Around 60% of rental leases in America last 12 months, while 32% are on a month-to-month basis.
Lease agreements play a crucial role in the world of rental properties. They define the terms and conditions of renting a property to protect both tenants and landlords.
Two common options when a lease term is coming to an end are renewing a lease and extending a lease. Read on to unpack everything you should know about a lease extension vs. renewal.
Renewing a Lease
Renewing a lease refers to the process of continuing an existing lease agreement. It's like hitting the "replay" button on the lease terms, which means both the tenant and the landlord are agreeing to keep the same conditions and agreements for another specified term. This term could be a month, a year, or any other agreed-upon duration.
One key feature of renewing a lease is that it generally keeps these same terms and conditions:
- The rent amount
- Security deposit
- Any special provisions agreed upon in the original lease
This doesn't mean that the lease is set in stone, though. Landlords and tenants can negotiate changes if both parties are willing.
Extending a Lease
Extending a lease involves prolonging the lease beyond its original end date with some modifications. It's like adding an extra chapter to the lease story.
During an extension, you have the opportunity to make alterations to these existing terms:
- Increasing or decreasing the rent
- Changing the lease duration
- Updating any other conditions that both parties agree to modify
If the tenant's circumstances change, and they need a shorter or longer lease term, an extension can accommodate that. Landlords can also adjust the terms to keep up with market rates or changing property management needs.
Lease Extension vs. Renewal: Key Differences
Navigating lease agreements is tricky. Here are the key differences between lease extensions and renewals that you should know:
When renewing a lease, the terms usually remain the same. Extending a lease allows for potential changes to the lease terms.
Renewing a lease typically continues for the same term as the original lease. Extending a lease can have a different duration, either shorter or longer, depending on the agreement.
Extending a lease involves a negotiation process between the landlord and tenant. Changes can be discussed and agreed upon before extending the lease. Renewing a lease is more straightforward since it generally keeps the existing terms unless both parties agree to change them.
In the case of renewing a lease, the rent is typically not up for negotiation unless the landlord decides to make changes. Extending a lease allows for rent adjustments through negotiation.
Renewing a lease usually maintains the existing security deposit. When extending a lease, you can discuss the security deposit. It could remain the same, increase, or decrease.
Do You Need Help Keeping Up With Leases for Your Rental Properties?
It's easy to get confused in the lease extension vs. renewal discussion. Using this guide should make unpacking the differences a lot less complicated. You can make the right lease agreements based on your business's needs.
Could you use some help with lease management and more? Contact HomeRiver Group to discuss how our winning property management solutions will help you.