Real Estate Terms

Lease Expiration Definition

A lease expiration is when a lease agreement reaches its end date. When a lease expires, the tenant can either move to a new property or continue living in the property under new terms.

Before taking the exam, real estate students must learn how an expired lease works. If you’re confused about what happens after a lease expires, you’ve come to the right place. With years of real estate experience, we’re here to explain this vital concept and help you succeed as a future agent.

In this post, we’ll define lease expiration, explain which options exist after expiration, and clear up some frequently asked questions. Keep reading for a complete breakdown of expired leases in real estate!

What Is a Lease Expiration?

A lease expiration occurs at the end of the lease term when the lease is no longer valid. At this point, the contractual relationship between the landlord and tenant ceases to exist.

When a lease expires, the tenant no longer has the right to live on the property. In many cases, the landlord and tenant sever ties; the landlord finds a new tenant while the old tenant searches for a place to live.

However, there are some instances where the landlord and tenant may continue their relationship. For example, they may choose to sign a lease renewal or extension.

Lease Renewal vs. Lease Extension: What Is the Difference?

A lease renewal is a new rental agreement, while a lease extension is a continuation of the original rental agreement. Let’s discuss exactly how each type of agreement works below.

Lease Renewal

A lease renewal is an agreement between the landlord and tenant to create a new rental contract. In a renewed lease, the new contract may feature different terms than the original.

For example, the new lease may stipulate a rent increase or other updated clauses.

In most cases, the landlord and tenant must decide to renew the lease thirty days before the expiration date. However, this time frame varies depending on state laws. 

For example, New York state law requires that landlords offer lease renewals between 90-150 days before lease expiration. According to Georgia state law, the landlord must offer the tenant a lease renewal at least 90 days before expiration.

Renewing a lease is appealing because it allows the tenant to keep living in the property without worrying about moving. It also benefits the landlord because they do not have to search for new renters.

However, one drawback of a renewed lease is that the landlord must create an entirely new contract. Not only is this more paperwork for the property owner, but it means the tenant may have to agree to new, less favorable terms.

Lease Extension

A lease extension is an agreement where the landlord extends the term of the original rental agreement. A landlord must grant a lease extension to a tenant before the expiration date.

In the case of a lease extension, the landlord creates a formal document detailing the length of the extension. An extension can be a specified amount of time or determined on a month-to-month basis.

The advantage of lease extensions is that they require fewer contractual changes than a lease renewal. This means the tenant will generally not have to worry about an increase in rent. However, the downside of an extension is that the term is for a shorter period than the original lease.

How Long Can a Tenant Stay After the Lease Expires?

In most cases, an expired lease means that it’s time for the tenant to move out. The lease features a termination date to let the tenant know when they must leave and take their belongings.

However, sometimes a landlord will allow a tenant to continue living in the property without signing a new lease or extending their current one. This type of agreement is known as a “tenancy at will.”

Tenancy at Will

Tenancy at will occurs when the landlord lets the tenant live in the rental unit even though the lease has expired.

In this arrangement, there is no contract specifying how long the tenant can stay. In most cases, the landlord simply drafts a document outlining rent payments and utility costs. This contract protects the landlord and tenant from miscommunications but does not feature a specific expiration date.

One of the benefits of tenancy-at-will agreements is that they provide flexibility for both landlords and tenants. Either party can terminate the tenancy at any time. However, this is also one of the drawbacks of at-will tenancies; the tenant may be kicked from the property with little notice, and the landlord may suddenly lose their renter.

Tenancy at Sufferance

Sometimes, a tenant may wrongfully stay in the rental property after the lease has expired. This is called a tenancy at sufferance, and the tenant in this scenario is a hold-over tenant.

When a tenant refuses to leave a property despite the landlord’s wishes, they may have to be evicted. An eviction occurs when a tenant is court-ordered to remove themselves and their belongings from a rental property.

Can Tenants End a Lease Before the Lease Expires?

There are some cases where tenants can terminate a lease before the lease expiration date. For example, if a landlord violates the terms of the signed lease agreement, the tenant may be able to get out of the contract.

Tenants can also end a lease early under the following circumstances:

  • If the rented property is not sanitary
  • If the landlord is harassing the tenant
  • If the rental property is illegal
  • If the tenant is a domestic violence victim
  • If the tenant must vacate due to military orders

However, if a tenant leaves before the lease expiration date without good reason, they may face negative consequences. For example, they may have to pay termination fees or risk getting a bad reputation as a renter.

Frequently Asked Questions

Let’s discuss some frequently asked questions real estate students have about expired leases.

How Does the Termination Date Work?

The termination date is the date when the lease ends. Landlords must provide tenants with a termination notice several days before the end date. This time frame ensures that the renters have time to pack up their belongings and leave the property.

What Is a Hold-Over Fee?

According to Law Insider, a tenant who stays in the rental property after the lease expires may have to pay a hold-over fee. A hold-over fee can be up to 25-100% of a tenant’s base rent. To avoid paying this hefty cost, tenants should vacate the premises when the lease expires or sign a renewed lease in advance.

What to Know Before the Real Estate Exam

A lease expiration occurs at the end of the lease term when the contract is no longer valid. At this point, the tenant may move out, extend the lease, sign a new lease, or become a tenant at will.

Real estate students must understand how expired leases work before testing day. Now that you’ve gained some insight via this article, we have no doubt you’ll nail this section on the exam.

Of course, this is only one of the critical terms you’ll need to learn. You can study other important concepts using our online Real Estate Flashcards!

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