How To Renew A Lease On Your Rental Property
How to renew a lease seems to be a question that landlords and tenants ask me about every week. The first question to ask is “What does your lease say?”
- How does it address the end of the lease term?
- How long was the original lease for?
- Does it automatically renew for a year?
- Does the tenant go month to month?
I know several landlords that get tired of renewing leases every year or two and just made them automatically renew for another year. The tenant is told when the lease is signed that it will renew for another year unless they give the required notice to vacate (30 to 60 days is typical). Tenants don’t typically like this because if they want to move and forget to give proper notice, they can be stuck for another year.
Should you renew a tenant's lease? Do you even like the tenant? Click To Tweet
Is This A Good Tenant?
You should also stop and ask yourself if the person living in your rental home has been a good tenant.
A good tenant:
- Pays rent on time
- Keeps the property in good shape
- Cuts the grass
- Calls in problems in a timely manner
- Is easy to deal with
If you decide that this has been a good tenant or even a pretty good tenant, then you should most definitely contact the tenant about renewing the lease. Good tenants can be hard to find and you want to keep them as long as possible. Again, how the lease is written will determine the next step. A tenant that is happy and eager to stay will also want to know how to renew a lease so they don’t get “kicked out”.
One very simple way to keep track of when a lease expires is to use an online calendar. I use the google calendar and when someone comes in to sign a lease, I enter the end date 60, 30, 15 and 3 days out. I will get reminders on all four days so that I can follow up with the tenant.
One very simple way to keep track of when a lease expires is to use an online calendar. Click To Tweet
How To Renew A Lease Call Or Mail?
You can mail the tenant or you can call them first. I personally like to talk to tenants and see how things are going. Letters just seem so impersonal to me and I have found that many people don’t even look at their mail anymore!
Usually what I do is call the tenant at the 60 day reminder to tell them their lease will be expiring and ask if they would like to sign a new lease. It is easier to get a feel for if the tenant is happy living there and most of them appreciate the personal contact.
There is another school of thought on this as well and there is some truth to this. Many landlords don’t like to contact the tenant before the lease is up because they feel like it might make the tenant move. My feeling is that your tenant already know is he is happy in the home and already knows whether he is staying or going.
Most tenants that I deal with already know roughly when their lease ends and will contact me before I ever contact them. Yes, it is a “risk” but honestly I would rather know than have them tell me two days before they move out.
Yes, I am renewing my lease.
If the tenant says yes, he wants to stay, I set up an appointment for him to come in and sign a new lease. It can be inconvenient to sign a new lease every single year so I always suggest doing a two or three year lease.
No, I am moving
Say I am sorry to hear that and is there anything I can do to change his mind. Sometimes it is possible to do that just by talking to them depending on why they want to move. Obviously I can’t add more bedrooms or bathrooms but I can’t find out what they need without talking to them. Assuming he is set on moving, I make a note on my calendar and explain the move-out procedure to him.
Don’t know yet
“I don’t know” is actually a common answer and one I don’t mind hearing. If your tenant is happy he may be shocked that a year has already gone by! This is your chance to flip him to the “I am staying” side. If he has been a great tenant, tell him! Your job is to make him feel like you don’t want him to move. Life events can cause uncertainty also and those you really can’t control. Job transfers, college graduation, a death in the family, etc. , can all cause uncertainty in the tenant’s life and he may need more time to decide. You can offer to check back in a week or so, opt let him go month to month or offer to do maybe a six month lease. Get creative so you don’t have a vacant property!
Skip The Phone Call, Just Mail Them And Ask
You can also decide not to call the tenant and just mail a certified letter to let him know that the lease term will be ending on this date and are they staying or going.
I give them three options:
- The lease will extend for another year. I list the new lease dates and rent increase amount. I tell the tenant to call the office to schedule a date to sign the lease.
- Option to go month to month but I increase the rent by a larger amount. Again, the tenant is told to make an appointment to come into the office.
- They can also check the “Vacating on or before ______________________” box.
Problems With Mailing
I have been on different forums and mailing the tenant seems seems to be the most popular way for landlords to renew a lease. They will tell you to do a quick one page renewal and include it with the letter telling them to initial the changes if they want to stay another year. No muss, no fuss is their motto and it just takes a few minutes to do.
But, my personal experience is that most of your tenant don’t open their mail and very few of them will actually sign and/or return the paper to you.
- Where do you stand when the tenant doesn’t mail the revised lease agreement back?
- Did you put a note in your calendar to follow up with the tenant when the paperwork doesn’t come back?
