Most Portland lease agreements last for a term of 12 months. They’re pretty straightforward. Our tenants have lived in the property for almost a year or maybe more, and when the lease expires we talk to the property owner, notify the tenant that the end of the lease is coming up, and move forward based on the decisions of both owner and tenant.
The next steps in our lease renewal process will depend on whether the owner wants to renew the lease and whether the tenant wants to stay in the property. This is where things can be unpredictable, and that’s why we like a lead time of at least three months. There’s no reason for the lease renewal or the negotiation of a new lease to be frustrating, delayed, or contentious.
Staying one step ahead of the lease expiration date is important, and maintaining communication with tenants is also important. We want both our owners and our tenants to feel comfortable with the process, whether we’re moving forward with a renewal or bringing the tenancy to an end.
Today, we’re talking about the lease renewal process, what it involves, and how to manage some of the most complex parts of lease renewals, including rental increases and 12-month leases versus month to month leases.
Communicating with Portland Tenants
After we’ve confirmed with our Portland property owner that they have no plans to sell the property or move into it themselves and they’d like to renew the lease agreement, we get in touch with our tenants. This initial contact regarding lease renewal occurs at least 90 in advance of the lease agreement’s end date. We let our tenants know that they have three options:
- They can sign a new 12-month lease to continue renting the property.
- They can go month to month instead of signing a lease agreement.
- They can move out and provide notice of their intent to vacate.
Within those three options, our tenants will get the best rent price when they sign a new 12-month lease agreement with us. The month to month option gives them more flexibility, but it will come at a higher rental price. Moving out comes with its own pricing risks because tenants will general find that rental values have increased over the course of the year that they’ve been renting with us, and it may cost more to find a new rental home in Portland.
Tenants are encouraged to get back in touch with us to provide their decision as soon as possible. The more advance notice we have, the better we are able to negotiate the rent and the terms of the lease renewal with those residents.
Factors in Lease Renewal Decisions
Both owners and tenants are going to make lease renewal decisions based on several factors. The owner and our management team will discuss:
- Whether the tenant has paid rent on time over the last year.
- If the tenant has maintained the property and promptly reported maintenance needs.
- Whether the tenant is easy to communicate with.
- What the owner plans to do with the property over the next year and long-term.
While making a lease renewal decision, tenants will likely consider:
- Whether they have had a positive rental experience over the last year.
- Whether the rental value matches the Portland rental market.
- If maintenance and repair needs were responded to promptly.
- Whether the landlord and/or property manager was responsive and transparent.
We like to hear from the tenants at least 60 days before the lease expires so we’ll know whether that resident is staying in place. If they expect to leave the property at the end of the lease term, we’ll want to begin making plans for turnovers and marketing. Getting the property re-rented to a new tenant quickly will be an important part of keeping your cash flow consistent and the property occupied.
Once the tenant lets us know whether they plan to renew, we move ahead to create the lease renewal or we prepare for a smooth move-out process.
Lease Renewal versus Month to Month
A fixed term lease renewal is pretty standard, and it’s for a fixed period of time, typically 12 months.
Sometimes we have a tenant who would prefer to continue leasing their home, but on a month to month basis instead of committing to a full year. This allows for greater flexibility, and it’s especially valuable for tenants who know they will only be living in the property for a short period of time. Perhaps they have plans to relocate in the next few months or their goal is to buy a home before the end of the next year.
We don’t especially love month-to-month leases because they bring a bit of uncertainty to the investment. We don’t know when the home will be vacant again, and it can feel rushed when that tenant does provide notice and we suddenly need to find a new tenant. If the tenant vacates during a particularly slow period in the Portland rental market, it can be even more difficult to get the property rented quickly at a good price.
However, we are always willing to work with month to month leases as long as the tenant understands the rent will be higher. With these lease agreements, either the owner or the tenant can end the lease at any time with the required notice. This gives both tenants and owners time to prepare if the other party decides to end the contract.
Raising the Rent with Lease Renewals
Most tenants expect that rent will go up when the lease renews.
This decision is typically made between our team and the property owner before we reach out to the tenant to discuss the renewal.
We do our research on the Portland rental market and we make sure we have the necessary data and documentation that supports our decision to raise the rent. We make sure we’re within all legal rent control guidelines and we remain open to talking with the tenant about why rent is increasing.
There’s also a consideration for tenant retention when we’re raising rent. Good tenants are valuable assets, and we want to keep them in place. Most of our owners want to earn more on their rental property but understand that the increase has to be balanced against the risk of taking on additional costs to find a new tenant and turn the property over. While rent revenue goes up when we raise the rent, we also must accept the risk that the tenant may look elsewhere and find a unit for a more competitive price.
If you have any questions about the lease renewal process in Portland, please contact us at PropM, Inc.