How can your agency generate revenue and save costs by renewing your landlord's tenants onto a fixed-term tenancy? Emily Popple, Head of Customer Success, explains.
We're seeing more and more agents renewing tenancies on fixed-term contracts. Why? Government statistics show that private renters stay in one place for 4.3 years on average, and letting agents can help their landlords capitalise on the extra security and regular income fixed-term contracts can provide for this extended period.
What's the difference between periodic and fixed-term tenancies?
At the end of a fixed-term tenancy agreement, if no new contract is signed, the agreement would become periodic. That means that it will continue on a monthly basis until the landlord or tenant chooses to end it. Alternatively, landlords and agents can choose to renew on a new fixed-term contract for a set period of time again - normally 6 or 12 months.
What are the benefits of renewing fixed-term contracts?
Easier to budget and plan
A fixed-term contract can help your tenants and landlords budget, safe in the knowledge that the rent will not change in that time period. Renewing on a fixed term contract also gives your agency and landlord more control and more time to plan for the end of a tenancy, and factor in the rent negotiations. Even if they choose to move out at the end of the contract, you'll have had plenty of notice so you can prepare in advance to put that property back on the market.
Negotiate rents in an annual review
Landlords and agents can choose to increase rent once a year on a periodic tenancy, at any time in the agreement. However, it's easier to establish new terms of a tenancy on renewal of a fixed-term contract. The top reason - it's a good time to renegotiate as tenants will be expecting it. All parties would need to agree to any increase before signing the renewal and it would mean that everyone's clear on these new terms for the time set out in the contract.
Extra revenue generated
Renewals are also a second (or third or fourth) chance to offer your tenants any extra products or services through your partners so that you can benefit from any commissions paid - normally with little effort on your part. You'll simply receive the kickback after they signed up. For example, Goodlord can offer tenants broadband deals, utility switching, offers on moving vans - the list goes on - on its customers' behalf. Agents can simply wait for that extra revenue to roll in.
The right time to discuss management fees
You can choose the renewal of a tenancy to negotiate with your landlords too, focusing on the value that your agency brings as well as the extra services. Rent protection, for example, can be a valuable service to provide. Your landlords' rent - and therefore your management fees - could be protected with this service, if your tenant were to fall into arrears, plus you can incorporate the cost of it into your management fees, to help you benefit financially too. Some providers like Goodlord can even help you understand the best way to promote this service to your landlords.*
Strengthen your income security
Although you can of course have a break clause in the contract, your tenants will likely be obligated to continue to pay the rent or find a new tenant if they wish to leave early. This will save you the hassle of finding someone to replace your tenant, and ensure that the rent payments will continue, uninterrupted, until the end of the tenancy, with no unexpected void periods.
Similarly, we've noticed a trend in agencies that we speak to that acquire new businesses - renewing quickly tenancies is their top priority post-acquisition. They use this as an opportunity to introduce themselves to their new tenants and ensure continuing income off the back of that acquisition.
*Terms and conditions apply, always read the policy wording. FP155
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