Do you charge tenants a lease renewal fee and if so how much?

General Landlording & Rental Properties
5yFollow

Do you charge tenants a lease renewal fee and if so how much?

Scott Esmail
Investor · Orlando, FL · Member since 2016 · 162 posts · 125 votes

I manage my own properties in Orlando Fl an own my own property management company. In the past I have not been charging a lease renewal fee when the past year lease expires. I have been just letting the leases go month to month with a rent increase if needed. I have noticed that others prop management co's are changing  a lease renewal fee making tenants sign up on another 1 year lease when the prior lease expires. If this is something you do what would you say is a fair  lease renewal fee to charge. I a have seen multifamily complex charge as much as $200. I rent single family home and the rent average is about $1100 per month.

0Reply
154 views

Most Popular Reply

Rumen Mladenov
Investor · Newark, DE · Member since 2014 · 245 posts · 198 votes
5y

Seems like a terrible idea to me. I want my tenants staying longer, and I actually give them incentives if they do. To charge them for saving me the headache of a turnover seems beyond stupid.  

21Reply
See this reply in the discussion

19 Replies

Jump to latestLatest
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    If they are simply renewing the lease, no especially if you are managing it yourself.  Businesses (ie PM company) may charge for simple renewals.  The one I use for one of my properties does not as it requires almost no time.  Literally changing the dates on the original lease and the amount (if there is an increase in rent).

    2Reply
  • Scott Esmail
    OP
    Investor · Orlando, FL · Member since 2016 · 162 posts · 125 votes
    5y

    @Theresa Harris thank you for your feedback, my property management company manages them (so not me personally and i do not do any of the admin at all ) we have staff and a amin person in the office who handles the renewals. 

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    The property managers aren’t charging the tenant a re-leasing fee, they’re charging the owners those fees. So if you want to charge yourself a fee for tax reasons that’s fine. I don’t believe a tenant has ever been charged that fee. 

    3Reply
  • Scott Esmail
    OP
    Investor · Orlando, FL · Member since 2016 · 162 posts · 125 votes
    5y

    @bill brandt Thank you for the feedback it may be different here in Florida. I have seen this charge many times in the past. Sometime when we are verifying an applicant who want to rent our home we require proof of  rental history and they upload there portal showing there rent payments and fee paid to there current property manager, once can often see this charge often appears its on there tenant ledger and charged  to the tenants. However i do agree that often times, if there is a charge it can be charged back to the owner in many occasions 

    0Reply
  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    After attending a few property management conferences I have learned that this is a thing.  Management companies do charge tenants (and owners) a release fee.  I don't have any exact numbers but I would guess it was a low % of companies that were charging tenants, around 10-15% give or take.  But seems to be growing in popularity.  

    0Reply
  • Rumen Mladenov
    Investor · Newark, DE · Member since 2014 · 245 posts · 198 votes
    5y

    Seems like a terrible idea to me. I want my tenants staying longer, and I actually give them incentives if they do. To charge them for saving me the headache of a turnover seems beyond stupid.  

    21Reply
  • Robert Williams
    New to Real Estate · Joliet, IL · Member since 2021 · 89 posts · 135 votes
    5y

    @Bill Brandt I agree. When I was renting, I was never charged a renewal fee other than the rent raise! At least it was never labeled as such…😂🤣🤣

    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    5y

    @Scott Esmail we don’t! As far as I know this is uncommon in OKC. I think it would be poorly received here, it’s interesting that is doable in other markets.

    2Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    There are some people that do this, but I think it's ridiculous. There is already value in keeping a good tenant, so why scare them off with additional fees?

    I do recommend an annual rent increase, even if it's only 3% to keep up with cost of living increases.

    The DIY Landlord Book4.7243 Reviews
    WebsiteView Page
    8Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    5y

    Many of the PMC's charging renewal fees to tenants are doing so in very HOT markets with high demand and low inventory of rentals. The ones we know doing it, do not also charge the owners a lease renewal fee.

    Capitalism - charging what the market will bear.

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    I never charge fees for that. I do 2 year lease renewals for the good ones and one year leases with the others. Most of mine are on two year leases. They all seem like lifers so it works for me and less hassle.

    0Reply
  • Todd Powell
    Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
    5y

    @Scott Esmail make yourself MORE valuable than your competitors and let the tenants know that will not charge them that fee as the others would. I let my tenants know that if they stay the following year there will be no rent increase. They feel good and I love the fact I do not have the turnover. My units are all college focused so I am used to the change over but I also value getting a 2nd and 3rd year renewal. Why get greedy and go for a lease renewal, but rather use it as a hook to keep your folks happy and coming back. Just my thoughts from a guy who owns and manages 16 doors. The other 72 units we have a property manager

    2Reply
  • Cody Waters
    Rental Property Investor · Conway, AR · Member since 2019 · 10 posts · 3 votes
    5y

    I’ve never heard of a lease renewal fee where I reside in Central AR. My observation comes as a previous renter dating back to 2103 and a current landlord. 

