When looking for a rental property, it may be written that the property has a fixed-term rental contract or can be renewed.
At first glance, it looks like you can continue living there even after the contract period ends. However, you need to be careful here. "Can be re-contracted" does not mean "can definitely be re-contracted".
What is a fixed-term rental contract?
A fixed-term rental contract is a contract that, in principle, ends when the predetermined contract period expires.
Unlike a normal rental contract, this is not a contract that can be renewed if the tenant wishes. In order to continue living in the property after the contract period ends, both the landlord and tenant must agree to a new contract.
“Renewable contract” is different from renewal.
Even if the recruitment drawing says "renewable contract", it does not mean that renewal is guaranteed.
This simply means that you may be able to renew the contract after the contract period expires if the lender approves. If the lender wants to use the property himself, sell it, rebuild, or change the terms, he may not be able to renew the contract.
In other words, even if it says "renewable", there is no guarantee that you will be able to continue living there.
The danger is signing a contract with the assumption that you will live there for a long time.
The most dangerous thing about a fixed-term rental contract is to treat it as if it were a regular rental contract.
For example, let's say you enter into a two-year fixed-term rental contract thinking it's okay because it says you can renew the contract. However, if he cannot renew his contract after two years, he will have to leave.
Considering moving costs, initial costs for the next property, replacement of furniture and appliances, and the impact on commuting to work or school, moving out in a short period of time can be a huge burden.
Terms may change when renewing contract
Even if you can renew your contract, there is no guarantee that you will be able to continue living under the same conditions.
There is a possibility that the rent will increase, contract renewal fees will be charged, you will have to go through the procedures with the guarantee company and fire insurance again, and the contract details will change.
Don't be reassured just by seeing that the contract can be renewed; be sure to check the costs and possible changes to the terms and conditions when renewing the contract.
Things to check before signing a contract
If you are considering a fixed-term rental contract, please check the following points before signing the contract.
- How many years is the contract period?
- How likely is it that the contract can be renewed?
- Do you have a track record of re-contracting for the same building in the past?
- Are there any renewal fees or administrative fees?
- Is it possible to change conditions such as rent?
- Does the lender have any plans to use or rebuild the property in the future?
- Can I cancel the contract midway?
Especially if you want to live for a long time, don't want to change your child's school district, or want to use the property for business or SOHO, you need to carefully consider the risks of a fixed-term rental contract.
There are cases where it is suitable
Fixed-term rental contracts are not always bad.
It may be suitable for people who plan to live there for only a few years, those who have a fixed period of relocation, and those who can live for a limited period of time as long as they can live at a lower price than the market price.
The important thing is whether the contract period matches your schedule.
summary
A fixed-term rental contract that allows you to renew your contract is not a contract that allows you to continue living there.
Unlike the renewal of a normal tenancy contract, the contract can only be renewed after the expiration of the term if the landlord and tenant agree. If you want to stay for a long time, check the risks of not being able to renew the contract, the costs, and the possibility of changing conditions before making a decision.