An Introduction to Rental Agreement Renewals
The basic concept of rental agreement renewals is a simple one: they seek to validate the ongoing arrangement between a landlord and a tenant after the initial agreement term has expired. They serve as formal recognition that both parties are willing to extend the occupancy of a rental property under the same or modified terms and conditions as specified in the original rental agreement. Rental agreement renewals are important for a landlord’s record keeping purposes, especially if the landlord has subsequently mortgaged the property as a new lender (or subsequent lender) may require proof of ongoing occupancy. Additionally , having a rental agreement renewal in place can be valuable for the landlord where the initial rental agreement is silent on the rate of rental increases or for subsequent increases beyond the one-year mark during which the rental amount is largely governed by statutory and common law requirements at the discretion of a landlord. Rental agreement renewals may also anticipate future alterations to the property that a landlord is willing to consent to.
As noted above, the rental agreement renewal process typically occurs at least annually upon the expiry of the initial term, but it is not uncommon for landlords to enter into longer-term agreements with tenants, particularly in competitive rental markets.
Important Aspects of a Renewal Agreement
The most common way for landlords to extend a tenancy is through a Rental Agreement Renewal. This is a simple way to extend a current rental agreement in order to keep the status quo, i.e. verify that the original terms are still in place. When a current lease is up for renewal, many landlords will send out a notification for a renewal (typically 30-60 days prior to the expiration of a lease) along with a rental agreement renewal, which includes the terms of the current lease. In some instances, landlords may want to change some of the original terms (increase rent, add stipulations, etc.). Others may use a Rental Addendum to address these changes instead of pairing it with a lease renewal. As a result, it is important to determine if a formal rental agreement or an addendum will be needed to properly address any changes.
Process of Renewing a Rental Agreement
Every rental or lease agreement has a time span associated with it, which has an end date on that agreement, after which a renewal form is required. This is useful in the case where a rental agreement is based on a month-to-month term. It is also useful in the case where a yearly rental is being set in place. In each of these cases, the association between the tenant and landlord is a valid, beneficial relationship requiring approval by both parties when extending the term on the rental agreement.
The process for renewing a rental agreement or lease is fairly straightforward. The lease agreement itself may contain terms and conditions for requested renewals between landlord and tenant. If not, negotiation between both parties is required to determine how the renewal will take place, periods of time, rental amounts, payments, terms and conditions, as well as any additional contingencies that would be required between landlord and tenant.
It is strongly recommended that a person developing a lease agreement understand in detail the provisions of that lease or rental agreement. For example, you did not offer the renter or tenant option for renewing the agreement or a procedure for pursuing that renewal. At the same time, it may be beneficial to incorporate any specific and/or unique terms that must be satisfied when the tenant considers extending their stay.
As you can see, the renewal of a rental agreement is just as important as the original agreement itself. Because it requires communication between parties, procedures for notifying the other and general terms and conditions of the tenure, it is advisable to work directly with the other party to the agreement and formalize the extension in writing in the same manner as the original agreement.
Example Templates and their Benefit
When it comes to updating or renewing your rental agreement with a tenant, using a rental agreement sample could save time and effort by ensuring you don’t overlook any important updates or changes. Most landlords don’t regularly update their rental agreements. But when your situation changes or the law says you must amend a rental agreement, consider using a rental agreement template to help you cover all the bases. For example, if you want to update the paragraph on pets, your template could provide you with some common pet rules to include like screening for pet deposits, how to register pets, where pets can go in and out of the property, and non-refundable cleaning fees for pet stains. Other common issues that require updates are: Using sample rental agreements can help you quickly identify all the common issues you haven’t covered, and you can borrow and cite portions from other rental agreements to save time. In addition, using sample forms is a great way to make sure all the necessary information is included in your renewal or update. It also makes it harder for tenants to misunderstand their rights and responsibilities, which can cut down on disputes and confusion.
Common Pitfalls
One common mistake is for the tenant to assume that the same rental agreement applies for the renewal period as well. You don’t want to make this assumption because during the rental agreement renewal process, either the terms of your rental agreement have changed (this is what the rental agreement renewal form does) or there are changes in rental laws that have been enacted since your last rental agreement. If the renewal period is for a longer term than previous rental agreements , also check to make sure there are no new construction or environmental problems that will arise that might affect the rental property after you sign the rental agreement renewal.
