How to Negotiate a Lease Renewal as a Landlord in NYC

If you’re a landlord in NYC, negotiating a lease renewal with your current tenant can be challenging and awkward. We’ll provide you with some pointers and other things to consider when negotiating a lease renewal in this video. Full blog post: https://www.hauseit.com/how-to-negotiate-lease-renewal-landlord-nyc/Show more

I’m Nick at Hauseit, based here in NYC. Visit https://hauseit.com to learn how to save money if you’re buying or selling a co-op, condo or townhouse here in NYC.

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Why Is a Lease Renewal Beneficial?

Negotiating a renewal is almost always in the best interest of both the tenant and the landlord.

As a landlord, the primary benefit of renewing the existing tenant is that you eliminate the cost and uncertainty associated with a possible vacancy period. You’ll also avoid paying another rental broker fee. In addition, renewing the current tenant means you won’t need to spend money on cleaning or repainting the property and making various repairs and touch-ups.

The tenant benefits financially from a renewal by not having to incur the costs of moving to a new apartment. The tenant is also spared the time and headache associated with searching for a new home.

Despite the obvious benefits for both parties in renewing a lease, the conversation itself can be rather uncomfortable for landlords.

Here’s why:

If you fail to agree on terms for a lease renewal, the tenant will obviously be unhappy at the prospect of having to move-out and search for a new home. Even if you and your tenant were on great terms during the entire term of the lease thus far, the relationship could rapidly deteriorate if you don’t agree on terms for a renewal. They’ll obviously think you’re greedy or unreasonable for wanting more rent than they’re willing to pay.

This is highly problematic, as now you have an angry and resentful person living in your home. The tenant is obviously far more likely to cause damage to your property or create other mischief if they’re holding a grudge against you, even if the rent increase you were asking for was completely justifiable based on market conditions.

While most tenants won’t damage anything on purpose even if they’re disappointed, there’s always the risk of a worst-case scenario. In New York City, that worst case scenario is that your tenant simply refuses to move out, and possibly stops paying you rent.

New York’s politicians have made it increasingly difficult to evict tenants over the years, and it’s gotten to the point that it can literally take 24 months to evict a tenant. Not to mention tens of thousands of dollars in legal fees and a long period of unpaid rent.

Even if your tenant decides not to go nuclear and lawyer up, there’s also a slightly less worst case scenario: your tenant ceases all communication with you and refuses to allow access to show the property to new prospective tenants.

If your tenant does this, it means you effectively can’t start searching for a new tenant until the old one has already moved out. This all but guarantees that you’ll have one, two or even three months of vacancy before your new tenant moves in.

Another risk of not renewing a tenant’s lease is that they internationally damage the property before they move out.

Tips for Speaking With Your Tenant

Remember to always remain calm and collected. Resist the temptation to take things personally. If your tenant sends you an aggressive email, wait a day or two before responding. Always sleep on any email you write before sending it to the tenant.

When it comes to the rental amount, do your homework. Don’t ask for an above-market rent, and always leave some wiggle room. In any negotiation, it’s important to make the other person feel like they’ve won. Both sides need to feel like they’ve gotten something out of the interaction.

Negotiating a Renewal When Rents are Rising

As a landlord, the best way to mitigate the risk of tension and conflict during the renewal discussion is to set expectations at the time you negotiate the original lease terms. If you’re painfully aware that rents are falling, make it clear to the tenant that the unusually low rent you’re offering is temporary. Let them know what the rent was before the recent decline, and set expectations that you will obviously renew at a much higher if market conditions improve.

Another great way to lay the foundation for a successful renewal conversation during a period of rising rents is to keep the gross rent closer to the rate you charged previous tenants (before rents declined) and reduce the net effective rent to the market rate by offering the tenant any number of free months of rent.
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