Lease Renewal Letters: What Landlords Need To Know [+ Free Template]

Finding and retaining great tenants can be challenging, and many landlords will go to great lengths to keep them. One essential aspect of property management is the lease renewal process. Sending a lease renewal letter to a tenant is a critical step in maintaining a positive landlord-tenant relationship and ensuring continued rental income.

This article will explore what landlords need to consider before renewing a lease, how to craft an effective lease renewal letter, and where to find free templates for lease renewals and residential lease agreements.

Key Takeaways

• Landlords are not legally obligated to renew a lease, but local landlord-tenant laws may impose certain restrictions.
• Important factors to consider before renewing a lease include current market rent and the terms of the new lease.
• A lease renewal can save landlords time and money by minimizing vacancy periods and lost rental income.
• Typically, a lease renewal letter should be sent to the tenant approximately 90 days before the current lease expires.
• If a tenant agrees to the renewal, a new lease agreement is drafted and signed; if not, a non-renewal letter is issued.

Does a Landlord Have to Renew a Lease?

While landlords generally have discretion regarding lease renewals, local and state landlord-tenant laws can influence this decision. In areas with rent control, specific regulations may restrict how and when landlords can terminate tenancies. 

To ensure compliance with applicable regulations, landlords should consult their property manager or real estate attorney before deciding whether to renew a lease.

Factors to Consider Before Renewing a Lease

Before sending out a lease renewal notice, landlords should evaluate several key factors:

1.  Rent

The first step in the renewal process is assessing whether the tenant is paying fair market rent. Market conditions may have shifted since the tenant signed their original lease and landlords may want to adjust the rent amount to keep it in line with fair market rates - this rent increase needs to be communicated with the tenant as part of the lease renewal process.

To determine current fair market rent, landlords can utilize online resources such as:

• Rentometer: A tool that assists landlords in evaluating whether they are charging too much or too little for rent.
• Zillow Rent Zestimate: A resource for estimating starting rental prices.

2. Timing

As a rule of thumb, landlords should send out lease renewal letters 90 days before the current lease expires. For example, if the expiration date is April 30th, the tenant should receive their renewal notice by February 1st. This three-month window allows ample time for market fluctuations while giving tenants sufficient time to make decisions without feeling rushed.

3. Decision Deadline

A well-crafted lease renewal letter should include a clear deadline for tenant responses regarding their decision to renew under the new terms. For instance, if tenants do not agree within 30 days, landlords still have 60 days to list the property for rent and screen prospective tenants.

4. Length of Renewal

Typically, landlords renew leases for the same duration as the original agreement. For example, if the initial lease was for 12 months, the renewal might also be for another year. However, landlords have flexibility in determining the length of the new lease. 

If rents are rising rapidly, they may opt for shorter terms (e.g., six months or month-to-month). Conversely, if they anticipate declining rents, offering a longer-term lease may be more prudent.

5. Tenant Considerations

Finally, landlords must assess whether they want to retain their current tenants. If tenants are responsible—paying rent on time and maintaining the property—renewing their lease could be advantageous. By doing so, landlords can avoid marketing costs and potential vacancy losses.

Pros and Cons of Lease Renewals

Here’s a quick overview of the advantages and disadvantages of offering a lease renewal:

Pros of Renewing The Lease

• Simplicity: Retaining existing tenants reduces effort compared to finding new ones.
• Familiarity: Current tenants understand property rules and landlord expectations.
• Cost Savings: Avoids expenses related to advertising and screening new tenants.
• Reduced Vacancy: Minimizes lost rental income associated with turnover.
• Lower Risk: Keeping tenants that you already know and trust reduces the likelihood of leasing to problematic individuals.

Cons of Renewing The Lease

• Tenant Issues: A landlord may prefer not to renew if tenants consistently pay late or damage property.
• Rental Increase Limitations: Local laws may restrict how much rent can be increased for existing tenants.
• Negotiation Challenges: Tenants may resist or negotiate unfavorable terms during renewal discussions.
• Opportunity Costs: Short vacancies can allow for necessary repairs or upgrades that justify higher future rents.

What to Include in a Lease Renewal Letter

A comprehensive lease renewal letter should contain essential information:

1. Date of issuance
2. Names and contact details of both tenant(s) and landlord
3. Property address (including unit number if applicable)
4. Expiration date of the existing lease
5. New rent amount
6. Term length of the renewed lease (e.g., another 12 months)
7. Deadline for tenant response regarding renewal

Sample Lease Renewal Letter

Below is an example of a basic lease renewal letter that landlords can customize:

Some landlords prefer mailing or emailing this letter; others opt for in-person delivery to address any questions directly (after providing proper notice). Regardless of delivery method, it’s standard practice for landlords to keep copies of all correspondence in tenant files.

How to Renew a Lease

If tenants agree to the terms outlined in the lease renewal letter, the next step is drafting a new lease agreement for both parties to sign. Before signing:

• Discuss potential changes such as increasing security deposits (if allowed by local laws).
• Determine payment methods moving forward (e.g., transitioning to an online payment system).
• Consider requiring renters insurance if not already in place.
• Address any changes in other terms (e.g., allowing pets or additional roommates).

If tenants decline or fail to respond by the deadline, landlords should send them a non-renewal notice indicating that their current lease will not be extended. This document serves as formal evidence that tenants were allowed to renew but chose not to do so.

Free Template: Lease Renewal and Non-Renewal of Lease Templates

Lease Renewal Letter: Final Words

Navigating the complexities of lease renewals is crucial for successful property management. By understanding what goes into crafting an effective lease renewal letter, considering important factors before renewing leases, and utilizing available resources like templates, landlords can maintain positive relationships with their tenants while ensuring consistent rental income.

Remember that proactive communication with tenants fosters goodwill and minimize potential disputes down the line—making it easier for both parties as they navigate their leasing agreements together.

If you want to simplify the tenant management and lease renewal processes, consider exploring property management software like Landlord Studio.

With Landlord Studio you can set reminders for important events like property inspections and lease expiry dates as well as automate tenant comms with customizable email templates

Create a free Landlord Studio account to streamline reduce late rent, keep vacancies to a minimum and maximize your portfolio ROI.