Good reliable tenants are not very easy to come by, so when you have one that pays rent on time and takes care of your property, it might be a good idea to retain them. You can do this by renewing their lease, which will also save you the time and stress of looking for a new tenant. Usually, this is done through a document called a Lease Renewal Letter.
What Is a Lease Renewal Letter?
A lease renewal letter is a document prepared by a landlord that intends to prolong the current rental agreement of a tenant. It usually stipulates the extension and could also mention changes to the current lease such as increased rent. Generally, it must be sent to the tenant within 30 to 90 before the current lease is set to end to give both parties enough time to prepare adequately.
Lease Renewal Letter Templates & Examples
When Should You Send a Lease Renewal Letter?
The amount of notice you need to give a tenant when you wish to renew a lease will vary from state to state. Generally, however, lease renewal letters are usually sent at least 90 days before the current lease expires. If the tenant rejects the offer, this notice period allows the landlord time to find a new tenant.
Things to Consider Before Sending a Lease Renewal Letter
Before drafting and sending a lease renewal letter to a tenant, you should answer the following questions to determine whether the decision is viable:
- Does the current lease expire in 90 days i.e. do you have enough time to send the letter?
- Is the tenant reliable, do they pay rent on time and take care of your property?
- Will the renewal be month to month?
- For how long will you renew the lease?
- Will the renewal come with any changes to the terms?
- When do you need the tenant to respond?
Benefits of Renewing a Lease
Renewing a lease is a cost-efficient and beneficial move for most landlords because of the:
1. Eliminated Vacancy Risk
If a tenant moves out before you get another prospective renter, you could end up losing rental income for the period your property will remain vacant. You might also need to pay for utilities yourself.
2. Reduced Costs
Finding a prospective tenant takes time and effort is also very costly. On average, you might end up using 35 to 80 percent of your gross operating income (GOI) on expenses involving cleaning, advertising, tenant screening, and renovations.
3. Time Saver
When a tenant moves out, you require time to prepare the premises for the next renter, screen prospective tenants, create a listing, and advertise the property. Renewing an existing lease saves you all this time, as well as resources.
4. Reliability
If you have a reliable tenant that maintains the property, gets along well with neighbors, and pays rent on time, a lease renewal allows you to keep them on the property.
How to Renew a Lease
While renewing a lease is definitely easier and more time saving than getting a new tenant, it does still involve some paperwork. Chief among these is the Lease Renewal Letter, wherein you negotiate the renewed lease. Here is a guide to help you prepare it and carry out the renewal process:
Step 1: Prepare an Intent Notice
In a simple letter, notify the tenant of your intent to renew the lease. You should decide beforehand whether the terms will remain the same or change. Generally, your letter should look like this:
[Date]
Dear [Tenant’s Name],
I intend to renew your current lease dated {current lease date}, which is set to terminate on {end date}. In the {duration} you have lived on the property, you have been a model tenant. I am offering to renew the lease for an additional {term duration} with rent being {amount}. Contact me at {contact information} by {date} with your response to this offer.
Sincerely,
[Landlord’s Signature]
Step 2: Send the Notice and Wait
Once you finish writing your letter, send it to the tenant within the recommended notice period and wait for their response.
Step 3: Prepare a New Lease
If the tenant accepts the offer, document any changes you wish to include in the lease agreement and have both parties sign the new contract. If the lease doesn’t involve a lot of changes, you can prepare a 1-page long lease renewal agreement for signing.
Renewal Vs. Extension
Legally, a lease renewal represents a new contract while a lease extension just prolongs the current lease. Here is a highlight of the differences between these two processes:
| Action | Extension | Renewal |
| Increase rent | Not Recommended | Recommended |
| Extend lease term | Recommended | Recommended |
| Add terms to the agreement | Not recommended | Recommended |
Tips for Writing a Lease Renewal Letter
Summer is usually the best time to renew a lease term because it is when rental properties are in high demand. This is because people prefer to move when it is warm and it allows parents to keep their kids in school during the school year. Besides this, other tips to help you renew your lease include:
- Always mention your intention in the first or second line of your renewal letter.
- Briefly explain the reason for the renewal.
- Give the tenant a timeline within which they must respond.
- Mention upfront whether you will be increasing rent.
FAQs
Usually, a landlord is not obligated to renew a lease. However, some local laws have recently been changed that limit a landlord’s discretion over renewals. It is best to consult an attorney about what your state laws say about renewals.
A landlord could avoid renewing a lease if a tenant is unreliable, destructive, always late with rent, or frequently complained about by neighbors. They could also do so if they plan to sell the property.
If your landlord offers you a renewal, you can write to them about terms you would like modified in the current lease. The strategy is to make your requests known before signing the new lease.
Final Thoughts
The primary goal of writing a Lease Renewal Letter is to maintain a reliable tenant that pays rent on time and maintains the property. Remember, you will need to create a new document capturing the renewal and any changes to the terms and ensure that both parties sign it.
