What’s the Difference Between a Lease Extension vs. Renewal?
If you’ve ever rented a home or an apartment, you’ve likely asked the question, “To renew or not to renew?” as you’ve approached the end of your lease agreement. However, in true Shakespearian fashion, there’s another option hiding behind the curtain: a lease extension.
So, what’s the difference between a lease extension and a lease renewal? A lease extension is an addendum to your original lease, while a lease renewal is a new lease agreement entirely.
Read on to learn more about the differences between a lease extension vs. renewal, with a specific focus on the following:
- Lease extension vs. renewal: Key differences
- Lease extension vs. renewal: Pros and cons
- Lease renewals: How to negotiate
Lease extension vs. renewal: Key differences
Although lease extensions and renewals are both similar in that they allow tenants to remain in rental homes or apartments after their original leases expire, lease extensions and renewals are quite different concepts.
Depending on the terms stipulated by your landlord, your lease will contain either a lease renewal agreement clause or an extension clause, which each feature some key differences:
New agreement vs. extended agreement
One of the main differences is that when you renew your lease, rather than extend it, there is something called a “legal instant in time.” This refers to the period between the expiration date of your original lease and the start of your next lease term. As such, when you sign a lease renewal term contract, you’re creating an entirely new lease.
However, under a lease extension arrangement, there’s no cessation between the old lease and the start of a new one. In fact, there’s no “new” lease at all—the lease simply continues as if it had not expired.
Important: When signing a lease renewal agreement, be aware that because this agreement technically constitutes a “break” from the current lease, the landlord can change the terms of the new lease, such as raising the rent payments.
Cessation vs. continuation of personal rights
When you’re deciding whether to sign a lease renewal or a lease extension, the decision necessitates an important question about your personal rights as a tenant: Will they continue to exist?
If the lease stipulates an extension, the same rights that applied to the lease before its expiration still apply. However, in a lease renewal situation, you may have to renegotiate certain aspects of your renter’s personal rights.
In most arrangements, a tenant’s personal rights include the following non-land-specific rights:
- Exclusivity rights: Exclusivity rights are rights that give a tenant the ability to engage in certain types of activities at a location, protecting a tenant’s business. For instance, if a lease stipulated that a tenant could continue to operate their cake business out of their rental home, the landlord couldn’t lease space to a commercial baker in the same complex.
- Right of first offer: If a “right of first offer” clause is written into the lease, the tenant has the ability to first bid on a property before it’s sold to a third party. This type of agreement is said to favor the seller.
- Right of first refusal: Unlike a “right of first offer,” a “right of first refusal” gives more power to the buyer. In this arrangement, the tenant is given the option to match any third-party offer received by the seller.
- Right to security deposit: A form of insurance policy, a tenant’s security deposit is a stipulated amount paid to the landlord in the case of damages caused by the renter. If no damages are found according to the lease’s original and expiration walk-through, the tenant is entitled to their full deposit.
Discontinued vs. continued liability
Continued liability refers to the scenario where an original tenant assigns rental interests over to a third party, such as a subletter. This most often occurs if the original tenant needs to make a move and is unable to break their lease.
In this case, the original tenant may or may not still be liable for the subletter’s failure to pay rent or damages under continued liability depending on the agreement:
- Lease renewal: Continued liability will have to be renegotiated
- Lease extension: Conditions around continued liability will stay the same
If you need to make a move quickly—whether for a new job or a desire to explore a new city—Landing offers flexible rental options with short-term leases so you can move at a moment’s notice, without the headache of continued liability.
Lease extension vs. renewal: Pros and cons
While a lease renewal creates a new contract, a lease extension is simply an appendage to your original lease and terms. But which option is better for you? Read on to uncover the advantages and disadvantages of both types of contracts.
Pros of a lease renewal
In addition to not having to go through the hassle of moving, signing a lease renewal offers you the following advantages:
- Fewer expenses: It’s no secret that moving is expensive. On average, moving costs $1,400—in addition to your first month’s rent, security deposits, and any other fees associated with renting a new home, condo, or apartment. Renewing your lease means you can save money by avoiding moving costs—and it’s convenient, too!
