There are a whole darn bunch of emails in our inbox right now that all ask something like this question: "I have a year-long lease that started this fall. I just moved in (some of my stuff is still in boxes!), but my landlord is already asking me to renew for the following year! Is that legal??"
The Answer Is: ... (drumroll)... Yes!
Landlords can ask you to renew the lease whenever they want.*
What If I Don't Sign?
There are many reasons that a tenant might not want to sign: winter hasn't happened yet, you haven't met your neighbors, you're not sure what you'll be doing in a year, you're not sure if your roommates are going to work out.
If you want to wait, you might not get the apartment. The landlord doesn't have to give current tenants any priority over new tenants.
Tips for Tenants:
- Figure out: How desirable is my area? Many utility companies keep general records about residential units and whether or not those units are occupied. These vacancy rates can give you a clue about how likely it is that someone will be anxious to rent your apartment - if it's super desirable, then it'll go quickly if you don't sign that renewal. If it's an area that's not so desirable, then your unit probably won't go as quickly. Madison's vacancy rates are here, on MG&E's website. A "normal" vacancy rate is about 8% - anything above that, and it's a tenant's market, to choose what they want from lots of options. Below 8%, and it's more of a landlord's market, where they can set the terms to their liking and choose among a bunch of tenants. In Madison, vacancy rates have had record lows, so it's an especially difficult place to deal with this problem - a landlord will probably (easily) find someone to rent your apartment, even so far ahead of time.
- Is there anything I can do to get my landlord to wait a little bit? What kind of leverage do I have? There are many reasons that a landlord would wait to sign a lease (more money, better tenant, less hassle, etc). You can appeal to the landlord to wait a little bit - you could offer an incentive to wait (more future monthly rent, an immediate sum to hold off on signing the renewal), you could appeal to their logic (we don't really know how we get along yet), or explain that you'll be a more stable tenant if they wait (if you're coming up for contract renewal at the new year, that might be a better time to make future plans). Make sure to get any agreement in writing.
- You can always break your lease. If you sign a lease renewal, and then don't wish to honor it, you always have the right to break your lease. This means that you can move out when you like, tell your landlord (with as much notice as possible and preferably in writing), and when the landlord signs a new lease with a new tenant, you're off the hook. However, if the landlord is unable to re-rent the property, you remain financially responsible for the rent and utilities on the apartment. More information on breaking your lease is here.
Tips for Landlords:
- Waiting longer means a tenant who is most likely to be stable in the lease. Many landlords are surprised to find out that if a tenant breaks the lease, the landlord then has to find a new tenant. (It's true! I wrote a post about it recently.) And so, if you sign a lease with a tenant waaaay in advance of that lease starting, you might be unhappily startled when they break their lease. A possible solution might be waiting a tad longer before asking, so that your tenant can actually know what they might be up to in the coming lease cycle, instead of just guessing.
There are a bunch of ways to ask tenants if they plan to renew their lease. Some options are more effective than others:
- A straight ask: "Sign this renewal. If you don't, I'll re-rent the apartment." Downside: no deadline for the tenant to figure out a decision means that you could end up with two leases signed for the same apartment at the same time. Also, if you aren't clear with deadlines for submitting the signed lease, it can lead to a lot of confusion.
- Financial incentive (month-to-month version): "If you sign this renewal, your lease will only go up by $5/month. If you don't sign this renewal, as a month to month tenant, your rent will go up by $40/mo." Downside: do month to month tenancies actually work for you?
- Financial incentive (annual lease renewal version): "If you sign this renewal by [date], your lease will only go up by $5/month. If you don't sign this renewal by that date, your rent will go up by $40/mo for future renewal offers."
- Renewal deadline written into original lease: "All renewal offers must be submitted to management by the [date] of each year, or else apartment will be re-rented."
- Give tenant a warning (in a newsletter? Or a letter?): "Lease renewals will be coming out shortly. Please figure out your plans for the coming year and then come in to speak with a manager by [date]."
* It is not legal for landlords to act in a way that's retaliatory or discriminatory.