Lease Renewal and Extension: Proactive Strategies for Tenant Retention

Q: When should I send a lease renewal letter?

Begin at 120 days before expiry, followed by 90- and 60-day reminders to allow for review, negotiation, and legal notice windows.

Key Takeaways How to Time and Communicate a Lease Renewal What to Include in Your Lease Renewal Letter Pricing Your Renewals and Using Concessions Wisely How to Draft a Compliant Lease Extension Agreement Technology for Renew Lease Workflows Measuring the Impact of Your Lease Renewal Program Implementation Roadmap

Key Takeaways

Start renewal outreach 120 days before expiry, then follow at 90 and 60 days.
Target 60%+ residential and 70%+ commercial retention; structured programs create advantage.
Use tenant classification to tailor pricing and incentives; portfolios often see faster lease‑up and higher NOI.
Draft lease extension agreements with a legal checklist, and respect local caps/notice rules.
Prove ROI by tracking avoided turnover, extended occupancy revenue, TSS/NPS, LTV, and cost per renewal.

How to Time and Communicate a Lease Renewal

A structured 120/90/60-day cadence consistently outperforms ad hoc outreach. It creates room to review performance, align on pricing, and fix maintenance items that influence decisions.

T–120 days: Pre-renewal check. Verify payment history, service tickets, and satisfaction signals; note any rent caps. Ask about plans.
T–90 days: Send a formal lease renewal letter with proposed term, pricing, and a response date. Keep the tone appreciative and clear.
T–60 days: Follow up. Offer a short call to address questions and highlight improvements or incentives. Document all communications.

Segmentation matters. Message long‑tenure, on‑time payers with continuity and community themes. Engage at‑risk payers earlier with options and payment clarity. It's important to tailor the commercial outreach to business continuity and plans.

If you need help with ensuring you have covered all the necessary requirements around your lease administration process you can leverage or Free Lease Admin Checklist Tool.

What to Include in Your Lease Renewal Letter

Keep it concise, personable, and directive. Lead with appreciation, then clarify terms and deadlines:

Appreciation and a brief property update.
Proposed term options (e.g., 12 or 24 months) and move‑in anniversary.
Rent change and rationale (market comps, improvements, or indexation rules).
Response deadline and how to accept.
Point of contact and next steps.

Sample snippet:

“Thank you for being part of our community. Based on your on‑time payments and care of the home, we’re pleased to offer a 12‑month renewal at $X, effective [date]. Please confirm by [deadline]; we’re happy to discuss options that fit your plans.”

A good starting point for your lease/renewal extension communications could be our free Lease Extension Agreement Generator below.

Free Lease Extension Template

Pricing Your Renewals and Using Concessions Wisely

Renewal pricing balances two goals: keeping reliable tenants and safeguarding the rent roll. Over time, renewal rents typically track slightly above new‑lease pricing, especially when new deliveries use concessions. The 2021–2022 period briefly inverted this pattern. Concessions are prevalent: nearly 21% of multifamily units offered concessions averaging ~5% of asking rent in Q2 2024, across Class A–C.

Practical approach:

Use graduated increases by tenant profile and payment history; reward high performers with modest increases or term flexibility.
In oversupplied submarkets, consider small one‑time credits, minor amenity upgrades, or a longer term to smooth escalation.
Document rationale (market comps and improvements) in the renewal letter for transparency.

How to Draft a Compliant Lease Extension Agreement

It's essential to keep a checklist of essential information to include in your lease extension agreement. Your checklist must include a legal review but as a start should include:

Parties and premises: full legal names; unit/address.
Original lease reference: date, term, and clauses that carry over.
Extension term: exact start/end dates and options.
Rent and payments: amount, frequency, methods, and escalations/indexation.
Deposits: amount and handling (unchanged, increased, or replaced).
Maintenance and repairs: landlord vs. tenant responsibilities and SLAs.
Utilities and services: who pays which services.
Notices: methods and addresses; statutory periods.
Early termination: conditions and notice.
Governing law; signatures/witnesses; recommend legal review.

Addendum Versus New Lease Agreement

Use a Short Addendum When…	Draft a New Lease When…
Only the term and rent change; all other terms remain intact.	Material changes to rent structure, responsibilities, or policies.
No statutory or policy changes since original signing.	New legal requirements, caps, or disclosures must be integrated.
Simple residential renewals with stable conditions.	Commercial deals with CAM, tax, insurance, or space changes to update.

