If you’re a landlord considering renewing a lease, that’s great news! It means that you’re happy with your tenant. And you’ve made it through another year avoiding the costly eviction process.
Around 75-80% of renters stay in their homes year on year, so it’s good to get familiar with the process. If it’s your first time, our guide to lease renewals can help you navigate the process with minimal fuss. You’ll keep your tenant on side and set yourself up for another year of regular rental income.
Join us as we take a deep dive into the world of lease renewals.
What Does Washington State Law Say About Lease Renewals?
As a landlord, deciding whether to renew a rental lease agreement is at your discretion. However, if you decide not to renew the lease, you must provide a good reason and sufficient notice.
For example, if you need to sell the rental property, you must give 90 days’ notice. If you decide not to renew for other reasons, such as deciding not to rent the property any longer or repeated lease violations, you must give 60 days’ notice.
Every landlord must become familiar with Washington Landlord Tenant law. That includes a new law, House Bill 1236, that came into effect on May 10, 2021. This provides additional protections for tenants.
Can Landlords Raise the Rent When Renewing the Lease?
Yes, Washington State Law allows landlords to increase the rent at this point. However, you may not raise the rent during the rental contract. So if you’re considering increasing it, this is your only chance to act.
In most parts of Washington state, you must provide 60 days’ notice of any rent increase. The City of Seattle requires 180 days, and this comes with additional regulations.
Over the last year since the federal eviction moratorium ended, rents have increased across the country. The Board of Governors of the Federal Reserve System expects rents to increase by 10% nationwide this year.
In Washington, state law does not limit the amount a landlord can increase the rent by. But again, Seattle has its own laws governing rent increases and additional requirements for landlords.
The Pros and Cons of Lease Renewals
Lease renewals are the lifeblood of a successful property business. They keep vacancy rates as low as possible. This keeps cash flowing in the right direction – into your bank account.
But that doesn’t mean that you should automatically renew the lease of every tenant who wants to stay. Ask yourself:
- Do they pay on time?
- Do they take good care of the property?
- Can you increase the rent to a level that’s acceptable to you?
Under Washington State law, multiple lease violations and late payment of rent can be seen as good reasons for not renewing a lease.
Does your tenant have a history of not caring for the property or struggling to make rent? It may be good to consider whether renewing the lease is the right move.
It may take a few weeks to find a new tenant. You may decide that this temporary loss is preferable to ongoing property damage or rent collection issues. Of course, whatever you decide, always follow state and federal laws on terminating rental agreements to the letter.
How to Renew a Lease
The first stage of renewing a lease is deciding whether you will increase the rent. Of course, any rent increase brings the risk of losing good tenants. At the same time, costs usually rise yearly, and your rental yield will decrease if you don’t increase the rent.
As there is no cap on rental increases in Washington State, the decision is yours. But many landlords choose to increase rents by no more than 5% each year to try to retain high-quality tenants.
Send a Lease Renewal Notice
Lease renewals begin long before the current lease expires. Ideally, you’ll send your tenants a lease renewal notice at least 90 days before the current lease expires. If you plan to increase the rent, the minimum notice is 60 days, except in Seattle, where it is 180 days.
The lease renewal notice is an important legal document. It’s usually a good idea to either hand deliver it or send it by certified mail.
The lease renewal notice includes:
- The date
- Property address
- Tenant’s name
- Terms of the renewal (length of lease, level of rent)
Sending the renewal out at least 90 days in advance gives the tenants 30 days to respond. If they decide not to renew the lease, they must provide 60 days’ notice. This will give you time to start marketing the property and hopefully find a new tenant to move in as soon as they leave.
Consider Giving Them Options
In your lease renewal notice, you have the option of giving the tenant an alternative type of lease. For example, if they’re on a full-year lease, you can give them the option of switching to a month-to-month lease.
If they choose this option, the notice period for tenants is usually 30 days.
The renewal is an opportunity for both sides to make changes to the lease. For most landlords, the rent is the main clause they choose to alter. But tenants may take the opportunity to request other modifications.
For example, they may wish to add another party to the lease. Or they may wish to carry out redecoration or renovations not permitted under the current lease. This may pose a dilemma – to agree or risk a vacancy?
This will depend on many factors, including your relationship with the tenant. If they’ve been a good tenant for several years, you may feel that their requests are reasonable and decide to acquiesce. If they are not, you can mutually agree to end the lease and start looking for another tenant.
Getting the Wording Right
Whether you’re sending a lease renewal or termination notice, you need to get the wording right. As the law varies from state to state, you must research the correct wording in your area.
It should be unambiguous and clear. There are many templates available online, but a word of warning. Generic templates may not comply with local laws.
The safest course is to check with a real estate attorney or a property management company. Property managers are not lawyers, but they handle lease renewals in the local area regularly.
If you work with a property manager, they already have letters prepared that meet local requirements. They can handle the whole process for you.
What If a Landlord Doesn’t Send a Lease Renewal Notice?
If neither party makes contact to either renew or terminate the lease, it will continue on a month-to-month basis. This can be a confusing situation for all involved. It’s better to avoid this and make arrangements to extend or terminate the lease well in advance.
Is a Lease Renewal the Same as a Lease Extension?
No, they’re slightly different.
A lease renewal is a new lease. It may have different terms, even though it’s for the same property and between the same parties.
A lease extension adds time to an existing lease. Both parties need to agree to this and sign an addendum.
If the landlord doesn’t take the initiative to renew or terminate the lease, the lease continues on a month-to-month basis. This would be considered a lease extension, as the terms remain the same.
The Value of Rental Property Management
Most landlords have regular jobs. For them, owning a rental property is a sideline, a way to generate a little passive income and build a nest egg for their retirement.
If that describes you, handling the ins and outs of lease renewals can be a real drag. You may only do it once a year, and it’s crucial that you get it right. That’s why it pays to work with a rental property management company.
Property managers live and breathe rental properties. They’re not lawyers, but they work with Washington landlord-tenant law day in and day out. They understand the specific requirements in Seattle and how they affect landlords.
Property managers can advise you on rent increases and can handle lease renewals on your behalf. Delegating this to professionals can reduce vacancy rates. They’ll keep your tenants happy and well-informed about their lease renewals.
Choose VerraTerra for Lease Renewals and More!
Lease renewals require careful preparation and execution. Keeping tenants happy takes skill and tact, especially when you’re raising the rent.
You can trust VerraTerra Real Estate Services to handle this process for you. Our full-service property management will find you the right tenant fast, reducing vacancy rates. We’ll collect rent, maintain the property, handle lease renewals, and so much more.
Contact us online to find out more about the services we provide.