Lease Extension vs Lease Renewal: What Are the Differences?

By: ROS Team

With nearly 60% of leases lasting just a year, it’s no surprise many renters face the question: what happens when that lease ends? Whether you love your place or need a little more time to find a new one, navigating the options of lease extension vs renewal can be confusing. Both extend your stay, but the details differ.

Let’s understand the key differences between a lease extension and a lease renewal so you can make the best choice for your situation.

What Is a Lease Extension?

A lease extension is like a bonus round on your current lease. It’s a new agreement between you and your landlord to lengthen your stay beyond the original end date, often with the possibility of renegotiating terms like rent.

Pros and Cons of Lease Extension Agreement

Pros:

More Time for both Parties: Lease extension agreements allow both landlords and tenants to continue their arrangement without disruption. The extra time provides convenience and stability. Neither party needs to search for new housing or tenants, simplifying the process.

Keeps the Agreement the Same: When extending a lease, the original contract terms remain intact. This continuity ensures no changes occur to important details like rent payments, property rules, or responsibilities.

Do You Know: California had the highest percentage of month-to-month leases (62.7%), followed by the District of Columbia (58.4%) and Arkansas (57.1%).

Cons:

You have Less Security: Lease extensions mean sacrificing long-term security. You commit to a fixed period without flexibility to alter stipulations if circumstances shift. Any unfavorable aspects must be accepted until renewal.

Subject to the Terms of your Previous Lease Agreement: Lease extensions typically inherit the terms and conditions outlined in the original lease agreement, which may not be advantageous to one or both parties as circumstances change.

Unable to Increase Rent: For property owners, lease renewals may prohibit raising rental rates, even if market values increase significantly. This scenario restricts earning potential and could mean forfeiting higher income opportunities.

What Is a Lease Renewal?

A lease renewal is like signing a fresh lease agreement. It replaces your current lease with a new one, typically for another fixed term (like a year), and may involve adjusting rent or other terms.

Do You Know: Nearly one-third of leases in the United States start in the summer months (June, July, or August).

What Is a Lease Renewal — Photo Credit: Canva

Pros and Cons of Lease Renewals Agreement

Pros:

Avoid Moving Expenses: Tenants avoid the financial burden and inconvenience of relocating. Lease renewals eliminate expenses like moving costs, new security deposits, and application fees.

More Consistency: With lease renewals, both parties enjoy stability and consistency in their rental arrangement. Uncertainties are minimized when the existing agreement continues.

Cons:

Contract may be subject to an Increase in Rent (For Tenants): Landlords may increase the rent upon renewal, leading to higher monthly expenses for tenants, especially if market conditions or property values have changed.

Possibility of Bad Living Arrangement: Renewing a lease means committing to the same living arrangement for an extended period, which could be undesirable if there are unresolved issues with the property or landlord.

Subject to Penalties if you have to terminate your Agreement Early: Tenants are bound to a fixed-term agreement. Early termination often results in penalties like lease break fees or forfeiting the security deposit.

Interesting Fact: In the first half of 2022, the average rent change was 12.2% for new tenants and 3.5% for existing tenants.

Lease Extension vs Renewal: How They Differ

While both a lease extension and renewal allow you to stay in your rental beyond the initial lease term, they differ in a few crucial ways:

Document:

Extension: Adds an amendment to your current lease, acting as an add-on.
Renewal: Creates an entirely new lease agreement, replacing the old one.

Terms:

Extension: Often keeps the existing terms, with rent potentially negotiable.
Renewal: Allows renegotiation of all terms, including rent, which may increase to reflect market rates.

Flexibility:

Extension: Generally quicker and easier to process compared to a full renewal.
Renewal: Offers more flexibility to adjust terms to suit your current needs.

Suitability:

Extension: Ideal for short-term extensions or when both parties want to maintain current terms.
Renewal: Better for longer stays or if you want to negotiate changes like rent or pet policies.

How to Decide Whether to Renew or Extend the Lease?

Choosing between lease extension vs lease renewal depends on your needs. Need a short stay with minimal hassle and potentially locked-in rent? Go for an extension. Want more flexibility to negotiate terms or plan a longer stay? A renewal is the way to go.

Lease Extension vs Renewal: FAQs

When Should a Landlord Use a Lease Renewal?

Landlords should use a lease renewal when they want to keep a good tenant and potentially raise rent to reflect market value or property upgrades.

When Should a Landlord Use a Lease Extension?

Landlords should consider a lease extension when they value a quick solution, want to keep a reliable tenant short-term, or are unsure about future plans for the property.

Can a Landlord Refuse to Renew a Lease?

In most cases, yes. Landlords generally don’t need a reason to decline a lease renewal, though there are exceptions to prevent discrimination against protected classes.

Will My Rent Increase With a Lease Extension?

Rent increases aren’t guaranteed with a lease extension, but it’s a possibility. You and your landlord can negotiate the rent during the extension agreement.

Best Ways To Negotiate Rent During A Lease Renewal
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