When in doubt, consult counsel—especially across multiple jurisdictions.

Jurisdictional Notice Periods and Rent Caps

Here are just a few examples of what could differ between some states and countries:

Jurisdiction	Key Rule	What It Means for Renewals
Inglewood, CA	Max increase 3% or CPI for 5+ units; 5%+CPI for 4 or fewer; 10% annual cap	Check CPI posted each May; ensure increases stay within caps.
Montgomery County, MD	Stabilisation allowance 5.7% effective July 2025; CPI-U+3% or 6% (greater of), with banking and fair return petitions available	Model scenarios using banked increases or improvement petitions.
NSW, Australia	End-of-term: landlords 30 days’ notice; periodic tenancies 90 days by landlord; tenant notice often shorter	Back‑schedule outreach to meet longer landlord notice windows.

Refresh cap tables and CPI references at least once per year. Keep a change-log of regulatory updates to support audits.

Automate and Personalise: Technology for Renew Lease Workflows

Automation wins. It creates fewer misses, faster cycles, and consistent documentation. Modern systems will trigger alerts, templates, and tasks from lease end dates, then personalise by tenant profile.

An example model workflow:

T–120: Auto‑create a “pre‑renewal review” task. Compile payment history, maintenance tickets, and satisfaction signals. Generate a draft email.
T–90: Send segment‑specific lease renewal letters. Include e‑sign links. Log responses and open a pricing task.
T–60: If no reply, escalate to SMS and phone. Surface incentive playbooks for at‑risk tenants.
Ongoing: Sync accounting, maintenance, and communication records via integrations to avoid duplicate entry and ensure CAM/tax updates flow through for commercial.

Additional AI assistance can support with screening and churn prediction triage where human time matters most. AI‑driven screening compiles credit, employment, and rental history to flag risk factors.

KPIs and ROI: Measuring the Impact of Your Lease Renewal Program

Most landlords perform best when they target higher-than-average tenant retention:

Residential: Aim for 60%+ tenant retention; the cross-asset national average sits around ~48%.
Commercial: Target 70%+ to limit downtime and fit-out disruption.

Beyond retention, there are some other metrics that signal healthy portfolios. These are:

Rent collection: ~95% stabilises cash flow.
Average days to lease: ~30 indicates effective leasing.

It is always important to measure leading indicators of performance. Tenant Satisfaction Score (TSS) and Net Promoter Score (NPS) are two that predict renewal behaviour. TSS above ~80% signals strong relationships. NPS classifies Promoters (9–10), Passives (7–8), and Detractors (0–6); score = %Promoters − %Detractors. Track both monthly, especially within 180 days of expiry.

Tenant Lifetime Value (LTV) is one more metric that is useful. It links retention work to revenue. A simple approach: LTV = average annual rent contribution × average tenancy length. Improving satisfaction reduces turnover costs and voids, lifting LTV.

The ROI of a renewal program is the final determinant of success.

Here is an illustrative formula

ROI (%) = [(Turnover cost avoided + additional rent from reduced vacancy) − program cost] ÷ program cost × 100.

It is important to highlight that classification‑led programs report faster lease‑up and NOI improvements, alongside fewer late payments and higher retention.

Especially for commercial owners, its key to tie renewal risk to portfolio planning. Aligning expiries with your risk profile improves Weighted Average Lease Expiry (WALE) and valuation; see our explainer on weighted average lease expiry (WALE). To measure the WALE of your portfolio you can use our Free WALE Analysis tool below.

Free WALE Analysis Tool

When should I send a lease renewal letter?

Begin at 120 days before expiry, followed by 90‑ and 60‑day reminders to allow for review, negotiation, and legal notice windows

What should a lease renewal letter include?

Appreciation, proposed term options, any rent change with rationale, deadline, and contact method—kept clear and personable

When do I use a lease extension agreement versus a new lease?

Use a short addendum when only term/rent changes and the rest stands. Draft a new lease when responsibilities, rent structure, or compliance requirements materially change; involve counsel for multi‑jurisdiction portfolios

About the Author

Dulan Perera
Director, Growth

Dulan combines strategic technology expertise with deep knowledge of commercial real estate (CRE) to drive meaningful growth across the industry. His focus is on connecting property professionals with insights that matter, spanning compliance, financial operations, property management, stakeholder relationships, and the evolving role of technology and AI. His goal: help real estate businesses scale smarter in a digital-first world.