In some cases, people find long-term property ownership unideal. This could be because they are frequent travelers, moving from one place to another. On the other hand, not everyone can secure the financing to purchase a home.
In such cases, these people prefer leasing a property as a temporary dwelling place. They may rent an entire property, like a house, or just a part of it, like an apartment. Unfortunately, most new landlords don’t know about the different types of tenancies available.
There are numerous types of tenancy agreements available for landlords and their renters. Understanding each type of tenancy will help you make the right decision when renting out your home. Below are the different types of tenancies.
A Fixed-Term Tenancy
A fixed-term tenancy, also referred to as a tenancy for years, is an agreement between a renter and their landlord that ends on a specified date. Characteristically, this type of tenancy often lasts for one year. For example, an agreement starting on November 2nd, 2022, will end on November 1st, 2023.
Keep in mind that some landlords also offer short-term fixed tenancy agreements that may last as little as a month, while others offer longer leases lasting up to 10 years. However, only commercial properties offer such long-term fixed lease agreements.
If you have a tenant under a fixed-term rental agreement, the terms and conditions of the contract apply until the end of the lease. You can’t raise the rent or change the agreement until the lease expires. You also can’t ask a tenant to vacate the premises for no reason.
On the other hand, a tenant can’t leave the house before the end of the lease unless you allow them to do so. However, some circumstances may allow the lease to be terminated before its expiration date.
This is a tenancy agreement or lease with no pre-set expiry date. This means it automatically renews after every rental period. Whether you choose to charge rent bi-weekly, weekly, yearly, quarterly, or even monthly, the lease will be up for renewal after the rent period is over.
Most tenants and landlords prefer monthly agreements, making them the most common type of periodic tenancy in the U.S. While some landlords prefer a well-written and signed lease agreement to establish periodic tenancy, other landlords only have a verbal agreement with their tenants. A verbal contract doesn’t involve any written lease.
Ending a periodic tenancy is easier than terminating a fixed term one. A landlord can end the tenancy by telling the renter that they want to end their agreement, and the renter can do the same.
Typically, you will need to give notice at least 30, 60, or 90 days in advance, based on your agreement with the renter. However, different states have varying laws and regulations regarding the amount of time you need to give a renter notice.
Before allowing a tenant to rent your property, make sure you screen them to determine who they are and whether they can pay the rent. You can do this by asking them for proof of income, whether they are salaried or self-employed. This is an essential step to avoid having a tenant who cannot pay rent.
Tenancy at Sufferance
This type of tenancy is also known as a “holdover” tenancy. This often happens when a renter or tenant stays in a property past the end of their agreed tenancy agreement. Even if it’s a periodic or fixed-term tenancy, if you stay past the end date, you could be forced to move out.
This could also happen if the tenant stays past the date listed on the termination notice of their tenancy. In such cases, the landlord could evict the tenant or accept their rent payments.
Until the landlord accepts the renter to continue living on the property or renews their tenancy agreements, the tenant is known as a “holdover tenant.” They are considered to be living on a tenancy of sufferance.
Tenancy at Will
This is an informal tenancy agreement between a landlord and their tenant. This typically happens when there is a pre-established tenancy agreement after a landlord gives a tenant permission to live in a unit. There are no pre-established rules in tenancy at will regarding how long the tenant will stay or whether they will pay rent.
Immediately, there is a tenancy agreement, and the rent amount is set; the tenancy now turns into a periodic tenancy. In most cases, this happens when you allow your friend to come to live with you for a few weeks, maybe because they need somewhere to crash.
And even if the tenant isn’t paying any rent, they also have rights. You can’t kick them out without warning. For example, in states such as California, you must give a tenant a 30-day written notice before kicking them out. This is the same process that is followed when terminating a month-to-month tenancy agreement.
Joint tenancy is a type of agreement where property ownership is shared so that every owner has an undivided interest in the house. This means that two or more people own a share of one property.
As a result, specific areas of the property are owned by two people instead of one. All owners of a joint tenancy property have equal rights to the property and equal responsibilities.
Joint tenancy could apply to brokerage and bank accounts, business ownership, and personal property. However, it’s most common in real estate investment. While each investor has the same rights and responsibilities, there are many limitations to joint tenancy and how the owners can use their property shares.
For example, a critical characteristic of joint tenancy is that it involves the right of survivorship. This means that if one of the co-owners passes away, the remaining ones can take over the property, preventing their heirs from inheriting it.
Now You Know the Different Types of Tenancies
There are many types of tenancies, including tenancies at will, tenancies at sufferance, periodic tenancies, and fixed-term tenancies. Understanding these types of tenancies and their pros and cons will help you determine what is suitable for your property before finding a tenant. However, keep in mind that tenancy screening is essential to finding the right tenant for your property.
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