Lease Extension vs. Lease Renewal: What Are the Differences?
When the lease expiration date is approaching, tenants have three options: they can renew their lease, request a lease extension, or move out. If tenants want to stay in the rental property, exploring a lease renewal or lease extension option may make the most sense.
A lease renewal is when the tenant and landlord agree to another lease term, which may require creating a new lease with updated clauses and a higher rent price in most cases. A lease extension is when tenants need the term extended for a certain period with a lease amendment.
Both options have similarities, but it’s important to learn more about the differences between a lease extension and a lease renewal before deciding what to do.
Lease Extension vs. Renewal: How They Differ
Both lease extensions and lease renewals allow tenants to stay in the rental property longer, but landlords must provide different documentation to ensure all parties are protected.
If the tenant requests a lease extension, the landlord can create a lease amendment to update the terms of the lease agreement legally. Even if the lease agreement states an expiration date, the lease amendment will extend the terms past the date and outline the rules the tenants need to abide by. However, some states can vary in rules regarding lease extensions, so refer to local landlord-tenant laws before creating a lease amendment.
In the case of a lease renewal, landlords will need written confirmation that the tenant wants to renew the lease and accepts the new rent price to create a new lease agreement with the updated terms. Once the tenant signs the new lease and the original lease expires, the new one will take effect.
The Pros and Cons of Lease Extensions
Exploring lease extensions offers benefits for landlords and tenants, so we outlined this option’s top pros and cons.
Pros of Lease Extensions
Give both parties more time: Lease extensions give landlords more time to find their next tenant and tenants more time to find (or move to) their next residence. This can be especially helpful for tenants looking to buy a property or waiting to move until they close on the homebuying process.
The same rental agreements terms: Lease extensions allow the terms to remain the same for a few more months if both parties have been satisfied with the current lease terms. Landlords will only need to create a lease amendment to extend the lease versus creating a new lease agreement.
Cons of Lease Extensions
Unable to increase rent: Unlike lease renewals, landlords cannot increase the rent price since the same lease is still active with a lease amendment. This makes it harder to increase profits until a new tenant moves in or a new lease agreement goes into effect.
Short-term solution: While lease extensions provide landlords and tenants more time, lease extensions are short-term solutions. Landlords will still need to turnover the apartment and tenants will still need to move out.
The Pros and Cons of Lease Renewals
Landlords generally present lease renewal options to tenants they’ve enjoyed renting to. But before agreeing to renew the lease, landlords and tenants should know the pros and cons of lease renewals.
Pros of Lease Renewals
Avoid the apartment turnover process: If a tenant decides to renew the lease for another team, landlords can avoid the apartment turnover process and save on various expenses.
Avoid moving expenses: For tenants, staying at the same rental can eliminate the moving process and any associated expenses.
A reasonable rental rate: Even if the landlord does increase the rent from the previous term, this can still be less than what other landlords are charging in rent. According to the latest Avail Quarterly Landlord and Renter survey, surveyed tenants who moved from a prior rental within the past year reported that rent prices increased by nearly 27% — almost double what those who renewed their lease are facing. So, while increased rent is never ideal, tenants may save more by renewing an existing lease than moving.
Cons of Lease Renewals
New lease agreement: To renew a lease, landlords will need to create a new lease agreement with the updated terms.
Can Tenants Negotiate the Lease Renewal Terms?
Tenants can negotiate the lease renewal terms, especially if certain clauses violate their renter’s rights or local landlord-tenant laws. However, if the new terms on the lease agreement don’t violate local ordinances, then the landlord has the right to determine what can (and can’t be) negotiated.
If you’re planning on negotiating the terms as a tenant, it’s important to build your case beforehand and communicate what you’d like adjusted before signing the lease. This can increase your chances of convincing the landlord to change the terms. Plus, landlords cannot change lease agreements once all parties have signed.
How to Decide Whether to Renew or Extend the Lease
Suppose you’ve enjoyed renting the property and have a good relationship with the landlord. In that case, it may be worth renewing the lease for another term — especially if you can’t find other comparable rentals. On the other hand, if you need more time to find another rental or move into a purchased home, extending the lease can provide more flexibility without committing long-term.
Based on the pros and cons of each scenario, you can determine whether renewing the lease or extending it for a short period is best for you.