Is yearly lease signing necessary?

Question

I've brought a new yearly lease to my tenants 3 consecutive years now and the only thing changed on it is the dates of start and end. As im asking questions to my friends and family about their lease I realize some of them have not signed a new lease since the intial signing or have every few years. I wasn't aware how common this was and thought it was natural to re sign a new lease after expiration if they expect to stay here.

I'm writing this to see if anyone else signs leases every year without any updates or am I doing unnecessary steps?

should I only be doing this if I am changing specifics on the lease to show we both agree to the new terms?

Trevor Richardson · Answer

I could go on a hour long video about this topic.

Short, yes keep signing your own lease and requiring your tenants to do the same. I can’t tell you how much bad residential investment real estate I’ve seen from lazy business owners not following up on leases. If your friends don’t sign an annual lease and are lazy then the owner can sell and they can be out. Though in NJ that may be different.

On the owner side they continually fall into this trap because it’s lazy, and end up with tenants claiming residency, not turning units over correctly. The oh well the tenant has lived there for 8 years so whatever sort of mentality.

Run these like a business. I can tell you owners of 300u apartment buildings don’t slack on managing leasing paperwork and expectations. But smaller rentals owners run housing like it’s a joke. Sorry for the rant it’s just almost comical to me.

Ive seen business owners of a small retail shop that’s worth $80k run it to perfection with paperwork, financials etc… if they own a $5m 20 unit building… ah whatever tenants are running around with out leases, maintenance is shot, hey whatever it’s housing. There is a “rental owner” culture that’s just lazy. In the end it costs the owner a ton when it’s time to sell. I can guarantee you that.

Matt M. · Answer

My leases go month to month automatically after the year is up. No need to do anything. And if you want to raise the rent, just send them 30 days notice.

Bill B. · Answer

I assume when you say”they didn’t sign the new lease” you mean they didn’t sign the 1/2 page addendum that says all terms to remain the same except….

Where you put a new start and end date, new rent amount, and any other rules/changes you want to make. This should be one paragraph on a page that’s mostly room for signatures. Seems pretty hard to not see if they all signed.

Jay C. · Answer

We do yearly leases so we stay on a good rental schedule and don’t get a winter vacancy.

Adam Martin · Answer

I don't think so, I like to start with a year and then let it go M2M.  Sure summer is best for rates for renewals but I wouldn't want the possibility/likelihood of all rentals coming open at the same time.  A lease holds you more than a tenant.  If they want to go they are going to but we do not have the same ease of transition in a lease with eviction or cash for key's as our only options and only if they are violating the lease.  Really the only benefit of the lease is the lease break fee if they break it but even then good luck getting it.  When I started I loved the idea of 2 year rentals and the thought of locking people into annual contracts.  In reality people just broke them and I didn't have a strong enough clauses in the lease at the time to really make it worth my while and mostly just broke even.

Marcus Auerbach · Answer

We do one year that convert to MTM. I am a huge proponent of annual inspections and also keeping rents current, but the advantage of a MTM is definitely with the owner. If tenants want to leave, they will break the lease, owners don't have the flexibility.

However, make sure your lease actually converts to a MTM after a year, otherwise you are potentially out of contract, which could constitute a verbal lease.

Theresa Harris · Answer

It depends where you are.  Where I have some rentals, I always do 1 year leases because it is easier not to renew them than it is to get rid of a tenant who is month to month.  The annual leases also give you a bit more control over when your unit turns over.

Eliott Elias · Answer

You can make changes on a lease amendment.

Shawn Mcenteer · Answer

@Joe Capobianco absolutely get leased signed each year.  This protects you and the tenant.  I would be issuing new lease every year for signatures, changing the dates and most importantly upping the rents. Leaving rent the same price in my opinion is not a good habit.  At some point taxes, inflation etc drive up the rent prices so even if you are just upping it $25 or $50 per month that is a much easier pill to swallow compared to no raised rent and then large rent increase a few years later to make up for lost time. In New Jersey once lease dates run out the lease stays in place but diverts to month to month.   Personally I can fill my units anytime of the year without much issue but I can get much higher rents during spring and summer so I like when leases end April-July.  Month to Month leases can end anytime.

Is yearly lease signing necessary?

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