- What if you freaked the tenant out and he thinks he has to move out?
- Some of them are not very smart and I am left scratching my head about their confusion!
In the end, you have to call the tenant anyway to ask if he got the new lease agreement, does he intend to stay, yada, yada.
Stressing About How To Renew A Lease – Should I Increase The Rent?
One of the biggest concerns about how to renew a lease concerns rent increases. Most landlords stress out over raising the rent for existing tenants.
- What if the tenant gets made?
- Will the tenant just up and move?
- Can the tenant afford to pay more rent?
- I can’t afford a vacant right now!
I am a firm believer in raising the rent every year or two. Most tenants will be able to easily afford a rent increase of $10, $20 or $30 a month without too much strain. The costs of owning a rental property will always go up as your insurance and tax rates will increase. If you pay for utilities, those rates also increase all the time which means less profit for you.
How much you decide to raise the rent will depend on:
- Area the home is in
- Original rent rate.
Keep in mind that most tenants live on a tight budget so crazy rent increases will freak them out and cause them to move. You need to walk the line between keeping the tenant and being fair and watching your bottom line. Depending on the area and the current rent you are charging, a rent increase of $50 to $75 may be fair or it could send the tenant into a panic attack. You have to know your market and raise the rents accordingly.
No matter what the answer, paperwork will need to be done and sent to the tenant. When your tenant agrees to stay in your rental for another year, get that paperwork done and ready to print! The dates and possibly the rental amounts will need to be changed. Another tip is to make sure that everyone listed on the original lease is still there. Also ask if anyone else needs to be added to the lease.
For a tenant that is moving, I will make another attempt to keep him. There seems to be a certain set of tenants that just like new and fresh so they move every year or two. You may find that offering to do something simple will get them to stay longer. You might offer to not raise the rent if the tenant agrees to stay for another year. Maybe offer to paint a room, install a ceiling fan, mulch the yard, etc.
If that fails, then I will send the move out packet to the tenant and wish him well.
With tenant’s that are on the fence about moving, sometimes the same tactics that I use on a tenant who wants to move will work in this case. It is worth a try and you may keep your tenant another year or two.
Do You Have To Renew A Lease?
A landlord is not required to renew a lease and the tenant is usually stunned when you inform him that he has to move. Your tenant will need to be pretty awful for you to decide not to renew his lease. A vacant house will cost you time and money to fix up and rent again. But I have told more than one landlord that your sanity and peace of mind are more important than a rented home! Nuisance tenants will drain your time, energy, good will and money very quickly.
Bad Tenant Has To Go
Let’s say you have a tenant that hasn’t been great and you really don’t want to renew the lease for another full year. If your lease states that the tenant will go month to month at the end of the original term, then just let it end. I recommend sending a letter telling your tenant that the lease term has ended and he is now on a month to month basis. Assuming you don’t like this tenant, maybe he will move on his own!
Making The Tenant Move
When you have a tenant that you really want to move, look at your lease and if it requires the tenant to give 30 days’ notice to vacate, then you usually have to give the same notice for him to vacate.
You as the landlord are usually required to send a certified letter stating that you do not intend to renew the lease and that they have 30 days’ notice to vacate the property. Keep in mind that if it states 60 days or 90 days, you have to give the same number of days for them to vacate. The laws will vary from state to state so double check the laws in your area to make sure that you comply with the proper notice required.
The Tenant Can’t Or Won’t Move That Quick
Your tenant may be shocked when he finds out that you are not going to renew his lease for another year. It may not be physically possible for your tenant to find a new place to rent in 30 days and actually be out. I recommend that you be nice and give them another 30 days but you aren’t required to. You get another month’s rent and hopefully the tenant won’t tear the place up because they are mad. Occasionally you have a tenant who refuses to move. In this case, you stop accepting rent and start the eviction process.
How To Renew A Lease Final Thoughts
Renewing the lease for an existing tenant is usually uneventful and goes smoothly. A good landlord will know the tenants and should have an idea of whether the tenant is thinking about moving or not.
Every so often I am shocked to hear that a tenant doesn’t want to renew a lease and is moving. Usually it is due to some big life changing event, not because of the ho use. I know that if a tenant is living in a two bedroom home and he has a kid or two, he is going to need a bigger house.
Have your lease renewal procedures and move out procedures listed in the lease so that the tenant can’t be surprised. The same goes for security deposits, damage deposits, damage fees, pet fees, etc. because they all have different rules that apply.
Assuming you have done your job and kept up with maintenance requests and kept the tenant happy, you will find that you have a stable tenancy in your rental homes.