Tenants in apartment kitchen holding wine glasses

Most seasoned landlords can agree keeping quality tenants is a great way to keep a rental property occupied at a low cost. While you can work to find new tenants to properly screen, offering lease renewals can make renting easier for you and your tenants.

In this cover, we’ll explain what it means to renew a lease and answer your burning questions on lease renewals.

Why Is it Beneficial to Renew Your Lease?

Renewing a lease eliminates the cost of finding a new tenant, which can quickly add up. In addition to the cost savings, you’ll also save a lot of time that you would otherwise spend marketing your unit, screening tenants, receiving applications, showing your unit, and signing a new lease.

In a survey, our landlords said finding new tenants costs them between $100-2,500. By asking tenants to renew (99% of our landlords pursue renewals before seeking new tenants), they have the opportunity to save up to $2,500.

These are some examples of ways a rental lease renewal can save you money:

Chart showing money saved by offering a lease renewal

Do You Want to Renew the Lease With Your Current Tenant?

Before you ask your tenants if they want to renew, consider if they are tenants that you want to keep in your unit.

Do they pay on time? Do they keep your unit clean and undamaged? If they don’t pay on time or caused you problems in the past, then it makes more sense to find a new tenant.

What Should You Do if You Don’t Want to Renew the Lease With Your Current Tenant?

If you want your current tenants to vacate your unit, then you should send them a notice reminding them of their lease expiration. While this isn’t legally required, it’s an opportunity to be a courteous landlord.

Unless they ask for a lease renewal, you can assume they will move out as expected. If they ask for a renewal and you don’t want to give them one, you can tell them you aren’t offering lease renewals.

Here’s an example of how to reject a lease renewal proposal:

Dear Tenant’s name,

Unfortunately, I’m not offering lease renewals at this time. For that reason, I can’t extend your lease past mm-dd-yyyy (the lease end date).  I expect you’ll vacate the unit by this date. If you have questions or concerns about this, let me know.

Thank you,

Your name

What Should You Do About Your Rent Price When You Renew a Lease?

Before offering your tenant a lease renewal, you should determine how to set a new rent price. You don’t have to increase the rent price if you don’t want to, but it’s always advised to do so when renewing a lease.

It’s important to keep in mind that any rent price should take into account rent benchmarks for comparable units, county rent trends and localized information based on nearby rental properties.

While you can find this information on your own, there are also data-driven reports you can invest in to help you determine a new rent price.

The Avail Rent Analysis report shares in-depth information on how your rental property compares to nearby properties, as well as rental benchmarks from lowest to highest to reference when increasing your rent price.

When Should You Ask a Tenant to Renew Their Lease?

You should begin the lease renewal conversation with your tenants 90 days before the lease expires. This gives them time to think it over and to get back to you. Ideally, you want a decision from them 60 days before the lease expires so you have time to find a new tenant if they decide to leave. Tell them you’d like an answer by a certain date.

Some states have laws about renewals. In New York, for instance, the Rent Stabilization Code provides “a lease renewal window of not earlier than 150 days out and no less than 90 days out” according to Teri Karush Rogers at Brick Underground. So, keep in mind that you may need to follow a guideline for when you can renew.

It’s also good to keep in mind that a lot of tenants don’t think about moving until 45 days before their lease expires. They likely won’t have made a decision when you first ask them, so give them a window of time to make a decision.

How Should You Ask a Tenant to Renew Their Lease?

You can ask your tenant in person, or send an email or letter. Here’s a sample of what you can write:

Dear Tenant’s name,

Your current lease expires on mm-dd-yyyy. You’ve been a great tenant and I would like to offer you a lease renewal for x months/another year, if you are interested. The rent terms of the new x-month lease will be $x/month.

If the terms are agreeable, please sign the attached Residential Lease Agreement and Addendums. If you have any questions or concerns, I’m happy to talk with you about it.

Thank you,

Your Name

How Can You Persuade a Tenant to Renew Their Lease?

Keeping rent the same is an effective incentive, but perhaps the most important way to ensure a renewal is to be a good landlord. Andy Jermstad, a current Avail landlord, says it well:

“I believe being a good landlord at all times is a powerful incentive to renew. I respond promptly to maintenance requests and do my best to resolve problems fairly and ethically. I sometimes get the occasional bad apple who will act unreasonably or try to take advantage no matter what, but most of the time, if I am good to them, they are good back to me.”

Another technique is to disincentivize your tenant from moving by reminding them of move-out hassles. As the deadline to renew nears, remind them, “You have a few more days to decide, but I want to give you a list of Move-Out Reminders in case you choose not to renew.”  

Move-out reminders include:

  • Pack belongings: need boxes and tape
  • Find moving company and set date and time
  • Cancel utilities
  • Return keys
  • Forward mail
  • Notify credit card, bank, insurance, and any subscriptions of new address

Providing this to your tenant(s) is beneficial for two reasons: it makes you a helpful landlord. If they do move out, they have a great list of reminders. Second, the list points out the difficulty of moving. It might be enough to entice them to renew their lease!

What if Your Tenant Wants a Month-to-Month Lease Renewal?

Month-to-month leasing is an arrangement where the lease renews automatically each month until either party gives 30-day notice of the lease expiring. This provides the tenant flexibility — they can choose to vacate whenever they want (with 30-day notice).

However, only having 30 days notice can be stressful for landlords. It’s a shorter turnover time for finding a new tenant.

Month-to-month leasing usually signifies the tenant plans on leaving soon; they just want a brief extension of their lease. This is another reason why month-to-month leasing isn’t as desirable a form of lease renewal. But if a tenant will only stay on a month-to-month lease, it can be a beneficial option.

Month-to-month leases should be negotiated at a higher rent price because you are offering them a higher level of flexibility and decreasing your tenant turnover time. You can write this into the original lease. The clause could state, “In the case of a month-to-month lease arrangement, rent will increase by $100.”

Here at Avail, lease renewals are incredibly easy. Go to your lease, click ‘Renew Lease,’ and a new draft of the lease will be created. You can make changes to the rental price and update the lease dates. Then, both parties digitally sign.

What Legal Steps Are Necessary in a Lease Renewal?

When you re-sign the lease, you are legally responsible for re-disclosing all addendums. This means that all addendums, including animal and bed bug addendums, need to be signed again. You also may need to consider (depending on your location) the following:

  • You may be legally required to increase the security deposit to keep the deposit equal to rent.
  • You may need to pay interest on security deposit.

Digital Leases and Lease Renewals

Lease renewals are a great opportunity for landlords to save time and money. Instead of spending money and energy finding a new tenant, you can simply re-sign a new lease with the same tenant(s). A lease renewal is the best way to eliminate hassle.

Renewing a lease is easy to do, especially if you use Avail. You can renew with a simple click of a button and both you and your tenants can review and sign the new lease digitally. Create a digital lease or renew your existing lease with Avail to make the rental process easier.

Thank you to Matthew Braun, Kevin Byrne, Ronald Dolt, Andy Jermstad, Bobby Mitchell, and Scott Sipiora for their landlord feedback.