Tenants and landlords in residential and commercial leases should be mindful of automatic renewal dates. Frequently, leases have a 30-90 day notice of nonrenewal. If neither party sends a nonrenewal notice, the lease may be automatically renewed for another year with a rent increase.
This automatic year renewal may cause a problem for a tenant who wants to leave at the end of the first term, who cannot afford a rent increase, or who wants to change the terms of the lease.
At the same time, an automatic year renewal can create a hardship on a landlord who wants to place the property for sale, who wants to move a better commercial tenant into an occupied space, who wants to increase the rent more than what's in the lease, or who wants to change the terms of the lease.
By contrast, a month to month automatic lease renewal has different hazards for the landlord and tenant. A good tenant has bargaining power to negotiate a lower rent with better terms or leave with 30 days notice. A landlord who is shopping for a good tenant has the freedom of time to shop the rental property to obtain better lease terms. Once that new tenant is found, the old tenant may be entitled to only 60 days notice before he has to vacate the property.
The best thing to do is mark your calendar, think about your plans for the coming year, and make sure you comply with the renewal or nonrenewal terms of your lease. If you have a good relationship with your landlord or tenant, you may want to discuss his or her plans for renewal before the deadline. Otherwise, you may be at a disadvantage in future lease negotiations.