What is Lease Renewal Agreement? When should you use it?

Today, great tenants are not easy to find, and landlords are at the forefront to ensure tenants don’t leave. It is the main reason tenants are considered gold eggs in the real estate landscape. And this is where the tenant lease renewal agreement comes into play.

Landlords understand that sending this document is a crucial aspect of operating and owning a rental property. In layman’s terms, the landlord sends a lease renewal to a tenant before the current lease expires. It highlights new changes along with and new offer that serves as an opportunity and propels a tenant to sign the new lease.

In this post, you’ll learn the basics of a lease renewal, the importance of a lease renewal, reasons to sign a lease renewal, and how to draft a lease renewal:

What is Lease Renewal Agreement?

A lease renewal is one of the most utilized documents that extend the original lease for a specified term or period. Using lease renewal agreements, landlords can renew the terms of a new lease and add new changes before the expiration of the current lease.

You may have heard about lease renewal agreements such as the lease renewal form, residential lease renewal agreement, lease renewal letter, or lease extension form. All these are alternative names for lease renewal agreements with the same function and laws. One of the highlights of lease renewal agreements is that it gives involved parties the to renegotiate the terms of a new lease.

If the landlord negotiates a specific rent increase, the tenant may demand new amenities before the new lease expires. Remember, lease extensions mostly focus on the current terms and conditions. It means when there is an extension on a current lease – chances are it contains the terms of the original lease.

If the tenant and the landlord are satisfied with their lease terms and want to continue the relationship, they renew the lease. Both parties have to be on the same page to renew a lease agreement. In this situation, the majority of the lease terms would apply in the new lease agreement.

But when a tenant doesn’t agree or sign a new lease, he can still be part of the rental. However, the tenancy will automatically turn into a monthly arrangement. The month-to-month tenancy offers more flexibility to tenants and landlords. On the flip side, month-to-month tenancy gives the landlord a chance to rent out the property to another tenant who is ready to sign an extended-term lease.  

What’s in a Lease Renewal?

Contrary to misguided perception, a lease renewal does not contain hundreds of elements. In fact, a formal lease renewal agreement consists of specific details such as:

  • Basic information about the landlord and the tenant
  • Dates of a renewed lease letter
  • Complete address of the property
  • The indicative expiration date of the current lease agreement
  • Revised rent in the new lease agreement
  • New lease agreement term, which indicates the time to renew the lease for a year
  • The last date for the tenant to sign the lease renewal agreement

It is up to the landlords whether they send the lease renewal letter via email or mail to the tenants. Landlords can also send the lease renewal agreement to the tenants directly and communicate the lease term in person. In fact, this style of communication gives the landlord an opportunity to explain revised changes in the lease renewal agreement.

The landlord can also highlight specific changes that would work in favor of the renter. The standard practice for landlords is to keep the original copy of the lease renewal agreement and send a copy to the tenants. Landlords also keep a detailed file that highlights how the lease renewal agreement was delivered to the tenant.

Why is Lease Renewal Agreement important?

A lease is a legally binding agreement between the tenant and the property owner. Despite how extensive or simple a lease renewal may be – it should highlight all the conflict resolutions, policies, and rules to stay in the property. An effective lease renewal agreement clearly defines rules for the tenant and outlines the responsibilities of the landlord and the tenant.

A lease renewal letter has to be in writing to make a legally binding document. Unlike many agreements that are often acceptable as verbal, a lease renewal has to be in writing. If a lease renewal form is verbal rather than written, it won’t be admissible in a court of law.  

Property owners who manage their properties can use online lease templates to fill out the information. Still, property managers slash property owners have to reach out to a local attorney to confirm the details within the document before sending it to the tenant.

Without a lease renewal form, tenants won’t have a clear sense of direction about their stay in the property. In a way, the lease renewal agreement works as a guide for the tenant and the landlord to agree on the same terms and move forward in the right direction.

When a landlord has multiple properties, it makes more sense to outsource property managers to address difficult situations and avail added management services. You can manage properties and draft lease renewal agreements on your own, but it would be wise to have the documents reviewed by a professional legal expert. It is the best way to ensure the lease terms are in your best interest and compliance with state and local laws.

Renewing a lease gives landlords an opportunity to keep their best tenants on flexible terms and collect rent on time. In fact, landlords prefer to rent out properties to tenants who are easy to work with and can undertake basic property maintenance responsibilities.

With lease renewal agreements, landlords can also ensure there is no significant vacancy gap that might send a wrong signal to the market. In fact, the more time a property is vacant, the more stressful it becomes for landlords to rent it out to suitable tenants. Today, landlords can create and finalize a lease renewal on the same day. As long as the tenant likes the new offered term and agrees to sign the document – the landlord can process the lease.

Why do you need to Lease Renewal Agreement?

When a tenant decides to stay in a rental property, the landlord sends a lease renewal to continue the rental agreement rather than find a new replacement. For property owners, the main reason to opt for a lease renewal is to cut out the cost of looking for a new tenant.

