What is a Lease Extension?
A lease extension is usually needed when the original lease has expired, but the landlord and tenant wish to have an agreement in effect for an additional period of time. This can be especially useful to a tenant who wishes to remain in the same location but is not interested in a long-term lease. It also serves as a protection for landlords who may wish to sell the property in the near future and need to provide a potential buyer with assurance that the property has already been leased for a certain period of time.
Lease extensions are quite common in the context of providing a continuous rental term to a tenant despite the ending of the current lease. It is typical to provide a one year lease, for example, that is automatically renewed unless either the tenant or the landlord gives notice within a specified period of time that they wish to terminate the relationship and retrieve the property .
Sometimes a lease extension is needed to secure an option to lease again in the future, but not for the term of the current lease. In this case, it might be necessary to extend the current lease for a brief period of time in order to create an option at the end of the lease – for example, a 30-day or 90-day lease extension to allow the tenant to continue its business while giving the landlord time to decide its plan for leasing the property upon expiration of the extended lease.
In any case in which an extension is desired, it is important to have a written addendum that states the extension period and whatever terms are new or different from the original lease. As always, it is helpful to have an attorney prepare the addendum so that there are no unexpected challenges in the future.
What is a Rental Agreement Addendum?
In the vast majority of states, a written lease can be extended through the use of a rental agreement addendum. A rental agreement addendum is a short document attached to the lease that indicates that the lease period has been extended. The rental agreement addendum will list the lease period along with the new lease period and the monthly rent amount to be paid. The rental agreement addendum will need to be signed by the renters and landlord/agent and a copy given to each party.
The Essential Elements of an Addendum
Depending on the changes that agreed-upon by the landlord and tenant, the addendum may need to contain a variety of different terms. In general, there are certain components that should be included in almost any rental agreement addendum that is used to extend a lease. Those components include a new lease term start date, a new lease term end date, an adjustment to the monthly rental payment, and any modifications to either the tenant or the landlord’s obligations and responsibilities under the terms of the lease agreement.
Legal Formalities for Lease Addendums
A rental agreement addendum must comply with certain legal requirements in order to be valid and enforceable. Although these requirements vary by state and territory, all jurisdictions stipulate that both the landlord and tenant must sign a rental agreement addendum in order for the document to be binding. Because an addendum is a legally binding document, it must be written in a clear, readable manner. Many states, including California, require the rental agreement addendum to be printed in a font size that is at least 10-point. Furthermore, any provisions that modify a lease or rental agreement must be handwritten or printed in a different size font than the original text.
Some states have additional legal requirements related to the use of rental agreement addendums. For example, the existence of rental agreement addendums must be readily disclosed in the lease or rental agreement before the tenants sign it in Louisiana, and if any of the addendums are negotiated before the signing of the original agreement, then they are subject to the types of property addendums that Louisiana law requires to be signed before a contract for sale is finalized. Illinois also has specific laws that require landlord-tenant lease addendums to be presented to the tenant at least 48 hours before the tenant signs.
How to Make an Addendum
When drafting an addendum, always be sure to clarify the agreement in question right at the beginning of the document. For example, the addendum might state something like, "This addendum is made part of the following agreement: Rental Agreement dated December 1, 2018 between Landlord and Tenant." It’s important that there be no ambiguity as to which agreement is being extended by the addendum and all parties to the agreement need to be made plainly aware.
Next , the addendum should specify the terms that are added or changed. Be as clear as possible not to cause unnecessary confusion about what is being modified, extended, or added.
It’s also important to have all of the tenants sign. If one single tenant vacates the property but the other still remains, it is just the remaining tenant(s) that need to sign the addendum.
Common Pitfalls to Avoid
One of the most commonly overlooked mistakes is the failure to sign both the lease and the addendum. Over time, you will forget, and when you go to a judge about a matter concerning the extension, the judge may rule against you. Always sign both documents and keep a copy in your files.
All parties to the lease or original rental agreement must sign the addendum as well. If just one person who signed the original lease fails to sign the addendum, the lease will be terminated, and you will have to begin a new rental agreement with the non-signing party.
Assuming that the original rental agreement is still in force is another mistake that landlords and tenants can make when extending the lease with an addendum. Tenants should always confirm that the lease is still active when they present the addendum, and the landlord should do the same. This isn’t always clear-cut. Some states will automatically renew the rental agreement if all parties to the agreement have continued to pay rent for a specific number of months. Even if the original agreement has been voided, a landlord may not remove a tenant until the tenant has signed the addendum and agreed to any new terms.
Always be specific. Never assume anything. Assume everything is temporary until you have new paperwork to prove that the rental agreement has been extended and the living situation has changed. This is particularly true when it comes to the duration of the agreement. Be very specific about how long you intend to extend the rental agreement. Until both parties agree to the extension in writing, it does not exist. This means signing the addendum and printing and signing a copy of the original rental agreement, which should be kept in your files with the addendum.
Getting Legal Help
Although this may seem quite simple, the drafting of an addendum is not as easy as it seems. It must contain the modification and changes that are agreed upon by both the landlord and tenant. However, it must also be very clear so that there is no argument about what remains in the original rental agreement and what has changed. Furthermore, all of the changes made and additional information added to an existing rental agreement must be legally and morally permitted by law. Therefore , creating a rental agreement addendum often requires consultation with a legal professional. Fortunately, there are free programs available online, such as Rocket Lawyer, which allow you to customize an addendum. However, how this addendum is signed by the tenant, and if that tenant is being represented by a professional, can be affected once again by law.