Why Did My Rent Increase During the Renewal Period?
As a renter, you may eventually come to a period when your lease is due to be renewed. Now, not every landlord will offer renewals, some will allow the lease to go month to month after the initial year is fulfilled. Different property management companies and landlords will offer different options that fit their specific preferences. Many companies choose to implement a renewal period after the initial year lease has been fulfilled. After a year has passed, the company then can review the financials, and the marketing rent in the area, and review how the tenant has behaved during this period to determine the next decision in the lease agreement.
A couple of different options that the property management company may offer may include continuing the lease for the same amount of money, for another year, thus extending the same terms for another year. This happens when the market rent for that area hasn’t fluctuated too much, or if it has gone down, or even if it has, if the tenant has been a great tenant, they may choose to continue the current lease amount.
The next option is for the tenant to renew at a slight rental increase. This increase is typically 3-5% higher than the prior amount. This may not happen every year. It may be every 2-3 years, depending on the preference of the leasing company. We will explain what factors come into play with a rental increase later in the article.
Going month to month is another option that your property management team may offer you, however, this could be at a higher rate than if you were to sign on for a full year again. Typically, this means you will be paying around $100 more per month, should you choose to go monthly instead of an entire year. This could be worth it for those of us who are looking to only be around the area for a short while and don’t want to be locked into a full year again.
The last option that the leasing office may present you with is not actually an option. If you had been a not-so-good tenant during your tenancy, the leasing office may choose to not renew your lease at all and ask you to vacate within 30 or 60 days. This is not obviously an ideal option for the company, as this causes a decent amount of labor and expenses with having to market and show the unit as well as screen prospective tenants. Most property managers would rather keep a good tenant than have to constantly filter through the bad apples. Thus, why most companies require background checks and credit checks to ensure the right tenant is chosen.
Now let’s rewind a little and discuss reasons why your rent would increase during the renewal period. One of the biggest reasons for an increase would be simply because the cost of living has increased. When the cost of property insurance or repairs or utilities (if they are included) has risen, as they typically do from year to year, it is in the best interest of the company to increase the rent to be able to maintain the same level of service to the tenants. The increase in rent is always put back into the property whether it be repairs, improvements and or upgrades.
At the end of the day, if you are confused or need a little bit more clarification on a renewal or lease extension, I always recommend taking the time to talk to your leasing staff about the details and what each option would mean for you so that you can make an informed decision. Keeping the communication and clearing any misunderstandings will make your tenant/property manager relationship better and you will feel more comfortable knowing that you made the right decision for your family.