Eventually, most people move. It’s just a common fact of life, and it pertains to the property rental market as much as it does people who own their own houses. Tenants who rent properties tend to stay for at least a few years, but there’s no guarantee they’ll stay for the long haul. Many move out so they can find a property closer to their job, cut down on travel times, or deal with a change of life such as a marriage, divorce, or the birth of a child.
That being said, you as a landlord depend on filling your property’s vacancy to maintain your cash flow, and lease renewals are a big part of that. Whether you’re renewing the lease of a tenant willing to stick around for a bit longer, or replacing said tenant with another prospect, it pays to follow some simple tips.
Depending on the length of your contract with a tenant, you should give ample notice of a lease renewal so that both parties understand what’s happening. Alternatively, you can opt for an automatic renewal of the lease if stated in the original contract. Typically, these kinds of automatic or manual renewals eschew the standard 1 or 2-year tenancy obligation in favor of a month-to-month rental contract.
If this is the case, it’s important to guard yourself against sudden vacancies. Tenants need to provide 60 days notice minimum before the lease expires if they wish to renew the contract, and both parties agree. Similarly, they must give 60 days notice if they intend to vacate the property before the one-year lease expires.
If either tenant or landlord is not satisfied with the conditions of a lease renewal, ample notice should always be given in writing. You as a landlord cannot enforce a renewal without the express consent of the tenant, and that includes their signature on the contract as well. If you’d rather forego a lease renewal option, a month-to-month tenancy schedule can be applied, provided the tenant agrees to give 60 days notice before vacating.
If a lease renewal coincides with a justified increase in rental fees, landlords should approach this topic carefully, and with sensitivity. Rates increases may be applied every 12 months based on the allowable limit set by the Ministry of Housing. All rent increase notices must be delivered to the tenant 90 days before they go into effect, and must be done in writing using proper forms. This does not apply to residential buildings, houses or condos built after 2018. In those cases, landlords can increase the rent every 12 months with no cap, provided there is 90 days notice given..
Regardless of what you decide, tenants should be informed as soon as possible about your decision. Most tenants are fine with a modest and acceptable rental fee increase, but a massive spike based on rising property or rental rates could prove to be a shock to the system. Notice must always be given so that tenants can make informed decisions. This gives them time to decide whether to stay or move, which will give the landlord ample time to find a replacement tenant. When in doubt, give factual and fair justifications for a rent increase to your tenant.
ANTICIPATE TENANT REQUESTS
Lease renewals don’t always operate one-sidedly. In fact, many tenants may wish to renegotiate their leases when the old one has run its course. This also includes the option for tenants to exercise their automatic renewal clause. In this case, never assume.
When renegotiating a lease renewal with a tenant, always ask the following:
- Do I want to keep my existing tenant?
- What are my limits within the legal framework?
- What are the local and national vacancy rates?
- Should I offer upgrades and perks for my existing tenants to get them to stay?
Make sure to perform all applicable research, while trusting your gut. Good tenants can be hard to find on your own. If you’re working with a property management company, you will have greater flexibility when deciding on tenant demands and requests during a lease renewal. Otherwise, you’ll have to take a risk.
YOUR REPUTATION WILL AFFECT A LEASE RENEWAL
If you’ve been a courteous, firm, but fair landlord who has garnered a great relationship with your tenant, you will have options when it comes to lease renewals. Oftentimes, a departing tenant may go to bat on your behalf, and start advertising the vacancy to their friends, family and coworkers. This is a social networking advantage that is totally free for you to enjoy.
If you’ve handled yourself admirably during the existing lease term by providing prompt tenant support for things like complaints, repairs and maintenance, you’re well on your way. Being a landlord means having a relationship with your tenant where both view your property as their own home. That’s the ideal situation, and it will pay dividends when the issue of renewal pops up.
Lease renewals don’t have to be a scary scenario. By following the above tips, you can renegotiate with tenants, or part ways on excellent terms without suffering a prolonged vacancy. This offers greater peace of mind, and a smoother property rental experience as a whole.
To make the process of lease renewals even easier, consider working with a property management company like RentCore. Not only will we navigate the intricacies of lease renewals, but we’ll also help find the best prospective new tenants, while keeping tabs on all the duties associated with being a landlord, so you don’t have to. Contact us today for more information.