Different types of tenancy agreement
Every day we arrange tenancy agreements between tenants and landlords. We find that there are still many misunderstandings among tenants, landlords and even letting agents. Tenancy law is mandatory law and cannot simply be set aside. The clauses in a tenancy agreement must comply with the law. But what are the most important and common differences? We are happy to explain them to prevent misunderstandings.
Indefinite-term tenancy agreement
When a tenant and landlord enter into an indefinite-term tenancy agreement, they agree that the agreement cannot be terminated during an initial period. Such agreements come in various forms, usually with an initial fixed minimum term of one or two years. This gives the landlord the certainty of receiving rent throughout that minimum period. Under this type of agreement, the tenant enjoys security of tenure. After the minimum period, only the tenant can give notice, with a notice period of one calendar month.
Dutch Rental Market Mobility Act: temporary tenancy agreements permitted
With the introduction of the Rental Market Mobility Act in 2016, landlords were permitted to conclude temporary tenancy agreements under which tenants did not enjoy security of tenure. One disadvantage for landlords is that tenants can give notice from day one, subject to one calendar month’s notice. Landlords and tenants may agree to a maximum rental period of two years. The tenancy agreement then ends automatically. However, the landlord must notify the tenant between three and one calendar month before the end of the contract. If the owner fails to send this notice, the contract automatically becomes an indefinite-term tenancy agreement, giving the tenant security of tenure.
Most common option
In the current market, we advise most landlords to enter into a fixed-term tenancy agreement. Our advice depends on the price category and how easy the property is to let. For an exclusive home in the higher market segment, an indefinite-term agreement may sometimes be preferable. For landlords with a luxury property aimed at a smaller target group, the certainty of rental income can be valuable. In a rising market, where a landlord may wish to release equity or charge a higher rent later, a fixed-term agreement can be advisable. In practice, the likelihood of a tenant terminating the agreement within a year is low, because they need somewhere to live too. We can often estimate from tenants’ employment contracts whether they intend to remain in Rotterdam for longer.
Conclusion
An owner who values certainty that the tenant is committed for a minimum period and accepts the accompanying security of tenure will choose an indefinite-term agreement. A landlord who wants to be certain the tenant will leave after the agreed period will choose a temporary tenancy agreement, accepting the risk that the tenant may leave sooner.
If you let your property through Riva, we will discuss these options with you in detail and clearly set out the differences in the agreement.