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What Is a Lease Renewal Agreement?
A lease renewal agreement is a legal document between a landlord and tenant to extend the tenant's duration of stay in an apartment. This means that their lease spans beyond its original end date to another fixed time in the future.
It is important to distinguish a lease renewal agreement from a rental lease agreement.
A lease renewal agreement is also known as a lease extension agreement. Typically, the lease lasts for 6-months to 12-months, but some may be 18-months or even 24-months.
However, a rental lease agreement contract tends to last for a much shorter time period, usually 30 to 90 days.
To learn what a lease entails and should include, you may find this article helpful.
When Should I Use a Lease Renewal Agreement?
You (the landlord) should issue a residential lease extension agreement when you want to continue renting your property to the current tenants. This extension will change the expiration date of their lease, extend the period of time they will rent your property, and ensure that both of your best interests are legally protected.
As a general rule, you should issue a lease renewal letter (notice to renew) within 90 days of the tenant’s lease expiration.
There are several critical benefits to renewing a lease with existing tenants, such as:
- No vacancy costs to pay.
- Consistent rental income year-round.
- Have open lines of communication with your tenants.
- Avoid having to search for and screen new applicants.
- Avoid turnover costs in your apartment/home.
- Possibly increase rent through renewal.
There are limits to how much you may raise the rent, but these vary by state. If you wish to increase the tenant’s base rent, you can send them a new offer through an official notice.
Giving someone at least 90 days to determine whether they will pay the new rent — or if they wish to negotiate — will allow both of you to prepare for any potential moves or vacancies.
Please consult this article for more information on lease renewal letters.
What’s Included in a Lease Renewal Agreement?
Before you sign any contract, you will first need to issue your tenant a lease renewal letter. This letter presents an offer of the rent, terms, and policies the tenant will have to agree to prior to renewing their lease.
If you intend to increase the rent in your offer, you should send a notice of rent increase along with your renewal offer. This should be done at least 90 days before the lease’s expiration to allow tenants to renew or find alternate housing arrangements.
Bear in mind that you must have a tenant’s signed consent before filing any residential lease agreement or commercial lease agreement.
You can never extend someone’s lease or increase their rent without formally notifying them and having them agree beforehand.
This article can help you learn more about the lease renewal process.
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How to Write a Lease Renewal Agreement
Learning how to write a lease renewal agreement requires a solid understanding of state and local law and appropriate lease terms and conditions.
Hiring a lawyer to draw a professional contract is best. The typical rental lease agreement cost is $625 throughout the United States.
Suppose you do decide to write your lease renewal agreement. In that case, you should still have a lawyer review the final contract to ensure it is compliant with your state’s landlord-tenant laws.
Element 1. Basic Information
The lease agreement should contain identifying information for the landlord, property management company, any co-owners, and a list of tenants occupying the residence. Additional occupants, such as children or adult dependents, should also be listed.
You can also specify the lease type in this portion of the contract. For example, is it a fixed-term lease, e.g., one year or a month-to-month lease that automatically renews every month until the landlord or tenant ends the agreement?
Element 2. Property Description
A detailed description of the property should include its square footage, any known defects, and any appliances, furniture, and other belongings that the tenant may utilize during their lease but does not have ownership to.
Element 3. Start and End Dates
Clearly print the start and end dates of the lease extension agreement, and specify what measures the tenant may take if they wish to terminate their lease before its expiration. You can also clarify what financial responsibility a tenant may have for the lease if they end it early.
A landlord should also clearly state their right to end the lease early under certain circumstances, such as a tenant violating the terms and policies laid out within the leasing contract.
Element 4. Rent, Utilities, and Amenity Fees
The rental lease agreement should fully disclose how much rent a tenant will be required to pay when they must pay it and the repercussions of paying late.
You should also state who is responsible for paying utility bills. Include any associated amenity fees a tenant may pay to you or the property management company.
Include a complete list of all utilities in the property, as well as any other fees a tenant may have to pay, such as:
- Pet rent
- Parking fees
- Late fees
- Insufficient fund fees
Element 5. Payment Methods
How will the tenant pay their rent each month? Make sure you clearly state how you will receive rent through a secure online portal, wireless bank transfer, or bank check. It is not advisable to accept cash as a rental payment method unless you issue a written receipt of payment each month.
Element 6. Tenant and Landlord Obligations
Specify the responsibilities a tenant has and yours as their landlord. If your new agreement modifies any existing obligations, this must be added in an addendum to lease contract.
An addendum is a separate document that will provide additional information or changes to a prior lease. The tenant must agree to all the information in the addendum and sign it before they can renew.
You may also clarify any tenant's rights to the property during their lease. For example, how can they handle these proceedings if they are permitted to sublease the apartment or house?
Element 7. Security Deposit
Be sure to clarify if the tenant must pay an additional security deposit to renew and the process for receiving their deposit at the end of their lease.
This should state what circumstances would result in a tenant not receiving their full deposit back, how the funds will be issued, and how long it will take to receive their deposit after moving out.
This article can tell you more about what to include when writing a lease agreement.
When Should I Send a Lease Renewal Letter?
You should send a lease renewal letter at least 90 days before a lease ends. This is the minimum required amount in most states. There are also restrictions on how soon you can send a renewal, typically no more than 150 days before a lease expires.
In some states, the lease renewal period is as little as 30 days, so you should consult with a local attorney to ensure you are within your legal rights as a landlord.
You can use this guide to learn about lease laws by state.
What if the Tenant Wants to Negotiate a Lease Renewal Agreement?
Tenants can openly discuss renewal and negotiate it with a willing landlord. However, suppose you agree to any changes the tenant requests. In that case, you must modify your lease extension agreement to reflect these alterations.
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