In the land of keeping rental income flowing and minimizing cost, lease renewal is king.
Assuming you are happy with your existing tenants, keeping them in place can potentially save you some serious time and money, making it the recommended path forward when your lease expires.
Think about the alternative – if you don’t renew, you run the risk of:
- Prolonged vacancy, resulting in lost rental income
- Potentially having to update the unit (repair, paint), resulting in added time and expenses
- Screening new tenants and running the risk of getting bad ones
- Potentially paying broker fees
Things to Know About Lease Renewals
Renewing your rental lease agreement means just what it sounds like – you extend your relationship with your existing tenants by signing a new lease agreement with similar terms.
Consider Your Existing Tenants
The first question you should be asking yourself when considering a lease renewal is this: are you happy with your current renters?
If you are not happy with your tenants, then you should obviously avoid a lease renewal and find new tenants.
If you are not sure about the quality of your existing tenants, here are some criteria to evaluate them by:
- Do they pay the rent in full and on time every month?
- Have they been treating the property with respect?
- Are they respectful of you and your time?
You should know the answer to the first and third questions right away.
If you are not sure about the condition of your property, you should consider conducting routine maintenance more often so that you are always aware of the property’s condition.
If the answer to all three questions is “yes”, then it’s a no-brainer – you should seek to renew the rental lease agreement.
If you can’t come to a clear cut answer and determine that your renters are “just ok”, you should weigh the risk of keeping them in vs. the cost of having to find new ones.
When To Communicate Renewal Decision
Regardless of whether you would like your tenants to renew or not, it’s a good idea to communicate your position to them long before the lease expires.
If you don’t want to renew the lease, send your renters a message reminding them of the lease expiration either at a time that matches the terms of your lease or at least 60 days prior to lease expiration.
If your tenants would like to renew but you don’t want to, let them know that you are not accepting renewals at this time and that you expect them to vacate the property by the lease expiration date.
Make sure to also abide by the terms of your lease when it comes to notices and showing the property to prospective new tenants.
If you do want to renew, you should let your renters know that you would be happy for them to stay well ahead of time, ideally 90 days prior to lease expiration.
It’s a good idea to give them a heads up long before lease expiration so that you could secure the renewal and potentially avoid them exploring the market, to begin with.
Ask your tenants for an answer by a specific date so that you have enough of a cushion to find new tenants if they decide not to renew.
Increasing the Rent Price As Part of a Lease Renewal
Whether you are seeking a renewal or new renters, you should evaluate the market price of your rental regularly to determine if your rental is due for a rent increase.
If you would like your current tenants to renew and would like to increase the rent at the same time, let them know as soon as you ask about renewing the lease.
Keep in mind that not increasing the rent is a great incentive for your tenants to renew, while you run the risk of them walking away if you decide to increase the rent.
If your tenants push back or are hesitant to renew at a higher rate, consider giving them some sort of incentive in the form of a one-time discount or ultimately forgoing the rent increase.
This is because the cost of finding new renters might outweigh the benefit of increasing the rent, so try and work through the scenarios prior to making final decisions.
Automatic Lease Renewals and Month-to-Month Leases
Some rental lease agreements stipulate that the lease will be automatically renewed by a certain date unless one of the parties opts out. Check your lease for automatic renewal language prior to making a decision about your current tenants.
If your lease contains renewal terms, it will stipulate the term for the renewal period as well. Typically, the automatic renewal period will match the original lease period, so if you have a 12-month lease the automatic renewal will likely call for an additional 12-months.
Sometimes, however, your lease will convert to a month-to-month lease upon expiration. It’s also possible that your renter would ask for a month-to-month lease instead of a full renewal.
While month-to-month leases give landlords great flexibility, they also limit the long-term certainty of rental income and should be evaluated on a case by case basis.
How to Renew a Lease
In order to renew a lease, you would have to sign a new agreement. The new lease agreement can be very similar to the existing lease agreement but must contain the new lease periods and signed again by all parties.
Using Zuby, renewing your rental lease is simple.
We’ve partnered with LawDepot, the leader in digital legal documents, which means that every lease you create on Zuby will be saved in your account.
This means that you can access your existing lease in draft format and edit only the appropriate terms, quickly creating a new lease for your renewal.