Another frequent mistake is miscalculating the notice period for a rental agreement renewal. Be sure to check your rental agreement regarding the required advance notice to avoid falling short of the deadline. Keep in mind that the rental agreement renewal may not be required if both you and your landlord are in agreement, yet it gives you added protection. A third mistake to avoid is forgetting to have the correct rental agreement name for your area. You may also want to review your rental laws regarding restrictions on tenants’ rights for your area.
Legal Repercussions of Renewal Agreements
When it comes to rental agreements in India, the renewal process is an essential legal requirement that both landlords and tenants need to adhere to. It is important to understand that renewal agreements do not mean a termination of the previous rental agreement rather are a way of extending the current agreement for some time further.
There are some essential legal aspects associated with rental agreements that a party should be aware of:
Compliance with Local Laws: Each state or region in India might have certain laws regarding a rental agreement that both parties need to comply with. For example, in some states, a rental agreement needs to be registered with the appropriate authority and both parties would need to provide certain documents as proof of their identity.
Impact on Tenancy Rights: If a party fails to renew its rental agreement within the decided time, then it can lead to certain consequences. For instance, if a tenant fails to renew the rental agreement within time then a landlord can easily evict the tenant. On the other hand, in some states, a landlord has the right to terminate the tenancy of the tenant during the time of the validity of the rental agreement. So both parties need to communicate clearly before the expiry period of the rental agreement is over.
Negotiating Terms with Renewal Agreements
As a rental agreement draws near to the end of its lifespan, both landlord and lessee often look to modify the contract in some manner: an extension of terms, some changes to the amount of rent, perhaps some alterations to the property itself. These alterations can be classified as either modifications (changes to the terms in their entirety, such as increasing the term duration), or amendments (changes to the terms that occur within the scope of the original agreement, such as a rent increase). The National Apartment Association maintains resources for landlords that seek to modify rental agreements upon renewal, and these suggestions are sound ones. The NAA notes that "Any time you have a resident vacate, [you] have an opportunity to increase rent", and this may be a good opportunity for landlords to compromise with lessees. In essence, the landlord can ask for another six month term, together with a 10% rent increase, instead of five additional months at the already-agreed rent. It is important that landlords remember that while they certainly want to increase their rent, they do not need to increase their rent to such a degree as to induce their lessee to vacate the premises. If the parties are on friendly terms, the landlord should thus be willing to negotiate a small increase, but in such a way that it facilitates the renewal rather than kills it. A $50 rent increase should be acceptable to anyone, whereas a $250 increase might actually induce the lessee to leave. Another important issue that comes up for landlords involves security deposits. As the term draws to a close, the lessor should consider whether the current amount of the deposit sufficiently protects his property. For instance, he might wish to increase the deposit by 15%, taking the additional security as an indication of the lessee’s commitment to stay on the premises and avoid dilapidation, but to jump up by a full 50% would be seen as exorbitant by anyone. Hopefully, the parties would have agreed on how to disburse the security deposit at the end of the contract in advance, and this security amount should merely follow suit, based on the increased rent. Resolving disputes amicably means that there are no hard feelings between landlord and lessee when the contract is drawing to a close. The owner should not be angry at how the lessee maintained the unit, and conversely, the occupant should not be angry that the landlord is seeking an increase in rent. At the end of the day, they are both looking for an extension of services so that they do not have to renegotiate contracts, and if temperament catalyzes that eventuality, it can only be for the best.
When Not to Renew
There may be occasions where it is required for you or your landlord to see through the rental agreement until the tenancy period is over. In these cases, you can either wait for the end of the term to decide the next step, or you can contact the landlord in advance to find out whether or not it’s possible to extend. If the landlord is unable to honour your request to remain for a further term, you can request that they do not renew the rental agreement. In this case, the notice should include the reason for your non-renewal. In this case, it is best to put the notice in writing, so there is a record of the refusal that can be referred to later if required . Some common reasons for not renewing a rental agreement include:
- Area problems
- Major defects with the property that have not been rectified
- Lifestyle changes, such as a new job, new baby, unforeseen health issues, family situations (marriage, divorce, etc.)
In most cases, as long as the tenant has given the required notice, the landlord will honour their request not to renew the rental agreement, however they cannot force you to leave the property. If you happen to be living in the property after the end of the tenancy term, you’ll either be allowed to remain there until the landlord brings in any necessary fixes, or they may offer you a new rental agreement. In either case, ensure you have the agreement in writing.