If the property’s market value has increased, then it makes sense to bump up the rent. However, it wouldn’t be suitable to raise the rent significantly. After all, you don’t want to dissuade the tenant vacate the property.

One of the main benefits and reasons to opt for a lease renewal is that it saves the tenant and landlord time. It helps landlords secure a consistent cash flow. Not to mention, it cuts out the need for the landlord to look for another tenant. Consequently, landlords save costs and time on advertising the rental property, meeting with potential tenants, and categorizing and screening applications.

Having a lease renewal minimizes the vacancy risk for landlords. Lost rent is lost income, and broadminded landlords understand the value of a lease renewal to continue the relationship with valued tenants.  

Market data shows that a large vacancy gap exposes the property to potential vandalism, break-ins, and a tarnished reputation in the market.

Another reason to have a lease renewal for landlords is that it cuts out the need to get a new tenant familiar with the term and rules around the property.

How to Write a Lease Renewal?

  1.  Get a generic lease renewal extension template online.
  2.  Include your lease renewal letter date.
  3.  Write down the address and geographic location of the rental property.
  4.  Mention the landlord’s name agreeing to the renewal agreement.
  5.  Mention details about how the lease renewal will work out.
  6.  Mention the reasoning for extending this lease or renewing the lease agreement for the tenant.
  7.  Highlight additional lease renewal terms.
  8.  Ensure there’s an executed signature by the landlord.
  9.  Highlight the starting date of the lease renewal.
  10.  Get the tenant’s signature to process the extended lease renewal agreement.

When should you use Lease Renewal Agreement?

As a landlord, you need to send residential lease renewal agreements if the tenants intend to continue their stay in your properties. Think of the lease renewal as the extension term that changes before the expiration of the existing lease.

By extending the lease term, you can continue to rent out your property, form trust with existing tenants, and ensure legal compliance with local and state laws. Typically, landlords must send a lease renewal notice at least 90 days before the renter’s current lease expires.

Again, the main reason to renew the lease agreement is to maintain consistent and round-the-year rental income. It also helps landlords avoid the search for new tenants and avoid property turnover costs. A renewal lease agreement allows landlords to maintain an open line of communication and gradually increase the rent.

Lease Renewal Agreement example

A lease renewal starts with the background and is followed by premises, original lease, renewal terms, and general provisions. Last but not least, a lease renewal form features the tenant’s and landlord’s signatures.

Here’s a standard template for a lease renewal:


Final thoughts

Mostly, the lease ends early. But there are some situations where the tenant needs a lease renewal. It is crucial to take into account all the considerations before signing a new lease. Today, local and state have predetermined laws in place as to how far a landlord should provide a lease renewal letter to the tenants. It is imperative to follow the best practices of lease renewal to avoid legal obstacles.

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Lease Renewal Agreement – FAQs

When should you send a lease renewal letter?

From a landlord’s perspective, the minimum notice period to renew a rent lease depends on local and state laws. In fact, the last thing landlords should do is generalize lease renewal periods. For starters, landlords need to send a renewal letter to tenants 90 before prior to the lease expiration.

As a result, it would give tenants plenty of time to decide whether or not they want to sign the new lease. When you send a lease renewal form 90 days prior to the expiration of the current lease, it gives the tenant peace of mind to think and explore other options.

What if the tenant wants to negotiate a lease renewal?

If the tenant wants to negotiate the lease renewal terms, the final decision is in the landlord’s courtyard. In fact, landlords decide whether or not they want to negotiate the lease terms. But when a landlord is dealing with a valuable tenant, it doesn’t hurt to check out their requests and take new terms under consideration.

  • A tenant can ask for changes in a lease renewal like:
  • The security deposit or monthly rent price
  • Rules and Policies
  • Lease Duration
  • Added renter’s insurance requirements
  • Mode of received payments

Can a lease renewal include changes from the landlord or property manager?

No, it wouldn’t make sense for landlords or property managers to change a lease renewal “after” it is signed. In fact, making changes after a lease renewal has been signed can trigger a legal lawsuit.

However, the property manager or landlord can make the newly proposed changes only when the tenant agrees to new changes. But the tenant and the lord will have to sign the lease renewal agreement again for legal validation and affirmation.

What happens if the tenant declines to renew their lease?

Tenants have to notify or alert the landlord that they don’t want to renew their lease. This notification has to be in writing and before the lease term expires. In some situations where a tenant is a domestic violence victim or gets military orders may not have to give advance notice to the landlord.   

So, if tenants inform you that they don’t plan to renew their lease agreement, get this information in writing as a confirmation before the lease expires. But what happens when a tenant still lives on a property even after the lease has expired? Well, then, it gives landlords a couple of options. If the tenant continues to pay the previously stated rent, the landlord can accept it.

In most situations, landlords ask for a renewal of the rent. Now, if a tenant stays on a property after the lease expires and doesn’t pay rent, it would violate the terms of the previous lease. In this case, the landlord will have to contact a local attorney to find local tenant-landlord laws.