Lease Renewal: What You Need to Know
Every time the lease renewal period comes around, owners have to figure out whether they want to continue renting to the same person or want a new tenant.
However, both choices have significant implications. Each can potentially cost you time and money. As such, it’s essential to carefully weigh the options and consider how the decision might impact your situation.
That said, what are some of the crucial considerations of renewing a lease? And when it comes to a lease renewal, how far in advance should you get the process started?
Let’s look at these and other important questions below.
Top Reasons to Renew a Lease
Even though it might not always be the right choice, renewing an apartment lease comes with many advantages.
For one thing, signing a lease renewal agreement is a huge time-saver. Instead of having to worry about where to find a new tenant, you can just renew the agreement with the current tenant and get everything taken care of in a matter of hours.
Another reason why it’s good to renew a lease is that it saves you money. Turning over the property to a new tenant can be an expensive and exhausting process, not to mention that if you fail to find a tenant on time, you will have to endure the expenses of having the property vacant.
Finally, even if you do manage to find a new tenant, there’s always a risk they won’t live up to your expectations. If your current tenant is reliable and trustworthy, it’s always better to stick with them because the risk of unexpected issues is much lower. Of course, a proper tenant screening is an important step in safeguarding your property.
How to Renew a Lease
When it comes to lease renewal, there’s one golden rule you should follow: starting early is always a good idea.
While it may seem like you have ample time to remind your tenant of an expiring lease, going through the process of informing them, waiting for their decision, and finding a new tenant in case they want to move out takes a lot of time.
And if you don’t allow enough time for the process, you might find yourself struggling to get everything done before the lease runs out.
What’s more, when you discuss renewing a lease with your tenant in advance, you also remind them that the time for a decision is approaching. As a result, they, too, can have plenty of time to decide whether to stay or move.
The sooner you learn their decision about renewing an apartment lease, the better the chances of finding an excellent new tenant and avoiding a vacancy.
How to Handle Negotiations for a Renewal Lease Agreement
One of the biggest headaches that come with lease renewal is renegotiating the lease with the tenant. As you renew the agreement, they might want you to include upgrades, renovations, or changes, which will usually end up costing you money.
And when it comes to what you agree to in the new tenant contract, you should think about the expense against what it would cost you to meet those demands.
For instance, if the request is minor and won’t take too much effort, it will probably be easier to meet the demands and get it done instead of looking for a new tenant.
However, if the list is extensive and you find it unreasonable, you should try to negotiate at least some of the items off of the renewal lease. Of course, you can also start weighing the benefits of looking for a new tenant.
Price is also an essential factor. As a result, you should have a good idea of your property value and what it would sell for in an open market.
How Far in Advance Should a Lease Renewal Be Sent?
The easiest way to determine how far in advance you should send a lease renewal is to look at the local laws in your state. That will usually dictate the specific minimum times, which you can then use as a baseline.
However, in most cases, it’s better to give the tenant plenty of time to consider their options, as that works in your favor as well.
Typically, 90 days is an optimal amount of time for the tenant to decide on whether they want to renew the lease. This also provides you sufficient time to find a new tenant should that need arise.
What is the Difference Between a Lease Renewal and Extension?
Even though a lease renewal and a lease extension are similar, there are important distinctions that need to be made between the two.
A lease renewal is the process of renegotiating a new lease contract that will take effect once the old one expires. Using this approach, both you and the tenant might renegotiate various aspects of the agreement, ask for additions, or make changes.
Meanwhile, a lease extension is simply a continuation of the current lease agreement past the expiration of the original one, setting up a new date for its expiry.
How AAOA Can Help
Lease renewal can be stressful for both owners and tenants. But, it doesn’t have to be! By approaching the process early, you’ll have enough time to clearly understand your options.
If you want to learn more about the best practices of lease renewal or have any questions regarding it, contact AAOA today. We’re happy to help!