How (and When) to Renew the Lease

Why are Lease Renewals a Good Idea?

By renewing a lease, you can keep good tenants who respect your property and pay their rent on time. 

To find new tenants you must first market your rental property, which could take a few weeks (or longer). You then need to screen the potential candidates. Once you have found the ideal tenant, it is time to draw up a new lease agreement. This can add up to be a costly and time-consuming exercise. 

Offering a lease renewal to your current tenants requires considerably less time, effort, and expense. Therefore, keeping good tenants beyond their initial lease term is advantageous for your return on investment (ROI).

Other advantages of lease renewals include:

• The landlord avoids vacancy costs.
• Tenants avoid the cost and hassle of moving to a different property.
• The property owner averts turnover or make-ready costs.

In addition, it is often appropriate to apply a reasonable rent increase when renewing a lease agreement. To offset increased expenses, most landlords need to raise their rent each year. 

However, property owners don't want to risk losing tenants by raising their rent too high. A Norfolk property manager can assist you with keeping your good tenants during the renewal process by setting fair rental fees.

How Does the Lease Renewal Process Work?

About three months before a lease is due to expire, review the lease. Evaluate the rental fee. Make updates to the rental agreement if needed. 

Then, send your tenants a lease renewal letter ninety days before their current lease expires. Offer the lease renewal via email or another digital delivery method. Details to include in the lease renewal letter include:

• Details of the existing lease
• The expiration date of the current lease
• The terms of renewal (i.e., fixed term for one year or longer, or a month-to-month contract)
• Outline any changes that will be made to the agreement
• The updated rental fees

Remember to thank your tenants for taking good care of your property. Give the renters a deadline for responding to the lease renewal letter. Thirty to sixty days is fair. This timeframe gives you sufficient time to advertise the rental property should they decide not to renew the lease.

If the tenants are eager to renew their lease, send them the new lease agreement. Allow sufficient time for them to review the document, ask questions, and make a final decision.

When Should Property Owners Offer a Lease Renewal?

A lease renewal agreement or residential lease extension is a legal document between a tenant and a landlord that extends the tenant’s duration of stay in a rental property.

A property owner should offer lease renewal notice to tenants ninety days before the lease is due to expire. This gives the tenant time to consider whether they want to renew the lease given the new lease terms. Should the current renters choose not to renew, it also gives a rental property owners time to market the unit and secure new tenants to move in once the present lease expires.

Fixed-Term vs. Month-to-Month Lease Renewals

If you and your renter wish to extend the lease agreement, you might need to decide between a fixed-term and a month-to-month lease renewal. 

A fixed-term lease renewal extends for a specific length of time. In this case, the renters commit to leasing the property for another six months, twelve months, or even two years. 

However, a month-to-month lease renewal means that the lease continues on a monthly basis. In other words, either party can end this lease at any time with sufficient notice, usually thirty days.

Advantages of a Fixed-Term Lease Renewal

With a fixed-term lease at renewal, both parties have more security. Renters know they have a home for the duration of the lease agreement, and you have consistent monthly income. 

What are the Pros and Cons of Month-to-Month Lease Renewals?

A month-to-month lease renewal provides flexibility to both the property owner and tenant. However, it also leaves both parties only thirty days or less to make alternative arrangements should one or the other submit notice to terminate the agreement. 

With month-to-month lease renewals, landlords can often charge higher rent amounts to compensate for the greater risk of the reduced notice period.

Do I Have to Renew the Lease?

No! Several instances would make a landlord reluctant to offer a lease renewal.

• If the current tenants are slow with their rent payments
• The existing tenants are negligent or destructive
• The neighbors have lodged complaints
• You might plan to make upgrades or renovations to the property
• You want to sell your rental property.

If you are ready for unsatisfactory tenants to leave, the end of an existing lease is an opportune time to make that happen without having to go through the eviction process. Ninety days before the lease ends, send a letter to your tenants to inform them that you are not offering a renewal. Remind them of the lease expiration date.

Streamline the Lease Renewal Process

An online portal and management system can make the lease renewal process simple and easy. Receive reminders about an upcoming lease renewal at least ninety days before a lease expires. You can also schedule reminders for mid-term property checks and regular maintenance. 

The best Norfolk property management company incorporates management systems that also make it easier for tenants to log maintenance requests and pay rent, amongst other time-saving benefits. 

Renew the Lease to Retain Your Best Renters (and Boost Returns)

Low tenant turnover and reduced vacancy rates maximize the profitability of your rental property investment. Improving tenant retention starts with excellent resident management, efficient and effective maintenance, and building good landlord-tenant relationships. 

If you are unsure of how much to raise the rent or how to start the renewal process, a Norfolk property management company can help! Osprey Property Management is here to help you stay on top of renewals and improve tenant retention. 

Download the "How to Create a Custom Lease Agreement" checklist to create airtight leases!