Lease renewal is a touchy subject, and in my opinion, it should never be guaranteed.
Some landlords prefer an automatic renewal approach, and even sometimes, the tenant is given a “guaranteed” renewal option. No thank you.
I never know what the future holds, and I need to keep my options open. I prefer not to be tied down like that.
None of my leases have automatic renewals, but I do require my tenants to give 60 days notice of non-renewal. Basically, I’m saying:
“If you plan on leaving when your lease is up, you have give me 60 days notice.”
It’s a great tactic that has reduced my vacancy to near zero, and saved me lots of time and money over the years.
Don’t Give a Guaranteed Renewal
If I get a bad tenant, the worst possible outcome is for them to have the “right” to renew at the same price. Meaning, they can renew, under the same terms, even if I don’t want them too.
Some inexperienced landlords have this clause in their lease, but I think it’s a horrible mistake. When signing a fixed-term lease, I never guarantee an option to renew.
Why in the world would I tie my hands like that?
When reviewing the lease with my applicants, about half of them ask “Will I be able to renew?”.
I always answer the same way:
“If you’re a good tenant, and I don’t have any other plans for the house, then of course I’ll give you a renewal offer. But we’ll need to work it out when the time comes. If you want to guarantee your tenancy for a longer term, we’ll need to sign a longer lease.”
To the best of my knowledge (although I’m not a lawyer), no state requires a landlord to renew a fixed-term lease. It would defeat the point of having a fixed end date. Although some tenant-friendly cities, like Washington D.C., give the tenant the right to go month-to-month after a fixed-term lease, with the same terms.
Further, many rent-controlled cities in California, say that a landlord can only terminate a tenancy for a variety of reasons, and no-cause terminations are easy fought.
What About Automatic Renewals?
An automatic lease renewal is ideal for at-will tenancies, such as week-to-week, month-to-month, or year-to-year. However, I don’t think it’s appropriate for a fixed-term lease (a lease with a set end date).
With that said, just because a lease automatically renews, doesn’t mean either party can’t terminate it with proper notice.
Automatic renewals have some negative consequences on a fixed-term lease:
- The manager won’t visit the property as often
- The landlord will forget about the renewal and miss an opportunity to raise the rent
- Many tenants forget about the date too, and then want to abandon their lease at a later time
60 Day Notice of Non-Renewal
None of my fixed-term leases automatically renew, however I still require a tenant to give me 60 days notice, prior to the lease end date, of their intent to move out.
Meaning, the assumption is that they will be renewing (assuming the rent doesn’t go up too much), even though the lease doesn’t automatically renew.
It just means that we need to sign a new lease if they want to stay.
My Lease Clause
RENEWAL. This lease agreement is not constructed to be automatically renewed at the end of the term for which drawn, however the intent to renew this agreement by the Tenant(s) will be assumed. All parties will need to sign a new agreement in order to activate a renewal term. If Tenant(s) intends to vacate the Premises at the end of the lease term, Tenant(s) must give at least sixty (60) days written notice prior to the end of this lease. If sixty (60) days’ notice of non-renewal is not given prior to lease term, Tenant(s) are responsible for the equivalent rent amount due for the sixty (60) days after notice is given, even though this lease does not automatically renew.
The Main Benefit
The reason for this requirement is that it guarantees I have 60 days to try to find a new tenant. If the tenant fails to provide 60 days notice of non-renewal, they will still be held responsible for 60 days of rent, unless I can find a replacement sooner.
For example, if the lease is scheduled to end on June 30, then they must give me notice by April 30th of their intent to vacate when the lease ends. If they don’t give me notice until May 15th, then I can hold them responsible for rent through July 14th (60 days), if I don’t find a replacement tenant prior to that.
Always Send a Reminder
Because this 60-day requirement is unusual, I try to remind my tenants of their 60 day responsibility at 70-75 days from the end of the lease – so that they can start thinking about their options.
If I plan to offer them a renewal agreement, I will send the new terms to them with this reminder. After all, how can they be expected to make a decision if they don’t know what the rent price will be?
This is my renewal reminder email:
Hi [ Tenant Name ]
I hope you had a nice weekend.
I just wanted to send a friendly reminder. Your lease ends on 4/30, and your lease says that you need to let me know within 60 days of lease end if you don’t intend to renew the lease. You’ve been fantastic tenants and I would love to have you sign for another year. If you are interested in renewing, I can commit to not raising the rent.
If some of you want to stay, but others need to leave, you could bring in new roommates, and we can sign a new lease.
Anyway, I just wanted to put it on your radar, since it has a tendency to sneak up on people. Please let me know of your decision by March 1.
I’m available by phone or email if you have any questions.
In summary, be fair, be logical, and give them a renewal offer before the 60 day deadline. If you refuse to offer a renewal, then tell them so. Let them know that they must move-out when the lease is up. The more time they have to plan, the less risk there is of an unlawful detainer.