Renewing & Ending Lease Agreements
When you have a long-term rental, the ideal situation for Landlords is to get quality Tenants in place who will renew their Lease Agreement and stay in the unit for multiple years. Finding and retaining quality Tenants gives Landlords better returns and makes property management easier. High retention rates mean reduced turnover costs, reduced vacancy costs, and less time spent on turnover and filling vacancies.
While good Tenant Screening and property management can increase Tenant retention, the reality is that there will still be some turnover at the end of the Lease term. This means Landlords need to stay on top of Lease end dates, determine whether a Lease Renewal Agreement or Non-Renewal Notice is needed, and then timely provide Tenants with the right notice and forms. Here’s a quick overview of how to do this.
How to Decide Whether to Renew a Lease Agreement
As much as possible, Landlords want to renew Leases with good Tenants. If a Tenant takes care of the property and consistently pays rent on time, this is a Tenant that you want to keep. Not only do you know you have a quality Tenant, but you also save the time and money of turning the property over and filling the vacancy.
If you have a good Tenant that you’d like to keep, it’s worth considering some incentives to have them sign a renewal. For example, defer rent increases, offer simple upgrades, or provide them with coupons and vouchers. Even small incentives show Tenants that you value them, which can go a long way toward encouraging them to stay.
That said, as nice as it is to avoid turnover, if a Tenant is regularly late with rent, behind on rent, difficult to deal with, or not taking care of the property, you might want to let the Lease expire and find a new Tenant. This is never the first choice, but there are times when it’s the right decision. If you’re regularly having to spend time collecting rent, managing complaints, or addressing Lease violations, it’s probably in your best interest to not renew the Lease.
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Sending a Lease Renewal Notice
If you want to renew a Lease with a Tenant, it’s important to give adequate notice. This will allow the Tenant time to make a decision about whether they want to renew while also giving you adequate time to find a new Tenant if they don’t.
Landlords typically send Lease Renewals anywhere from 90-45 days before the end of the Lease term, and we recommend sending them out 60 days before the Lease end date. When you provide Tenants with a Lease Renewal Agreement, make sure it includes:
- The date the Lease is set to terminate;
- The proposed renewal period;
- Any small changes to the terms of the Lease;
- Rent amount for the new Lease period; and
- The deadline for responding to the Renewal Agreement.
Keep in mind, if there’s going to be a rent increase during the new term, it’s important to comply with all of your state’s rent increase laws, which you can review here. To make sure you’re complying with all applicable laws, you should provide Tenants with a separate Increase in Rent Notice to review before signing a Lease Renewal.
Landlords also need to decide whether they’re going to sign a new Lease or simply change the Lease period. If you’re not making any substantial changes to the Lease, it’s generally easiest to simply sign a Lease Renewal Agreement that changes the Lease term and states that all other terms of the original Lease will remain in effect during the new Lease period.
Sending a Non-Renewal Notice
If you don’t want to renew a Lease Agreement, it’s important to send a Non-Renewal Notice prior to the end of the Lease term. Many Lease Agreements state that at the end of the term, the Lease will automatically become a month-to-month Lease Agreement that either party can terminate with 30 days’ notice.
As a result, it’s essential to make sure you provide Tenants with adequate notice that you plan to terminate the Lease. It’s always important to check your state’s notice requirements, but non-renewal notices should be sent at least 30 days before the end of the Lease term. The Notice should state the Lease termination date and provide information about move-out logistics like providing a forwarding address, scheduling a move-out inspection, and returning keys.
Preparing for the Next Step
Once you’ve provided Tenants with adequate notice about renewal, you’re ready to prepare for the next step. If the Tenant is staying in the property, this could mean doing an annual inspection, performing annual maintenance, or simply checking in to see if there’s anything that your Tenant needs.
If the Tenant is not renewing, it’s time to prepare for move-out and turnover. Next month, we’ll look in-depth at the move-out process. Until then, visit ezLandlordForms.com for the forms, tools, and support you need to get the most out of your rental property.
Kevin is passionate about helping others to become a better Landlord by providing tools and education to help them thrive.