Lease Extension: Here’s How Property Owners Can Do It

As a property manager or owner, finding reliable tenants is challenging enough—so what happens when a good lease is about to expire?

You might think your only option is to go through the entire leasing process again, but there’s a simple alternative: extending the current lease with just a few adjustments.

Extending a lease allows you to keep your trusted tenants in place while avoiding the hassle of searching for new ones. But how do you decide when it’s best to extend a lease versus renew it?

Let’s explore when each option makes the most sense and how to execute these processes efficiently.

Difference Between Lease Extension and Lease Renewal

When it comes to continuing a rental agreement, property managers and owners have two options: lease extensions or renewals. While they might sound similar, there’s a key difference:

• Lease Extension: A lease extension addendum simply extends the current agreement’s end date while keeping the original terms intact, with minor adjustments like rent increases.
• Lease Renewal: This process creates a brand-new lease agreement with updated terms. It’s typically used when substantial changes are necessary or when both parties want to start fresh.

If your goal is to maintain the status quo with minimal administrative overhead, a lease extension is the more efficient choice.

When Should You Consider Extending a Lease

Lease extensions are particularly useful in the following scenarios:

• Reducing Vacancy: Retain reliable tenants without the hassle of finding new ones.
• Avoiding Gaps: Adjust lease terms so that they end during a more convenient time, avoiding holidays or peak busy seasons.
• Simplifying Processes: If the only change needed is a rent adjustment or an extended lease term, an extension keeps things simple.

However, there are situations where lease extensions might not be ideal, such as when major renovations are planned or if the tenant has repeatedly violated the terms of the lease.

How to Execute a Lease Extension

The lease extension process can be broken down into a few key steps:

1. Review the Existing Lease Agreement: Before making any changes, carefully review the current lease. Note details like the end date, rent amount, and any terms that might need updating.
2. Communicate with the Tenant: Open communication is essential. Discuss the possibility of extending the lease and ensure both parties agree on the updated terms.
3. Provide the Lease Extension Addendum: Draft the lease extension addendum with the new end date and any changes, like a rent increase. Ensure that both parties sign it to make it legally binding.
4. Secure Signatures: Once signed, update your records with the new agreement details.

Managing lease extensions across multiple properties can become complicated without the right tools. This is where DoorLoop’s software makes a difference.

With DoorLoop, you can easily extend the end date of an active lease without needing to create a new agreement. Whether you need to correct a previously recorded date, transition a lease to month-to-month, or simply extend the lease, the process is straightforward.

To edit the lease terms on an active lease, click Leasing on the left-hand main menu. Now click Active Leases. Find the lease you want to extend and click on it.

Click on the Settings tab and then click Lease Term.

Once you’ve selected the lease you want to extend, you can adjust the lease end date, turn on the rollover to "Month-to-Month" at the end of the term, or switch the lease entirely to month-to-month.

DoorLoop makes it easy to manage lease extensions seamlessly without the administrative hassle of drafting new agreements.

When Should You Consider Lease Renewal

Lease renewal is the right choice when you need more flexibility in updating key terms of the agreement. Here are some situations where renewing the lease might be more beneficial than extending it:

• Substantial Changes to the Agreement: If you want to modify more than just the end date or rent, such as updating clauses, adding new rules, or revising responsibilities, a renewal gives you the opportunity to start fresh.
• Major Property Upgrades or Renovations: If you’re planning renovations or significant upgrades, a lease renewal allows you to renegotiate terms that reflect the improved property value.
• Reassessing Market Rates: If rental rates in your area have increased substantially, renewing the lease gives you a clean slate to adjust the rent in line with current market conditions.
• Resetting Liability: A lease renewal can also limit liability from the previous lease, which may be beneficial for both parties, especially if any disputes or issues arose during the original term.

How to Execute a Lease Renewal

Executing a lease renewal involves more steps than a simple lease extension because it’s essentially creating a new agreement. Here’s how to do it:

1. Review the Current Lease: Before making changes, examine the existing lease agreement to determine what needs to be updated or revised.
2. Discuss with the Tenant: Ensure that the tenant is interested in renewing the lease and discuss any necessary changes to the terms, such as rent increases, new rules, or updated responsibilities.
3. Draft the New Lease Agreement: Use the information from your discussions to draft a brand-new lease that reflects the updated terms. This may include adjustments to clauses, rent amounts, and other critical details.
4. Collect Signatures: Once both parties agree to the new terms, ensure that the lease is signed and dated, making it legally binding.
5. Update Your Records: Store the signed lease in your records and update your software to reflect the new agreement.

Renewing leases can be time-consuming, especially when managing multiple properties. DoorLoop’s software simplifies the process by providing a structured, step-by-step approach.

DoorLoop allows you to track leases approaching expiration with the Upcoming Renewals feature. Here, you’ll find a list of all leases set to end within a customizable date range, helping you stay on top of renewals well in advance.

To start the lease renewal process, navigate to the Leasing section from the left-hand main menu, then select Upcoming Renewals. You’ll see a list of leases set to expire within the next 120 days. You can adjust the date range using the Term Ends filters to customize the list based on your needs.

Find the lease you want to renew, and click the Renew Lease button.

DoorLoop’s Lease Renewal Wizard walks you through each step.

On the Overview page, you’ll find a summary of the current lease details, including the current monthly rent and any deposits held.

Below that, you can choose to renew the lease as either a fixed term or a month-to-month agreement. This flexibility ensures you can cater to the needs of both your tenants and your business.

Next, you can update the rent charges. Whether you’re making minor adjustments or adding new recurring charges like pet fees or parking, the wizard guides you through each step.

You can even schedule future rent increases within the same workflow, allowing for more strategic long-term planning.

For those cases where additional deposits are needed, DoorLoop also makes it easy to adjust deposit amounts or add new ones. This ensures your lease renewal is comprehensive and accounts for any changes in the tenant’s responsibilities.

Finally, once the renewal terms are set, you have options for managing the signature process.

DoorLoop’s integrated e-signature functionality lets you either send the document for immediate signing or save it as a draft if further review is needed.

This flexibility ensures that lease renewals can be finalized quickly and securely.

Choosing the Right Approach for Your Lease Strategy

Whether you’re extending a lease to keep things simple or renewing a lease to introduce new terms, it’s important to choose the approach that best suits your needs as a property manager or owner.

Lease extensions are perfect for maintaining the current agreement with minimal changes, while lease renewals give you the flexibility to refresh the terms entirely.

Managing these processes across multiple properties can be challenging, but using software like DoorLoop helps simplify and automate many of the administrative tasks, allowing you to focus on what matters most—maintaining great relationships with your tenants and keeping your properties running smoothly.

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