Many tenants sign a lease contract that covers a single year. But should you lock yourself into a longer-term rental contract?
Most people who rent homes sign a short-term lease that covers a 12-month period for a full apartment or house and 6 months for a room: but what if your landlord offers you a long-term rental contract instead? There are advantages and disadvantages to a longer lease contract from both a tenant and landlord perspective, so here’s what you need to know.
Should you sign a long-term lease as a tenant?
When you’re looking to sign a new lease on a home, or room, you may be given the option to sign a one-year agreement, or a multi-year agreement. The longer contract won’t always be available, but if it is, here is a few differences to keep in mind:
Long-term contracts offer more stability; short-term leases offer less.
Long-term contracts let you lock in your rental price for more than a year; short-term contracts only guarantee your current rental rate for a year.
Some long-term contracts offer discounted rent for committing to a longer term.
Short-term contracts offer more flexibility if you want to move; long-term leases offer less flexibility.
With that in mind, let’s determine whether you’re better off opting for long-term contracts or not.
Benefits of signing a long-term lease
Signing a long-term contract gives you more long-term stability. That’s an important thing to have when you’re hoping to stay in the same location for several years or longer, or when you’re moving with a family.
When you sign a short-term contract, your landlord may request you to vacate your home after a year, even if you’re interested in renewing your contract, and even if you’ve been a great tenant. With a long-term lease, you buy yourself the time to stay put for multiple years.
You don’t have to worry about rent increases, or pulling your kids out of a certain school district right away, or having to bear the expense of moving your belongings from one property to another.
The main benefit of signing a long-term lease is locking in the same monthly payment for several years at a time. It’s common for landlords to demand rent to increase from one year to the next, in line with inflation, even when you stay in the same home. But if you sign a multi-year rental contract, you won’t have to worry about your rent going up and wreaking havoc on your budget.
Furthermore, some landlords offer tenants a discount on their monthly rent in exchange for signing a long-term rental agreement. That way, they’re guaranteed a steady stream of rent payments for longer, and you benefit from a reduced rate.
Drawbacks of signing a long-term lease
While there are plenty of good reasons to sign a long-term rental agreement, if your career and life, in general, are changing quickly, it could be a big mistake.
One major downside to signing a multi-year lease is that you’re making a commitment to stay in one place for a relatively long period of time. But what if you get a new job 18 months into that lease, or you have a baby and find that you need a larger living space? Suddenly, you’re stuck in your rental longer than you’d like to be.
Another downside of signing a long-term lease? You remove the option to cut back on your housing costs during its term.
Imagine you move to a new town and sign a one-year lease on an apartment, only you realise midway through that you’re paying too much rent for your budget or comfort. At that point, you can scale back on other expenses temporarily to ride out the term of your contract, and then find a cheaper home once your contract expires. When you sign a long-term lease, you lose that option, and as such, you put yourself at risk of getting stuck and paying higher rent than you can afford.
Also, while you might grab a discount on your rent by signing a long-term rental agreement, this won’t always be the case, so there may not be all that much financial upside involved.
Remember, too, that when you sign a long-term lease, it could mean getting stuck with some very bad neighbours for years.
Imagine you rent in a building or a room in a house and wind up living next door to a couple that blasts music all day and night. If you sign a multi-year rental agreement, and they do the same, guess what?
You’re stuck with them for a very long time. Granted, the risk of bad neighbours exists any time you rent in a multiunit building, but with a shorter-term contract, it’s easier to escape a bad situation. With a long-term rental agreement, you’re often trapped.