About long-term leases

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A long-term lease is a lease agreement of more than five years. An agreement of up to five years is a short-term lease.

Benefits for landlords and tenants

There are now two types of fixed term lease agreements that can be used for a tenancy in Victoria:

You can also use the existing short-term agreement (Form 1) for a long-term lease; however, it does not include the additional benefits available in the new long-term lease agreement (Form 2).

If a long-term lease agreement is not in writing, the tenant can end the lease at any time without penalty by giving the landlord 28 days’ written notice.

Switching from a short-term lease to a long-term lease

If you are happy with your current tenancy arrangement and would like to continue it for more than five years, you may want to consider switching to a long-term lease. Make sure you negotiate the terms of the long-term lease agreement before ending your existing tenancy.

For more information on how to start a long-term lease, or switch from a short-term to a long-term lease, view our How to start a long-term lease page.

In a long-term lease agreement (using Form 2), a landlord can ask the tenant to top up the bond amount after five years by giving them 120 days’ written notice of the request. This can only occur if there are five or more years left on the lease, or the lease is extended so that there are five or more years left. The top-up process will be similar to the bond lodgement process via the RTBA Online website.

View Clause 3 of Form 2 - Residential tenancy agreement for a fixed term of more than 5 years (Word, 632KB).

Amount of bond top-up

The initial bond amount cannot be more than one month's rent if the rent is less than $760 per week.

If the landlord chooses to top-up the bond, and the rent is less than $760 per week at the time of top-up, the total amount of bond after the top-up cannot be more than one month's rent.

Example only (outcome may differ in individual cases):

If the rent when the lease was signed was $700 per week and the rent after five years is $750 per week, the landlord can ask the tenant to lodge a further amount so that the total bond lodged with the Residential Tenancies Bond Authority (RTBA) does not exceed one month's rent.

There are no limits to the initial bond amount or bond top-up amount where the initial rent is more than $760 per week, or increases to more than $760 per week during the tenancy. 

When the bond top-up can occur

The top-up can only occur after five years, and only if there are five or more years left on the lease.

For example:

  • in a 10-year lease, the landlord can ask the tenant to top up the bond after five years as there are still five years left on the lease
  • in a seven-year lease, the landlord cannot ask the tenant to top up the bond after five years, as there will only be two years left on the lease.

If the tenant agrees, the landlord can extend the lease agreement so that there are five or more years remaining, to allow for the bond to be topped up.

If the tenant does not top up the bond

If the tenant does not pay the required amount on the date specified in the 120 days’ written notice, it will be treated the same way as rent arrears. For more information, view our Rent arrears page.

In a long-term lease using Form 2, the amount and frequency of rent increases are agreed in advance as part of the rental agreement.

View Clause 6 of Form 2 - Residential tenancy agreement for a fixed term of more than 5 years (Word, 632KB).

If the landlord and tenant agree to rent increases, these cannot occur more frequently than every 12 months. The rent increase must be based on one of the following options:

The landlord and tenant can also schedule the date and amount of the rent increases in the long-term lease agreement by completing the relevant table in Clause 13. This allows them to plan their finances with greater certainty as they will know in advance what their costs/income will be.

The landlord must give the tenant 60 days’ notice in writing before each rent increase, except when the increase is based on a fixed dollar amount. In this case, the rent will automatically increase on the date stated in the lease.

Tenants can apply to us for a rent assessment if they feel that the increase is excessive or unreasonable. For more information, view our Rent increases page.

Landlords and tenants have the option to agree on certain modifications up front and include them in the lease agreement.

View Clause 9 of Form 2 - Residential tenancy agreement for a fixed term of more than 5 years (Word, 632KB).

If the landlord and tenant agreed to any modifications up front when negotiating the terms of a long-term lease agreement, the tenant can make the agreed modifications without having to get written permission from the landlord. This is because it is already written in the lease.

If the tenant wants to make changes to the property not already agreed to in the lease, the tenant must get the landlord’s written permission to do so. The tenant and landlord should record their agreement on an additional copy of Part E of the long-term lease agreement (Form 2).

The landlord must not unreasonably refuse consent for alterations or modifications.

It may be reasonable for the landlord to refuse consent for modifications if the property:

  • has heritage protections which would be adversely affected by the modification
  • would be non-compliant with other legislative requirements. For example, to install security screens on the windows of a downstairs apartment, if the fire evacuation rules state that the windows must be able to be opened in an emergency
  • would be devalued
  • is about to be sold.

