Leases Expiring? Get a 2-3 Month Head Start!

VOLUME V

By Juliana Torres-Mason

Months before a lease expires, landlords should consider whether they want their tenants to stay. In most situations, a new lease means the tenant and landlord are entering a new legal agreement—one that should be considered carefully and intentionally pursued or ended.

Deciding Whether to Renew

Whether or not landlords decide to renew a lease depends on a variety of factors. Landlords must weigh the value of their current tenants versus the cost of finding new ones. They must decide the merits of increasing the rent or changing the terms of the lease against what might turn quality tenants away.

In most markets across the United States, rental properties are in high demand. According to Rent.com, the national average lease price for every apartment type—from studio up to three-bedroom—increased. In fact, studio apartments had the largest increase at 5.37% from 2018 to 2020, followed by two-bedroom units, up nearly 4.5% and more than $62 from 2019. On the other hand, one-bedroom apartments increased only 1.6% since 2019.

In Florida, the rent average was approximately $1,166 for a studio, $1,630 for a one-bedroom and $1,854 for a two-bedroom in 2020. In Texas, the rental rate was higher for only studios, at approximately $1,335 for a studio, $1,271 for a one-bedroom and $1,576 for a two-bedroom for the same year.

Nationally, the tenant turnover rate and renter mobility rate are on a downward trend, according to the National Apartment Association’s 2020 report. In 2019, tenant turnover dropped to 49%, which was the second lowest rate since the association began tracking the metric. The association attributes the lower rental turnover to a dramatically low vacancy rate across all types of rental housing.

Despite these trends, replacing a tenant comes with a price tag. TransUnion Smart Move calculates that the average cost for finding a new renter is $1,750 per month. This could include mortgage payments on the property, homeowners association dues, costs for advertising the property, costs for a thorough cleaning, general maintenance and the potential cost of hiring a property manager. Landlords also should consider property taxes, insurance and ongoing utility costs, along with the time investment of bringing on a new tenant.

Realtor Reminder

At Go4Rent, there is a reminder system to help Realtors and landlords keep track
of when leases are set to expire. This retention system is beneficial for Realtors,
landlords and tenants. If a Realtor represented the tenant who is choosing to end
the lease, that’s an ideal time to follow-up with that renter for alternate housing
opportunities. If the Realtor represented the landlord instead, the two can work
together to start scheduling walk-throughs for new tenants.

For Landlords: Out With the Old, In With the New?

How should landlords weigh the value of their current tenants against a hot rental market? The length of a lease gives landlords some time to assess if their renters live up to the references and screening that secured them the property in the first place.

The Balance Small Business offers several questions landlords should consider in the assessment of tenants. The first consideration is the timeliness of their rental payments. Landlords might decide to move on from tenants who had trouble paying rent and did not communicate a good reason for any delay.

Next, landlords should consider how the tenants kept up the property. Were they clean or did neighbors and/or the homeowners association complain about their upkeep? Landlords should consider any maintenance issues that come up, beyond normal wear and tear of the property, and how tenants communicated those problems.

Also up for consideration is how the tenants interacted with the landlords themselves. Good tenants will adhere to their landlord’s policies as well as terms of the lease. Did the tenants take the right steps to make requests for new pets or dramatic changes to the property? Did they complain a lot and demand unreasonable and expensive repairs?

If so, landlords may want to be proactive to keep good tenants and remove the bad ones. Early notice, as much as 90 days before the lease ends, gives renters time to consider their options and potentially notify their landlord ahead of time if they decide to move.

Early notice also can help ease potential rent increases. Landlords should be able to identify what costs are prompting the increase to determine how much to raise the rent. While working with a Realtor, they can research the local rental market to fairly place the property among other rental options like it.

Ending or Renewing a Lease in Texas

In Texas, the lease will likely outline how landlords must go about terminating their relationship with their tenants or renewing it with higher rent or different parameters. Texas law does not require any specific amount of notice for written leases if the term is longer than month-to-month.

