Altering a Lease Mid-Term
April 10, 2019
We’d love to connect with you.
How To Alter A Lease Mid-Term
A lease is a contractual agreement that dictates a landlord-tenant relationship for a future period, typically twelve months. But the circumstances around that agreement are not static. It is common for both landlords and tenants to request changes to a lease agreement after it has been signed. As a landlord, it’s important that you find ways to accommodate lease adjustments when necessary to keep your tenants happy and your business operating smoothly. This is where altering a lease comes in.
When done properly and when all parties consent, alterations are a relatively simple, straightforward process. However, this does not mean it is something that should be done regularly. It is always best to stick with the original agreement whenever possible. Changes can introduce ambiguity to a contract. They can also give a false sense to the tenant (or the landlord in some cases) that the contract is lenient. As a general rule, lease alterations should be made only if they are absolutely necessary.
Can You Alter A Lease?
Let’s start with the obvious: A lease agreement is a legally binding document, and those who’ve signed it are contractually obligated to follow it to a T. Many people, however, assume that leases are permanently set in stone once they’re signed. This isn’t necessarily true – If consent is given by all parties that initially signed the lease, alterations can be made for the remainder of the term.
Altering a lease is not a one-way street. The landlord cannot just edit or add clauses to the lease agreement without the tenant’s consent. In fact, tenants can also propose to make changes to the lease. In these instances, it’s important for landlords to genuinely consider any alterations their tenant might want to make. Don’t write off tenant requests immediately – discuss them in person so each party can clearly share their perspective. If a mutual agreement has been reached, the changes can (and should) be documented.
How Can I Ask For A Lease Alteration?
The most effective way to propose a change to your lease agreement is to put it down in writing. A written request should clarify the meaning of the alteration and explain how it would affect the current agreement / relationship. Plus, it gives the other party a chance to review and consider the request without any added pressure to send out a quick response. Another advantage of having the alteration on paper is that it provides accountability. This ensures that words don’t get misconstrued between one party and the other. If any of the parties have received a written request, they should try to respond within two weeks.
Can I Alter Month-to-Month Leases?
One of the great advantages of using a month-to-month lease is that it can easily be altered or terminated by the landlord. Each state has its own rules regarding how far in advance any notifications must be provided. Also note, the original lease agreement may set its own notification rules (these rules cannot be in violation of the state rules). Most states require thirty days’ notice.
Because a month-to-month lease is in essence a very short contract that is repeatedly renewed, it is best to simply sign a new agreement when introducing changes.
How Can I Alter My Lease?
There are a few ways you can alter your lease agreement. Each has its own advantages and disadvantages.
A Lease Addendum is an addition to the lease agreement. When a lease addendum is appended to a lease agreement, all the clauses mentioned in the original document remain in force. Unless otherwise stated, once signed, the lease addendum is treated as any other cause in the lease and is in full effect until the agreement expires. A lease addendum simply adds on to the lease and supports it without rendering any parts of it invalid.
Addenda are often concerned with common changes. For example, if after six months of a twelve-month lease, your renter adopts a dog, a pet addendum would be a simple way of managing that situation.
A Lease Amendment is a modification to a specific part of the original lease agreement. Like addenda, lease amendments do not invalidate the original agreement – they simply alter clauses within it.
Let’s say, for example, in your original commercial lease agreement, you as the landlord agreed to pay the water utility bill. However, your commercial tenant introduces a new product that requires extremely high water usage. You could use a lease amendment to make your tenant responsible for the water bill. Amendments are also used to adjust occupancy rules, extend the lease term, or make improvements or modifications to the property.
If you’re still finding it tough to understand the difference between amendments and addenda, check out this guide.
Signing a New Lease
Sometimes, the proposed lease alterations are so substantial that they necessitate an entirely new agreement. In these cases, amendments and addenda simply aren’t enough or would create more work than they are worth. In such a case, you can cancel your old lease agreement and start a fresh one.
After signing a new lease, you must not forget to dissolve the old one. You cannot simply shred your old lease and leave it at that. Even though the lease is being mutually terminated, the required documentation must be drafted. You can sign an ‘Agreement to Cancel Lease’ or an ‘Agreement to Nullify Lease’. These two agreements are synonymous with one another and either can be drawn up.
Common Lease Alterations
Do not leave any ambiguity in your agreements. Any changes to your lease need to be documented for proof and accountability to protect both you and your tenant. Even if you feel you have a strong, positive relationship with your renter, a handshake agreement is not enough. Whether it’s a big change or a small one, take the time to formally document your lease changes.
Here are some of the alterations you’re likely to encounter:
- Adding New Tenants – This is particularly common in student housing but occurs at times in all housing circumstances. Perhaps it’s a sick mother or another long-term guest. Whatever the circumstances, be sure to add any new residents onto your lease agreement. And remember, the original tenants must all sign the addendum.
- Tenants Leaving – Life doesn’t happen in twelve-month periods, and oftentimes, one of your tenants on a multi-tenant lease will need to leave before their agreement expires. If possible, include a clause in your original lease that deals with this very circumstance. The Joint and Several Liability Clause can also be a great asset during early move-outs. But if no such clauses exist, a lease addendum or amendment can help determine how to handle future rent payments, the return of a security deposit, and any other new responsibilities that may come up. Be sure to recognize that this may be a stressful time for both the tenants that remain and those leaving. Try your best to accommodate them within reason.
- Replacement Tenants – If a tenant moves out early, a great solution can often be adding a replacement tenant. Here too, common issues include security deposit, house rules, etc.
- Subletting – A sublet combines both the tenant leaving and replacement tenant scenarios. It’s most common in student housing but can occur in all residential housing. The lease agreement may not have a specified clause on subletting. Subletting might actually work to your advantage here. The responsibility to find a replacement falls on the tenant and this is, therefore, an opportunity to negotiate other changes. Use it if needed.
Lease Term/Length of the Lease
Your tenant may wish to extend their lease, shorten their lease, or switch to a month-to-month lease for added flexibility. Depending on which, a lease amendment or an entirely new lease may be your best option.
These conversations are the hardest to have. Ideally, you should never try to renegotiate the rental amount after your lease is signed. However, if your tenant comes to you with a proposition, take the time to hear them out and always try to come to a peaceful agreement. A tenant that requests a reduction in rent is likely doing it because they’re tight on cash. Ignoring this warning sign or refusing to work with them could result in more headache than it’s worth.
Sometimes, this might even play to your advantage. Your tenant might want you to decrease the rent amount, but they are also proposing to increase the length of their lease by one additional year. That could be a good deal, saving you the time and effort of finding a new tenant as well as the cleaning charges you might have incurred. After all, the cost of tenant turnover can be high.
Rental amount changes can go terribly wrong as well. You might have tenants threatening to break a lease if you don’t make a change. You’re vulnerable because you know it will be hard to find new tenants soon. But you shouldn’t give in. In these types of scenarios, it is best to hold firm and let them leave if they are truly unhappy. If you give in to one demand, you could find yourself facing many more down the road. This could turn the landlord-tenant relationship bitter, causing even more problems if future conflicts arise.
As a landlord, when it comes to changing your lease agreement, you should try your best to meet your tenants halfway, negotiate peacefully and, retain a healthy landlord-tenant relationship. The most important advice to remember when altering leases is to make it official. Whatever method you choose to alter your lease agreement, putting everything in writing will protect you, your tenant, and your business moving forward.
For more interesting articles on managing your properties, be sure to subscribe to our blog and Like us on Facebook. And don’t forget to share your thoughts in the comments!