your lease is month-to-month, there is no charge for breaking your lease. If you sign a long-term lease, you are legally responsible for rent payments for the duration of the lease, whether you live there or not. Month-to-month leases allow you to pack up and go at a moment’s notice.
- Looking for convenience – If it turns out that you want to stay put, speak to your landlord, who may be interested in extending your short-term lease into a longer-term arrangement. This saves you the trouble of having to look for new accommodation or potentially having to reapply for a new place.
On the other hand, short-term leases may not be suitable for you because it:
- Lacks security and stability – If stability and security is what you seek, a longer-term lease may be a better option. Tenants who plan on staying for a longer period may end up paying too much when renewing the lease, while those with a family may find the instability frustrating and impractical.
- Can affect your credit – Every time you apply for a lease, your landlord will pull up your credit history, and the more times that report is accessed, the more it can negatively affect your credit score. It can also be a warning sign to prospective landlords that you live an unstable lifestyle.
- Incurs relocations costs – Changing locations after each lease can incur high relocation costs.
Long-term leases are ideal for people looking to base themselves in an area for an extended period. Long-term leases offer more stability for people looking to put down roots long-term. There is also sometimes the option to choose a fully furnished, partly furnished or unfurnished property.
Some reasons for considering long-term letting include:
- Reduced frequency of moving
- Long-term value and security
- Establishing a family, or enrolling in a place of school or university
- Temporary employment becomes permanent
Long-term leases are well suited to tenants who:
- Are looking for stability – Long-term leases are ideal for tenants wanting to firmly establish themselves in a specific location. A long-term lease also gives the tenant peace of mind in knowing what their living arrangements will be for the duration of the lease. It also protects the tenant from having to move if the premises are sold or if lease renewal is not an option.
- Make long-term financial plans – Long-term leases allow you to calculate your rental expenses over the long-term and make proper provisions. When it comes to fixed-term leases, a rental adjustment is only allowed at the end of the lease when you renew, so you know exactly how and when to budget for any upcoming increases.
- Enjoy flexibility – Tenants may find that landlords offering long-term leases are more willing to compromise on other lease terms like a rent-free period, renovations, or a sub-lease option.
Long-term leases involve:
- More complex, in-depth negotiations – The application process for long-term rentals can be lengthy, complex, and competitive as the lease negotiations need to be in everyone’s best interest for the long term.
- Fixed-term, legally binding contract – Tenants are legally bound to the terms of the lease, including paying the rental whether you live there or not. Once a long-term lease is signed, there is very little wiggle room to get out of the contract should unforeseen circumstances arise.
Which is Better?
Choosing a short or long-term lease will depend on your individual circumstances. While short-term leases are a convenient option for tenants looking for flexibility, long-term leases will provide greater stability, security of income, and less hassle in terms of looking for new accommodation.
Are you looking for expert advice on short and long-term leases? Speak to a consultant at Douglas and Gordon today.