    I agree with others in believing charging such a fee would be a disservice to good tenants. The only way I could see a lease renewal fee working in my market (a city with many colleges) would be to charge it in lieu of increasing rent. 

    0Reply
  • Kathy Henley
    Rental Property Investor · St. Louis, MO · Member since 2014 · 741 posts · 424 votes
    5y

    @Scott Esmail My employer manages hundreds of units. We charge the owners for lease renewals. Often buildings come with inherited tenants and poorly written leases. We have to work with the tenant to understand the new lease and the new responsibilities of each party - snow removal, furnace filters, landlord liability insurance, dog fees and poop cleanup, who pays for broken windows, etc. This takes time. We want them to stay, if possible, and avoid a costly make-ready (pushing it into the future more or less.) For the owner which we serve, this is fee that they are willing to pay ($60). If the inherited tenant doesn't want the new terms, they have the option of not renewing. No renewal fee to them but most will have a rent increase of $25. If tenant chooses to not renew, we do not charge the owner.

    0Reply
  • Louie Gabriel
    Member since 2020 · 57 posts · 24 votes
    5y

    Why would you ever charge a renewal fee? The entire point of getting a renewal is to save money on vacancy and turnover expenses.

    Even better, write an automatic renewal clause into the lease so that if the tenant doesn’t provide 30 days notice to vacate before the end of the lease term, it automatically renews for another year.

    2Reply
  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Bill Brandt This is no longer true. The new trend in PM is to charge tenants fees - like a renewal doc prep fee - to avoid raising prices in their owners who are price sensitive. It is a changing world!

    757-472-2547
    0Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 729 posts · 596 votes
    5y

    @Scott Esmail

    Why would I actively discourage lease renewals? I do increase the rent to keep with the market, but charging a fee simply to renew seems absurd to me. Also, I do not generally low leases to go month to month. 60 days before a lease ends, I send out a new 1 year lease with the new rate (unless tenant has informed me they are moving out, then lease may go month to month till they move out).

    2Reply
  • Nathan FaseltBusiness Member
    Rental Property Investor · Iowa City, IA · Member since 2019 · 94 posts · 35 votes
    5y

    @Patti Robertson

    Very interesting you say that. It makes sense to keep cost down for owners at PM company keep your owners happy don’t lose business.

    But seems like a risky and behind the sense way to really end up costing the owner more money because you may scare off renewals which always cost the owner much more.

    But I guess that is a gamble and would the owner see it that way.

    If you are a owner manager I would say it’s not worth risking the turnover cost.

    We manage 350 units in iowa city and do not charge as of now but have started but we own 200 of them first and never considered charging in hopes to keep renewal rate high.

    Now that we serves at 3rd party manger to 150 unit and growing we have considered ways to increase our profitability for the management company , or at least stay competitive. That’s how I stubbled on this forum.

    Very insightful and interesting to see range of thoughts on this topic.

    0Reply
    • Patti RobertsonBusiness Member
      Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
      5y
      Originally posted by @Nathan Faselt:

      @Patti Robertson

      Very interesting you say that. It makes sense to keep cost down for owners at PM company keep your owners happy don’t lose business.

      But seems like a risky and behind the sense way to really end up costing the owner more money because you may scare off renewals which always cost the owner much more.

      But I guess that is a gamble and would the owner see it that way.

      If you are a owner manager I would say it’s not worth risking the turnover cost.

      We manage 350 units in iowa city and do not charge as of now but have started but we own 200 of them first and never considered charging in hopes to keep renewal rate high.

      Now that we serves at 3rd party manger to 150 unit and growing we have considered ways to increase our profitability for the management company , or at least stay competitive. That’s how I stubbled on this forum.

      Very insightful and interesting to see range of thoughts on this topic.

      I'm not personally charging these fees either, but it certainly is the trend and I think I should be.  Think about how much it costs someone to move though - both real costs and perceived costs.  If you charge a $125 admin fee and they avoid the cost of moving, plus their perceived loss of the deposit from move-out damages, $125 seems like a bargain.  Just start looking at some of the rental ads of the large property managers in your market and you will see their fees to tenant disclosed.  You will probably be surprised at what you see.  Especially in this market, tenants know it is cheaper to stay put than to move and pay the inflated rental prices elsewhere.

      757-472-2547
      1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free