How to maximise benefits during lease renewal?

As a landlord, are you wondering how much notice is required to inform tenants of your intention whether to renew the lease? What if the tenant wishes to break the lease? How much loss incurred? How to determine rent increase amount during each lease renewal? Will I be informed and involved in all decision making regarding my investment property? In this video, we’ll discover some common concerns of landlords when it comes to lease renewal. 

There are typically two scenarios to consider, the first one is landlords and tenants have to make decisions whether they wish to renew the lease before it expires. And the second scenario is generally called break lease, meaning that the lease has not expired, but either the tenant or landlord wish to terminate the contract prematurely.

Let’s talk about the first scenario. When the lease is about to expire, Midas property management system will automatically send emails 75 days prior to the end of the lease, to notify landlords and tenants to make decisions whether they wish to renew. According to the latest legislation by Queensland government residential tenancies authority (RTA), effective on 1 July 2023, leases with a term of less than 12 months do not allow rent increases. Hence for the lease length below 12 months, we always suggest they renew the lease with current tenants for another 6 months. Once it marks up to a total of 1 year lease, landlords may increase the rent. Property managers will contact the landlords to discuss the current tenant’s situation and determine whether the landlord is willing to renew the lease. We usually conduct a market analysis to inform landlords about the rental market conditions in their investment property’s area, offering a reasonable rental range for the landlord to decide upon. When we send emails, we often include screenshots of similar market rental listings, CMA (Comparative Market Analysis) reports and other relevant materials for landlords’ reference.

Nowadays cash interest rates are rising in Australia, landlords may wonder if they should raise the rent due to higher interest rates. Actually, our property managers in Midas are all landlords and we fully understand and empathize with this concern. However, high demand for properties during mid year does not necessarily mean the same conditions will apply at the end of the year. The decision to raise the rent, and the amount by which it can be raised, depends on the current rental market, supply and demand factors, average rental in certain areas, and the condition of the property itself. We consider the current market conditions while balancing the maximization of the landlord’s interests and avoiding vacancies, and aim to retain quality tenants for a win-win solution. 

If the current tenant’s situation is favorable, we will suggest landlords make a reasonable adjustment to the rent to avoid scaring off quality tenants with excessively high rental rates. If the tenant’s performance is not ideal and the landlord decides not to renew the lease for them, we will notify the tenant two months in advance, which is also by law requirement, to give them sufficient time to move out. Our property management team will also begin to advertise the property as a premium feature ad listing about three weeks before the lease expiration date, ensuring that the landlord’s properties stand out among numerous listings. Open houses will be held, applications will be reviewed, and the final decision on the new tenant will be made in our discussion with the landlord.

Conversely, if the landlord decides to renew the lease, we will notify the tenant 2 months before lease expiration. The tenant must inform us of their decision whether to renew the lease at least two weeks before the lease expires, this is also required by RTA law. If the tenant chooses not to renew, we will proceed with advertising and arranging for the new tenant to move in, as mentioned earlier. While if the current tenant agreed to the new rental and decided to renew the lease, a renewal contract will be sent for them to sign, following the lease renewal process as usual. 

If the new tenant has pets, an additional pet agreement will be necessary, and the tenant will be responsible for the costs associated with pet-related maintenance during the lease and professional carpet cleaning and pest control before vacating.

In terms of ongoing management, we provide regular property inspections. If any damage to the property is identified during these inspections, the landlord will be promptly notified. If a tenant wishes to break the lease, which is the case of the second scenario, we will notify the landlord as soon as possible and coordinate the process, informing the current tenant of the fees incurred, such as the reletting fee and advertising costs. Our team is dedicated to ensuring that landlords receive timely information and regular property updates. What if a landlord wishes to terminate the contract before lease expiration? We will explain this second scenario in detail in our next episode, so stay tuned!

That’s all about the lease renewal procedures. I hope this video has been helpful to you, see you next time!

If you have any question, please do not hesitate to contact us. If you wish to know more about our property management service, feel free to click here for more information.