Lease Renewal
When the end of a tenant’s lease is near you have a decision to make, renewing the lease agreement or finding another tenant. If you have a tenant that clearly needs to go, there is nothing to think about, don’t renew the lease. On the other hand, if you have tenants that pay rent on time, respect and take care of their unit, and are easy to work with, then you have quality tenants and you try to keep them. Filling a vacant unit is expensive between leasing costs, turn costs, and holding costs. The longer you take to find a new tenant, the more money you are losing. This is why we suggest that if you have a good tenant, you should renew their lease. In many cases even a less than great tenant is worth keeping when you consider the cost of the turn over.
When to renew a lease
When to renew a lease depends on the terms of that specific lease. In most cases, 45-60 days is plenty of time to send out lease renewals. Make sure to give your tenant enough time to weigh the option before their notification window closes. Our standard notice is 30 days so we aim to get the renewal out at least 45 days in advance so the tenants have at least two weeks to make a decision. Landlords are not required to notify tenants when their renewal window, so if you missed a certain time frame you have not done anything specifically wrong.
How to Renew a Lease
The first step is to prepare a lease renewal offer. This is the best time to add any addendums or change lease terms since they will already be signing something. If you have new policies that have come up in the last year, include them with the renewal offer. We generally like to offer several lease renewal options with different prices, month to month leases come with a significant premium due to the uncertainty and the longer lease terms are strategically priced. You can also provide a short notice of non renewal form with your offer for the tenant to notify you if they are leaving. All notice should be delivered in writing and this gives the tenant a clear way to do that. Having a tenant auto renew into a new lease can be bad for both the tenant and landlord and lead to potential fights, strife, or ill will.
Do you raise the rent?
The short answer is almost always YES! Inflation is a real thing and costs go up. In our local market the cost of water and sewer goes up almost every year, property taxes go up, insurance goes up, and in turn rent must go up. The challenge is how much do you raise rent? Raising rent at the renewal is a bit of an art to see how much you can maximize the units without scaring off your tenants. Unless a unit is grossly underpriced you can and should renew the lease at less than the current market rent. For this blog post we will avoid using specific circumstances or discussing the exact costs of a move out/vacancy but the costs are high and a few dollars less in rent each month is well worth preventing that occurrence.
How to not renew a lease?
If you choose to not renew a residents lease, you need to notify them in writing according to the terms of their lease. Most leases require 30 day notice in writing. When sending a notice you want to make sure that you have copies of everything that goes out. A best practice is to send an e-mail in addition to physically mail a paper notice requesting acknowledgement. If there is reason to believe that a tenant may try to cause an issue then you can send notices via certified mail however this is not usually necessary.