How fixed is a fixed-term tenancy?

A friend of mine is facing a dilemma. Over the next year or so, he’s hoping to move to New Zealand. He’s getting all his ducks in a row now. His profession is one that’s in demand, he has contacts, friends and a promise of a place to stay while he finds his feet. But right now, while he’s seeing out a project he’s been running in the UK, he needs a place to rent.

Finding a property isn’t the issue. The issue for him is not knowing how long it will be before he moves out to Christchurch. Depending on a whole clutch of variables it could be 18 months, but if his project doesn’t hit any glitches and a brilliant opportunity arises in New Zealand, it could be six.  His situation isn’t unique. All over the country people are wondering what happens if they take out a fixed-term tenancy, say for 12 months, and want to move on half-way through the term.

Putting it bluntly, a fixed term is fixed. It ties you in. If it’s for 12 months, you’re liable to pay 12 months of rent. It’s the landlord’s way of getting a bit of certainty in an uncertain world. They know that for the period of the tenancy, providing you don’t default, their rental income is assured. They know when a tenancy will end and when to start the search for a new occupier.  Fixed terms can work well for tenants too. You know what the situation is and can plan around it.

But when there are other variables – as in the case of my friend or perhaps if you’re renting while searching for a property to buy – the ability to cut short a fixed term agreement could be a major advantage.

There are a couple of ways in which this could be done. Firstly, some fixed-term agreements have a break clause built-in. Typically, a 12-month tenancy would have a break at 6 months. But note that the precise details of how such a clause would work and how much notice would be required can vary.

The second way is to negotiate with the landlord. There is no guarantee that they will agree, but you can take steps to make it more likely. Perhaps the key factor is the nature of the relationship you have with the landlord. If it’s a good one, based on respect and trust, and you have a genuine reason for wanting to end the tenancy early, you may be able to agree what’s called a surrender.

Remember that the landlord has no obligation to help you out, so anything you can do to assist is a good move. You could be very accommodating with viewings for example and keep the place immaculate.  Maybe you know someone who would be interested in taking on the tenancy? Could you find someone yourself? Some tenants have forfeited a deposit to secure a surrender. Others move on and simply continue to pay the rent until the new tenant moves in. It’s not perfect, but it could save you a few months’ rent.

My advice to my friend was to look for a contract with a break clause. I suggested he was open and honest about his plans with potential landlords, and that he give them his assurance that he understood his obligations and was willing to work with them if his circumstances changed.

If you’re in a similar situation, have a think about how you’d handle it.

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