If the landlord refuses consent

If the landlord refuses consent for a particular modification, the tenant should first ask why the request was refused, as there may be a legitimate reason. A tenant who believes the landlord is unreasonably refusing consent can apply to the Victorian Civil and Administrative Tribunal (VCAT) for a ruling on the matter.

Agreeing on and documenting modifications

The landlord and tenant should also decide who pays for modifications and whether the tenant is responsible for reversing any modifications when they leave.

Example only (outcomes may differ in individual cases):

If the tenant installs a dishwasher, the landlord and tenant can agree for it to remain in the property. They have an option to also decide whether the tenant is reimbursed some of the cost.

Alternatively, if the landlord does not want the dishwasher to remain, they can approve the modification on the condition that the tenant either remove the dishwasher before they leave or reimburse the landlord for the cost of removal.

Whatever is agreed should be written into the Alterations and restoration requirements section (Part E) of the long-term lease agreement (Form 2) and signed by both the landlord and the tenant. If the tenant makes any changes to the property that are not stated in the agreement, the landlord may require the tenant to reverse the modification before they leave – even if the landlord agreed to it verbally.

Inspections

In a long-term lease agreement, landlords can inspect their rental property once every 12 months by giving the tenant 14 days’ written notice. The first inspection can happen at any time within the first 12 months.

View Clause 16 of Form 2 - Residential tenancy agreement for a fixed term of more than 5 years (Word, 632KB).

Landlord requirements for inspections are the same as in a short-term lease. For more information, view our Landlord or agent’s right to enter the property page.

In a long-term lease agreement, most of the reasons and time frames for leaving a rental property are the same as a short-term lease. View our:

Mutual agreement to end or shorten a lease agreement

At any point, tenants and landlords can mutually agree in writing to end a long-term lease early or reduce the number of years on the agreement.

If the landlord wants to sell the property

As with a short-term lease, if a landlord is selling a property that has a tenant on a long-term lease, they must state this in the contract of sale. The new owner must then take on the long-term lease agreement.

The landlord and tenant can agree to end the lease early, so that the property can be sold without a tenant.

If the landlord wants to move into the property

Unless the tenant agrees to end the lease early, the landlord must give the tenant 60 days’ notice to vacate, with the 60th day falling on or after the lease’s end date. This is the same as a short-term lease. For more information, view our Landlord giving notice to vacate page.

If the landlord or tenant cannot continue the lease due to hardship

The landlord or tenant can apply to the Victorian Civil and Administrative Tribunal (VCAT) to end the long-term lease early by providing evidence of any severe hardship, such as bank or income statements, or proof of a medical condition, to show they cannot continue the lease. For more information, visit the Application by a tenant or landlord page on the VCAT website.

Tenants experiencing domestic violence can also apply to VCAT to end the lease agreement early. For more information, view our Family violence resources page.

For other vacate reasons and timeframes, view our Tenant giving notice of intention to vacate page.

If the tenant wants to break the lease

View Clause 18 of Form 2 - Residential tenancy agreement for a fixed term of more than 5 years (Word, 632KB).

If a tenant breaks a long-term lease – that is, the lease did not end early by mutual agreement or a VCAT order on hardship grounds - the landlord can ask the tenant to pay one month’s rent for every full year remaining on the long-term lease. This is capped at six years, so the maximum amount the landlord can ask from the tenant is six months’ rent. This is based on the rent amount the tenant was paying when they broke the lease. For more information, view our If you do not give notice (if you break the lease) page.

Example only (outcome may differ in individual cases):

Lucy and Stefan sign a 15-year long-term lease agreement using Form 2, and decide to break the lease early. If Lucy and Stefan break their lease after nine years and three months the landlord can ask them to pay a maximum of five months’ rent, as there will be five full years remaining in the term of the lease. If Lucy and Stefan break their lease after five years, although there are 10 years remaining in the term of the lease, the landlord can only ask them to pay a maximum of six months’ rent.

The landlord must take all reasonable steps to re-let the premises, and cannot claim rent after the property is re-let. If the tenant believes they were paying rent after the property was re-let, they can apply to the Victorian Civil and Administrative Tribunal (VCAT) for a ruling on the matter. For more information, visit the Application by a tenant or landlord page on the VCAT website.

Breach of duty

Under a long-term lease, the landlord or tenant can apply to VCAT for a compliance order after serving a breach of duty notice. Tenants and landlords can also apply to VCAT to enforce a term in a long-term lease agreement.

For information on breach of duty notices in a short-term lease, view our When a tenant or landlord breaks the rules page.