In New Zealand, there are two common notice agreements; periodic tenancies and fixed-term tenancies. We outline the pros and cons of each option below, as well as take a look at what happens if you decide to sell your home or rent it to family members.

Periodic tenancies

This is the most common type of tenancy agreement and is best known as a ‘rolling contract’ or ‘ongoing tenancy’. It means the tenant can rent the property until they – or you – give written notice. The exact amount of notice required will depend on what was agreed upon in the contract. Standard written notice periods are 21 days by the tenant, and 90 days by the landlord.

Entering into a periodic tenancy agreement comes with both advantages and disadvantages.

Advantages

• Flexibility. As long as the correct amount of notice is given, you can initiate to end the agreement at any time.

• Long-term tenants. There is no time limit on this agreement, which appeals to long-term renters.

Disadvantages

• Uncertainty. Your tenant could give notice at any time – they could stay six months or six years. There’s always the risk they might leave at a time that inconveniences you.

• Missed opportunities. If your tenant does stay for a long time, you might find it challenging to put the rent up or make renovations to the property – but you could do this in between fixed-term contracts.

Read more: The benefits of having an arm's length relationship with your tenants

Fixed-term tenancies

As the name suggests, these tenancy agreements last for a fixed amount of time. The most common agreements are six months or 1 year, but they can be as short as 90 days. Neither party can give notice to terminate this agreement early.

Advantages

• Certainty. With a fixed-term tenancy, you know what you’re going to get. This can help with cashflow, budgeting and also give you peace of mind that your tenant isn’t going to give notice unexpectedly.

• Quality of tenant. Most tenants who sign a fixed-term contract are in stable jobs, have a firm idea of where they will be in six months or a year’s time, and are looking for a reliable landlord.

• Regular reviews. At the end of every fixed-term agreement, you have an opportunity to make renovations to the property, increase the rent or maybe even sell up.

Disadvantages

• Ongoing paperwork. Every time a fixed-term agreement comes to an end, you have to update the paperwork and go through the process of finding a tenant all over again.

• Inflexibility. When you sign a fixed-term agreement, you are locked in; it’s hard to break it early. This means if you change your mind for any reason, there’s not a lot you can do other than wait the agreement out.

What if I want to sell my property?

If you are engaged in a periodic tenancy agreement, then you can give 42 days’ notice (instead of the standard 90 days) to your tenant if you are selling the property. You can also give 42 days’ notice if you or your family member wishes to move in. This flexibility does not apply in fixed-term tenancies, where there is no notice agreement in place.

Which agreement is right for me?

This is a personal choice; what works for you might not work for another property owner and vice versa. It depends what is most important to you at the time of signing the agreement: flexibility or certainty? Both options have their merits. To play it safe, you could start by entering into a fixed six-month agreement and reassess once it’s over. You may find you swap between different tenancy types at different times in your life. At least now you know that both options are available.

Want to make sure you keep risky tenants out of your rental property? Download our guide below: