Both tenants and landlords can make use of the lease renewals to extend the period of tenancy. If the tenants are comfortable enough staying in the property and they don’t have any plan of moving our or finding new property for the lease (unless for the early termination), then renewing the lease may seem like a good idea.
This can also be beneficial for the landlords. If they are already happy enough renting out the property to cooperative and good tenants, why should they vacant the property to find other tenants – who may not be as good or cooperative as the current ones?
What to Know about Lease Renewal Agreement
As you may have guessed from the name, this agreement refers to a legal document between the tenant and landlord, stating their ‘agreement’ to extend the stay duration (of the tenant) within a property. It means that the lease will span beyond the original end date – going further to another (fixed) time in the future.
This agreement is also called lease extension agreement, which generally lasts from 6 month up to 12 months. However, there are some cases where the lease may last up to 18 months, and even 24 months.
When Should the Agreement Be Used?
When the landlords want to stay renting their property to their current tenants, they should issue the so-called (residential) lease extension agreement. The extension would change the lease’s expiration date, extend the period of the tenancy, and make sure that both parties are protected legally.
There are several important perks of having lease renewals agreement with the already existing tenants:
- It can avoid the turnover cost in the property
- Landlords can have consistent and continuous rental income all through the year
- There are no vacancy costs (or whatsoever) to pay
- Landlords and tenants can have an open communication
- Landlords don’t have to do the search for new applicants and screen them – all over again
Moreover, when landlords renew the lease, they can keep the cooperative (and good) tenants. Not to mention that these landlords won’t have to deal with vacancy period, which can go for a long time.
If landlords wish to make passive income from renting out their property, the best thing to do is to keep the already existing tenants close-by.
Renewing the lease is a better option for landlords because they can avoid the hassle and complication of advertising the property, screening the tenants, and such thing alike. The process itself can last for weeks, or even months.
But when they create a new lease agreement, they won’t have to deal with such a lengthy process and a lot of work. Not to mention that these landlords are sure that there would be someone (or some people) which provide them with streams of revenue.
The Crucial Importance
Before landlords propose the lease renewals letter, they should think about the types of tenants that they want to keep. They should only offer the renewal to good tenants that have never caused any problem, paid their rent on a timely manner, taken care of the property well, respected the neighbors, and been cooperative in dealing with maintenance aspect.
If landlords offer the renewal to ‘troublemaker’ tenants (meaning that they are often late in payment, they aren’t exactly easy to work with, or they are nuisance to their surroundings), these landlords only invite problems to themselves. Managing their rental won’t be easy and it would be more stressful.
When should landlords start offering the lease renewal letter to the tenants? They should provide the so-called lease renewal notice and it should be given within 90 days before the tenancy is over. The offer can be done in person, through a letter, or through the email.
The main purpose is to get a reply in 30 days. In the event the current tenants refuse to renew the lease, the landlords can have a minimum of 60 days to find new tenants.
However, landlords should be prepared if the tenants prefer having month to month lease instead of the fixed-term one. It depends on the tenants, really, but there is always a possibility that tenants choose month to month type over a fixed-term one.
In the event landlords and tenants agree to this kind of lease renewals, both still need to sign a new lease agreement: the month to month type.
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