- More consistency: For many people, consistency is key. If you’re happy with your job and where you live, why change a good thing? Renewing your lease gives you more time to put down roots in a place you love.
- Strong relationship with your landlord: In most cases, landlords will only give you the option to renew your lease if you’ve been a good tenant (i.e., paid rent on time, no disturbances, etc). When you renew your lease, you can continue to strengthen your relationship with your landlord. Thus, your landlord will be more likely to give you a housing reference in the future.
- Good rental rate: Building a great relationship with your landlord also has a big financial advantage: locking in a good rental rate. Having a tenant renew their lease is often far easier (and cheaper) for a landlord than finding a new tenant. Play this to your advantage by negotiating a locked-in rental rate with your landlord.
Cons of lease renewal
While there are many pros of renewing your lease from a tenant’s perspective, there are a few cons. These include the following:
- New agreement: As mentioned above, a lease renewal technically means that you create a new agreement. This gives both you and your landlord the chance to start over. However, renewing your lease may result in new terms that take away certain benefits, such as low rental rates or access to certain amenities.
- Rent increase: Although good tenants often have more leeway when it comes to negotiating a locked-in rental price, some landlords raise rent prices every year to keep up with the market. Rent hikes happen especially in highly desirable neighborhoods because landlords know people are willing to pay whatever it costs to live there. Renewing your lease may subject you to the same rent increases.
- Possibility of bad living arrangement: If your landlord is unresponsive or callous, renewing your lease forces you to live in the same unpleasant environment for another period. If you’re unhappy with your rental situation and you can afford to leave, it’s best to do so.
Pros of lease extension
If your landlord allows you to extend your release rather than immediately renew it, both parties may benefit:
- Gives you more time: This benefit applies to both parties: A lease extension gives the tenant more time to find a suitable new home while giving the landlord more time to reduce vacancy and find another great tenant.
- Keeps the agreement the same: Unlike a lease renewal, an extension keeps the lease’s original stipulations intact. This means that tenants will live with the same rent costs, personal renter’s rights, and continued liability clauses as before.
Cons of lease extension
While lease extensions are advantageous in certain circumstances, they may also have the following disadvantages:
- Provides less security: Because a lease extension is meant to be a temporary fix, this arrangement gives both parties less security than a new long-term lease would. Both parties must prepare for the eventual change, which most likely means another move and another empty apartment to fill.
- Keeps the agreement the same: If keeping the agreement the same is advantageous when things are good, it’s detrimental when things are bad. If either party is unhappy about the current living arrangement, keeping the same leasing terms may put tenants in unacceptable or uncomfortable living situations.
Lease renewals: How to negotiate
If you choose to sign a lease renewal rather than a lease extension, you still have the opportunity to negotiate your leasing terms.
Just because you’re happy with your current rental arrangement doesn’t mean you shouldn’t aim higher. In fact, negotiating your lease renewal terms comes with many benefits, and minimal risks—not only can you negotiate a new rental price, but you can also confer on other terms, such as how many cats are allowed in your apartment or how you can gain access to that prime parking spot.
However, before you start laying out your case, it’s helpful to do the following:
- Know your lease terms and rights
- Build your case ahead of time
- Communicate with your landlord early and often
- Study up on local rental markets
- Check local legislation
- Consider extending your lease
Lease how you want with Landing
When you’re deciding whether to renew your lease or ask for an extension, it can often be a complex decision. As long as you consider the factors, a Shakespearian tragedy is sure to be avoided.
If you’re looking for a leasing arrangement without the hassle of long-term leases, consider Landing.
Landing reinvents apartment living by offering fully furnished apartments with flexible, short-term leases throughout the country. What’s more, we never ask for an application fee or a security deposit. With Landing, you have the no-hassle experience that gives you more time to explore the city you love.