Maybe instead of the twelve-month renewal offer you expected to receive, your landlord surprised you by asking you to sign a three-year lease. Or maybe you’re moving to town for the very first time and wondering why your landlord wants you to sign up for a sixteen-month rental term. Although the final decision in either situation largely depends on your personal circumstances, there are a number of general reasons why a longer lease may be attractive to both tenants and landlords, as well as several factors that may make this arrangement less than ideal.
Why would a landlord offer a longer lease?
Whenever a tenant’s lease expires and they vacate their apartment, the landlord is left with the responsibility of filling their vacant unit. This can be a long and expensive process, especially if the real estate market is in bad shape: the landlord will have to organize visits, sort through tenants’ requests and draft new lease agreements, not to mention cleaning and repainting the dwelling. to make it presentable. All the while, they will simultaneously lose income from the rental unit because it is unoccupied. Longer leases allow landlords to avoid this annual inconvenience and associated expense.
Until the mid-1800s, nearly all residential leases in New York expired simultaneously on May 1 of each year. (You can imagine the chaos!) Today, lease expirations are much more spread out but still heavily concentrated in the summer months. Landlords generally prefer tenants’ leases to end between May and October in order to take advantage of the booming market of summer tenants looking for new accommodation. So if you are starting a new lease beginning in the winter, it is not uncommon for landlords to ask for a sixteen to eighteen month lease ending in the summer.
Finally, if a landlord has a desirable tenant who reliably pays rent on time, receives no complaints from neighbors, and makes relatively few maintenance requests, the landlord may be eager to “lock them in” for a longer period. rather than risk taking on an unknown tenant for their next rental period.
Benefits of signing a longer lease
Moving tends to be much more complicated and expensive for tenants than for owners. If you are moving from one smaller apartment to another smaller apartment in the same neighborhood (e.g. from one Bushwick studio apartment to another), you will still need to drop at least several hundred dollars to your move. Moving an entire family into a new townhouse will likely cost you thousands of dollars, and that’s assuming nothing valuable is broken or lost during the transition. Signing a multi-year lease will give you a reprieve from the time commitment and financial burden of moving.
No matter how many visits you make and how many searches you do beforehand, moving into a new apartment has many unknowns. You might not find out your upstairs neighbor is an insomniac Riverdancer with a dedicated late-night snooze routine until your first night in your new room. If you’re happy with your current home, a two-year lease can be a good way to maintain the status quo and avoid any unpleasant surprises in your living situation.
There are also emotional consequences associated with the move. While some find it exciting to learn how to navigate a new neighborhood, many of us are creatures of habit who like to memorize our favorite train routes and know exactly which bodega in the neighborhood has the most delicious coffee or sandwiches. the cheapest. This is especially true for families with children, where moving can mean enrolling in a new school district and losing touch with neighborhood friends. When you have firmly rooted in your immediate neighborhood, a longer lease can provide a comforting sense of stability.
Since longer leases are often preferable to landlords, you can also take advantage of a longer lease to gain concessions under the terms of your lease. For example, some landlords are willing to offer a reduced rent for the first months of occupancy in exchange for an extended lease. Always worth a try negotiate your lease terms to see if you can reap any additional benefits.
Rent increases during annual renewals can be extremely costly. A longer lease means you know exactly what you’ll be paying in rent for the next few years, which can help give you peace of mind if your personal finances are at stake. Having a fixed rental rate can also save you a lot of money if the market value of your apartment skyrockets during your residency. Tenants who signed multi-year leases in early 2021 are definitely reaping the benefits this year as rent prices continue to soar across the city.
Disadvantages of signing a longer lease
Unfortunately, the financial implications of signing a longer lease are highly dependent on the state of the real estate market. If the market value of your apartment decreases while you are a tenant, you are contractually obligated to continue paying the rent set out in your contract and will not be able to take advantage of rent reductions that your landlord would otherwise have offered. This was an issue faced by many frustrated tenants who signed long leases in 2019 only to see rental prices drop sharply in 2020. To help you make your decision, pay close attention to market forecasts to find out whether the rental prices should come down. increase or decrease in the years to come.
Perhaps the biggest downside to signing a long-term lease is that it severely limits your flexibility. If you fall in love with your apartment in your first year, you’ll have no choice but to hold on and stay put. Even if the apartment is ideal, the circumstances of your life can always change unexpectedly. A two-year lease on a fifth floor with no elevator could prove difficult if you were to sustain an injury resulting in permanent loss of mobility. And if you’re offered an attractive new job in a remote part of town, you could be stuck with an unpleasant and potentially exhausting commute for the duration of your lease. Worse still, you could be unexpectedly laid off completely and find yourself contractually tied to an apartment you can no longer afford.
In the latter case, you would probably have to dip into your savings to pay rent, or even resort to break your lease. This could expose you to serious financial consequences from your landlord, including the cost of your security deposit and missed rent. If you can’t agree on an early departure, you are very likely to be sued. This is especially dangerous if you are already in dire financial straits, as any resulting debt or unpaid fees could hurt your credit score. Breaking your current lease can also make it harder to secure your next apartment, as it can impact your landlord’s willingness to write you a glowing recommendation.
To best protect your interests, it is definitely worth discussing whether your landlord would be willing to include an “opt-out” or early termination clause within the terms of the lease to minimize potential penalties should you need to move out early for any reason. This could potentially give you the best of both worlds: the security of a long-term lease and the flexibility to relocate if your situation calls for it.