Lease Renewal Fees and why they are charged
It’s a common question about Brisbane property management: Why do agents charge a lease renewal fee? No doubt there’s many aspects of your job that someone outside your industry wouldn’t easily understand, and ours is no different. Some investors might think a lease renewal is simply the agent sending an email to the tenant…. however that’s far from the truth!
Managing an investment property is a detailed and complex task with a number of pieces of legislation to be considered. It takes a lot more than many people would consider and is not only about physically maintaining the asset, but also about ensuring the client is receiving the highest and best possible return. The simplest and best way of doing this is to ensure your vacancy period is minimal, as a property sitting vacant for 2 weeks is the equivalent of a loss of $20/w for a $500/w property and many investors do not consider this risk when purchasing. Mitigating the vacancy risk is of utmost importance to our agency and, once we find them, keeping good tenants in place is how this is achieved.
I have broken down the process of what goes into getting that next lease for your property. More than 2 months prior to the lease ending your property manager contacts yourself and the tenants to obtain intentions from both parties (there’s a reason for this timeline to ensure compliance with the Residential Tenancies and Rooming Accommodation Act). For investors they could be selling, renovating, keeping the tenants in place, whilst the tenants are going to be either moving, staying or undecided dependent on the appeal of other rental homes or potentially a price change.
Once we ascertain that your plans are to continue with the tenancy we then start to compile a comparative market analysis on the property, sourcing information on properties that have been leased in the area. We sift through all the comparable current rental listings advertised on the property portals to gauge the competition, we then take into consideration where the market trends are heading and our recommendations on what can be done in order to achieve that highest possible return. Armed with all this information we analyse it and form our professional opinion and recommendation on market rent conditions for your property. Once this has been discussed with you and we have your instruction the next step begins.
A new lease document Form 18a – General Tenancy Agreement and any other relevant paperwork (for eg RTA Form2 – Bond Lodgement for any top-up of bond required) is drawn up based on the instructions and then sent to the tenants as the lease renewal offer. As we know life gets busy and completing and sending back paperwork seems to get pushed to tomorrow and then the next day. Our property managers continually follow up with the tenants to ensure that we obtain agreement for the lease renewal and receive the completed General Tenancy Agreement back. If a negotiated outcome can’t be reached it is important to note that the current lease does not just automatically end on the end date and the tenant does not have to vacate as of this date. You as the landlord, are required to give the tenants two months’ notice for them to vacate by issuing the correct prescribed form – the RTA Form 12 – Notice to Leave, otherwise the lease becomes a Periodic Lease and this then may have some implications on your Landlord Protection Insurance cover. This notice period requirement is why predicting what the market will be doing in 2 months’ time is important and is the reason we are starting the process as early as we do. On the flip side however tenants need only give the owner two weeks’ notice, and this worryingly low notice period can give uncertainty to the landlord. It’s one reason our property managers spend a lot of time chasing an answer from the tenants in these two months.
During this time we are not only chasing the tenant but negotiating with them in order to ensure you are receiving that highest and best return. Also of note, another step is to ensure that the property is compliant with the current Smoke Alarm Legislation by arranging another inspection to ensure compliance to the requirements and all this needs to be done within the 30 days immediately before the lease renewal takes affect, and the key word here is before.
This process can take weeks in some cases! Importantly new tenancies details need to be updated in our system to ensure we’re not just collecting the right rent payments, but there’s no ‘hidden arrears’ that can happen when these recorded amounts don’t correlate with the agreement.
We’re on your side throughout a lease renegotiation. Remember that a vacant property brings in no income for not only the landlord but also the agency and keeping a good tenant in place is in both of our best interests!