Why a Lease Extension Addendum is Important

Your rental property has been humming along in profitability. You've got some great tenants in there that always pay their rent on time and they've been taking care of the property consistently as well. You want to keep them in there for another year at least, but the lease is drawing to a close. What can you do to secure another good year? Through the use of a lease extension addendum. This is a simple document that both parties sign which will extend the original leasing agreement for a period of time that you determine. Most yearly leases will have a 1 year lease extension addendum. Once signed, this document serves to extend the original lease and keep it valid. Why is it important? Without the addendum, the lease would expire on its last valid date and many landlord/tenant laws would allow that tenant to move out without any prior notice. In the best case scenario, a lease would transition into a month-to-month agreement.

What Is Important To Include In a Lease Extension Addendum?

Most of the time, an addendum is just going to extend all of the terms of the original lease to a new date. This requires some basic language. Here's one good example. “For the property listed at [insert address], both the tenant and the property owner agree to extend the terms of the lease signed on X/X/XX to now expire on X/X/XX.” Once both parties sign the lease addendum, it becomes a legal document that attaches to the original lease. It becomes enforceable just as a brand new lease would be enforceable, but under the previous terms. Property owners and tenants could request specific changes in the agreement to be listed as modifiers to the previous agreement as well. Increases in rent or the addition of pets are two common addendum modifiers. The good news is that it will keep good tenants around. The bad news is that sometimes you really do need to create a new lease.

What Happens If a State Changes Its Landlord/Tenant Law?

In almost every state or province, rental properties are only allowed to enforce legal stipulations that are included in a lease. If the law says that you can only charge 1 month's rent for a security deposit, for example, then you can't create an addendum that would require a tenant to pay a higher security deposit than that or force them to move out. When laws change and the current lease is not up to current legal standards, then it is better to create a new lease with the new standards then try to enforce an old lease under the old standards. Why is that? Sometimes a jurisdiction can invalidate an entire leasing agreement if there are illegal or outdated provisions in it. That's bad news to the landlord who finds themselves with a trashed property and no way to make the tenant pay for it. A lease extension addendum makes a previous lease still be enforceable for both parties. If you want to secure rental income over a longer period of time and have more legal options for everyone involved, then sign an addendum before the end of a lease to make sure you're finances are adequately covered.

Posted on Dec 29, 2014


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