Lease renewal agreement and when landlords should use it

In today's real estate landscape, finding excellent tenants is challenging, making them invaluable to landlords who strive to retain them. Tenants are often considered the "gold eggs" in this scenario. The critical tool for ensuring tenant retention is the Lease Renewal Agreement.

Landlords recognize the vital role of sending this document in the operation and ownership of rental properties. Simply put, the landlord sends a lease renewal to the tenant before the current lease expires. This document outlines any new changes and presents a fresh offer, allowing the tenant to sign a new lease.

This post covers the fundamentals of a lease renewal, its contents, the reasons behind needing one, and the appropriate times to utilize it.

What Is A Lease Renewal Agreement?

A Lease renewal agreement is a widely used document that extends the original lease's duration for a specified term. This legal instrument allows landlords to renew the period lease times and introduce new changes before the lease expires.

Commonly known by various names such as lease renewal form, residential lease renewal agreement, lease renewal letter, or lease extension form, these are interchangeable terms denoting the same function and legal implications. A key feature of lease renewal agreements is their ability to allow involved parties to renegotiate the terms of a new lease.

For instance, if a landlord proposes a specific rent increase, the tenant may counter by requesting additional amenities before agreeing to sign the new lease. It's essential to recognize that lease extensions primarily revolve around the current terms and conditions. Consequently, an extension typically retains most of the terms outlined in the original lease.

When both the tenant and the landlord are content with the existing lease terms and wish to continue their rental relationship, they opt for lease renewal. However, both parties must be in agreement for the renewal to proceed. In such cases, the renewed lease agreement generally upholds the majority of the terms from the original lease.

In contrast, if a tenant refuses to agree or sign a new lease, they can remain part of the rental property. Still, the tenancy automatically transitions into a month-to-month arrangement. This month-to-month arrangement offers increased flexibility for both tenants and landlords. On the positive side, it also allows landlords to lease the property to another tenant willing to commit to a more extended-term lease agreement.

What’s Included In A Lease Renewal?

Despite common misconceptions, a lease renewal is not an intricate document with numerous details. A formal lease renewal agreement typically includes specific information, such as:

• Basic details about the landlord and the tenant.

• Dates associated with the renewed lease letter.

• The complete address of the rental property.

• The anticipated expiration date of the current lease agreement.

• The adjusted rent is specified in the new lease agreement.

• The duration of the new lease term, outlining the renewed period, often for a year.

• The deadline for the tenant to sign the lease renewal agreement.

Landlords can choose how they deliver the lease renewal letter, whether via email or traditional mail. Some landlords prefer direct communication, providing an opportunity to discuss changes in person and clarify any modifications in the lease renewal agreement that may benefit the tenant.

This personal communication style allows landlords to emphasize changes favoring the renter. Typically, landlords retain the original copy of the lease renewal agreement and send a duplicate to the tenants. Additionally, they maintain a comprehensive file documenting how the lease renewal agreement was delivered to the tenant. This structured approach ensures clarity and transparency in the lease renewal process.

Why Do You Have To A Lease Renewal Agreement?

When a tenant decides to stay in a rental property, the landlord initiates a lease renewal to extend the existing rental agreement rather than seeking a new tenant. The primary motivation for property owners to opt for a lease renewal is to avoid the costs of finding a replacement tenant.

A reasonable rent adjustment may be considered when the property's market value has increased. However, it's crucial to strike a balance and avoid substantial rent hikes to prevent discouraging the tenant from vacating the property.

A key advantage and rationale for choosing a lease renewal is the time and effort it saves for both the tenant and the landlord. It ensures a steady cash flow for landlords and eliminates the need to search for a new tenant. Consequently, landlords save on costs and time-related to advertising the property, meeting potential tenants, and managing the screening process.

Opting for a lease renewal also serves to minimize vacancy risks for landlords. Recognizing that lost rent translates to lost income, forward-thinking landlords appreciate the value of a lease renewal in maintaining a positive relationship with valued tenants. Market data underscores the risks associated with prolonged vacancies, including potential property damage, break-ins, and a diminished reputation in the market.

Another compelling reason for landlords to pursue lease renewals is the avoidance of the need to familiarize a new tenant with the property's terms and rules. This streamlined approach ensures continuity and contributes to a more efficient and hassle-free leasing process.

When Should Landlords Use A Lease Renewal Agreement?

When considering the utilization of a Lease Renewal Agreement, landlords play a vital role by sending residential lease renewal agreements when tenants express their intention to extend their stay in the property. Picture the lease renewal as an extension term that undergoes adjustments before the lease expires.

Extending the lease term serves multiple purposes, enabling the continuous rental of the property, fostering trust with existing tenants, and ensuring compliance with local and state laws. Typically, landlords are obligated to issue a lease renewal notice at least 90 days before the current lease of the renter ends.

The primary objective behind renewing the lease agreement is to sustain a steady, year-round rental income. This proactive measure also alleviates the need for landlords to search for new tenants, thereby avoiding associated property turnover costs. A renewed lease agreement facilitates an open line of communication for landlords, allowing them to implement gradual rent increases while maintaining a positive landlord-tenant relationship.