Landlord Quandary: Long Lease vs. Short Lease

As a landlord signing a lease with a tenant, is it better to get a long lease from them or a short one?  Some landlords only have their tenants on month-to-month contracts.  While others might have a tenant in a property with a lease agreement for years.  This latter case is particularly common with commercial property.

Interestingly, in England during the reign of Queen Elizabeth, rents became an issue that government took an interest in.  At that time, the Church of England was governed by the Monarch and by extension, the Parliament.

One of the problems the Church was facing was that its was leasing property, typically farm land that it held, for exceptionally long lease periods.  These leases would bind the church to a fixed rent amount for an extended period into the future regardless of changing market conditions.  So, Parliament acted and micromanaged the Church's dealings in this regards.  The book Commentaries on the Laws of England has this to share on the subject:

"...the mischief was, that they let long and unreasonable leases, to the impoverishment of their successors: the remedy applied by the statute was by making void all leases by ecclesiastical bodies for longer terms than three lives or twenty one years. Now in the construction of this statute it is held, that leases, though for a longer term, if made by a bishop, are not void during the bishop's life; or, if made by a dean with concurrence of his chapter, they are not void during the life of the dean: for the act was made for the benefit and protection of the successor. The mischief is therefore sufficiently suppressed by vacating them after the death of the grantor; but the leases, during their lives, being not within the mischief, are not within the remedy." Book 1 p.88

So, as you can see, limits were placed on leases for 21 years or 'three lives'.  Bishops and Deans who initiated leases were excepted from the law.

As a residential landlord, long leases can lead to a decline in income due to the natural phenomenon of inflation.  As the cost of all things increases over time, rents that stay the same lose their real value.  If repairs cost $100 today and become $300 in 20 years, the landlord who keep rents the same under this scenario will have a more difficult time affording the repairs.

So, it stands to reason that as the markets fluctuate, leases should mirror the changes in supply and demand.  I encourage landlords to raise rents as market conditions dictate.  Sometimes rents will stay the same while the property condition deteriorates over time.  I hope this isn't the case for you; but, it is something that can be observed in the marketplace.  If you are acting as a landlord, be adaptable to the marketplace and you will be rewarded.  Long leases might work in some circumstances, but my experience has shown that a yearly reassessment of rents is always a good business practice.