Should you offer your tenant a fixed long term tenancy?

There are many advantages and disadvantages to offering a long term tenancy (i.e. longer than 12 months)

If you do decide to offer your tenant a long term tenancy agreement, it should only be for a maximum of three years. Anything longer than a three year period,  and the tenancy goes from an Assured short hold tenancy (AST) to a lease,  and there are a lot of different rules and regulations that are involved in a lease rather than an AST.

 If you do decide to only offer your tenant a 12 month tenancy,  the main advantage to this is at the end of that fixed term period you can review the tenancy agreement and its terms. Technically you are beginning a brand new contract with brand new terms. You can look at the market rate in relation to the current market values and the most recent current rental payments. You can then decide if you want to increase the rent for the term of the new tenancy, 

This is often the reason why a lot of landlords do tend to stick to the 12 month term because it does give them the advantage of being able to control the tenancy.

Also if you are not sure how long you want to keep your rental property or if you are looking to sell then a 12 month agreement may be the best way to go as you may require possession earlier.

If you opt for a much longer term tenancy  i.e. anywhere between six months and three years than this also can have its own advantages. It means that you have got the same tenant in your property for a fixed period of time. They are also tied into that contract for the term, and you have the piece of mind knowing that you are more than likely going to be getting your rent for the set period that the tenant is in the property. 

With a longer term tenancy you must decide when it may be the correct time to impose a rent increase (i would suggest every 12 months) and to do this you must ensure that you have written into your tenancy agreement the procedure that you’re going to enforce for increasing your rent and you must stick to this. You also need to get the tenants to agree that they are going to be happy with increasing their rent at a certain point. You may want to think about putting wording in there such as “increasing the rent to the current market value” rather than just having a set fee that you’re going to increase it to at that time. The reason for this is if it is above market value then of course the tenant can refuse the rent increase on the grounds that it is unfair. You must always ensure that the rent increase is fair and realistic and is in line with the average local rents.

The final point to make is that if you do have a longer term tenancy, it is even more imperative to maintain a good relationship with your tenant as it could be harder to remove them from the property when they have a fixed term contract for a 2 or 3 year period.