However, a sizable amount of leases for private-market housing in Texas require landlords to give 30 days or more of notice if they intend to change or terminate the lease. Other leases narrow it down to 90 days of notice or no notice at all.

If the landlord does not give the tenant notice of any changes and if the tenants do not state an intention to leave, annual leases may provide for a transition to a month-to-month agreement.

However, even if the lease is silent on automatic renewals, parties may still have an implied contract, based on how often tenants continue to pay rent. For example, if a landlord accepts another month of rent from the tenant after the lease ends, the parties have entered into a de facto month-to-month tenancy. Texas landlords should check their lease for the terms of giving notice if they don’t want the lease to automatically renew.

If the rental arrangement already is in month-to-month status and the landlord wants to end or change the agreement, notice must be given. How much notice depends on how often the rent is paid. Rent paid at one-month intervals or more requires a month of notice. For agreements where the rent is paid in intervals shorter than a month, the notice should match how often rent is paid—a week of notice of rent is paid weekly, for example.

Tenants who wish to leave must give notice of their intention to move, otherwise the landlord may hold them liable for rent outlined in the expired lease.

Florida Law on Ending or Renewing a Lease

In Florida, the lease can automatically renew, but only if the lease states an agreed rental cost ahead of time, Florida law firm Jimerson Birr explains on his blog. If the lease does not explicitly state that it will renew and what the cost will be, it legally expires at the end of the lease term, which is usually 12 months.

In that case, the tenants are required to vacate the property by the termination date, and no warning or notice is legally required, Florida real estate firm Kelley & Grant states on the law firm’s website. To avoid legal complications should the situation escalate, it’s still a good practice to provide notification.

Still, a lease may require the tenants—and by extension, the landlord—to notify the other party of their intention before the lease term ends. If the lease requires the tenants to give notice before they leave after the lease ends, then the landlord must give the same amount of advance notice to end the lease. The notice required by the lease cannot be more than 60 days, according to Florida state law.

If tenants don’t give notice of their intention to leave before the end of the lease and the lease requires it, they could face penalties listed by the landlord in a notice given to the tenant 15 days before the deadline for the notification, according to Florida state law.

If a landlord in Florida accepts rental payments after the lease is over, the tenant is legally allowed to stay. In order to terminate what has become a tenancy at will, landlords would have to give their tenants proper notice of that intention. Florida state law lists the required notice as 30 days if the rent is paid by quarter, 15 days if the tenancy is month-to-month and seven days if the rent is paid weekly.

Landlords should be careful if they’ve collected the last month’s rent at the beginning of the lease, as collection in the 12th month would mean they’ve automatically allowed the tenant to stay one more month, through the 13th month.

If both the landlord and the tenant decide to continue the arrangement past the lease terms, they will enter into a completely new agreement, whether or not the term or rental cost has changed.

Can a Lease Be Renewed Orally?

In Texas, oral leases are as legally binding as written ones. However, oral leases for a term longer than 12 months are invalid.

In Florida, oral rental agreements also have the same legal standings as written agreements. Nonetheless, all notices between Florida landlords and tenants must be in writing and hand-delivered or mailed. The state of Florida cautions that oral agreements can lead to misunderstandings between parties and can be hard to prove if there is a dispute.

Final Renewal Decision

As long as landlords stay updated on oral and written rules, along with payment policies regarding leases, then renewals should be a seamless process. But by evaluating each tenant early on in the process and making sure that they are fully aware of what’s to come, this can eliminate quite a bit of rental confusion before it’s down to the wire.

Additional Sources:
Austin Tenants Council
Florida Department of Agriculture and Consumer Services
TexasLawHelp.org
The 2021 Florida Statutes

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While tenants of rental properties focus on factors such as property quality, location and monthly rent, investors may focus on one overarching factor: return on investment. Here’s what Realtors need to know about how investors generally decide whether they want to invest in rentals.

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Navigating Out-of-State Rental Properties

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For a landlord, a rental property is an uphill battle against mishaps, calamities, the hands of time and sometimes nature itself. To guard their investment, property owners must plan ahead, maneuver tactfully and sometimes be prepared to cut their losses.