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

Question

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.

Rumen Mladenov · Answer

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.

Nathan Gesner · Answer

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.

Bill B. · Answer

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.

Curtis Mears · Answer

@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).

Louie Gabriel · Answer

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.

Alyssa Dyer · Answer

@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.

Todd Powell · Answer

@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

Theresa Harris · Answer

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).

Patti Robertson · Answer

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.

Drew Sygit · Answer

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.

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

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