How To Negotiate Your Lease Renewal: 4 Strategies
You get your lease renewal for your apartment in the mail. You open it up and brace yourself. Ouch, a 10% increase. Is this normal or am I getting screwed, you wonder. You also wonder what the best way is to negotiate your lease renewal.
You are not alone. I have had the privilege of advising hundreds of tenants and landlords in negotiations on their lease renewals.
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First, Do These Two Things Before You Negotiate Your Lease Renewal
First off, to help with any potential future negotiation with your landlord you should always do the following two things:
-Pay your rent on time.
-Throughout the lease term, only get your landlord involved on important issues.
You want to be able to use both of these items above as negotiating points during any pricing discussion. For example you want to be able to tell your landlord that you have always paid your rent on time and that you have been a “hassle free” tenant. This will help you right off the bat when you negotiate your lease renewal.
Understand These Two Factors Before You Negotiate Your Lease Renewal
Before you negotiate your lease renewal with your landlord, there are two important factors to consider:
First, you want to understand how the proposed new rent compares to your current rent. Second, you want to understand how the proposed new rent compares to the current market price of the apartment. Both matter. You want to take into account both pieces of information before you negotiate your lease renewal. Let’s look at both in turn:
First: How does the proposed rent compare to your current rent?
Generally speaking, a reasonable proposed rent increase would be between 3 and 5 percent. Of course this varies greatly depending on market conditions and what you are currently paying. Still, this is a good baseline for you to compare how “reasonable” the increase is when you negotiate your lease renewal. So, in other words, if your landlord wants to increase your rent 10% then this increase is way above average (assuming normal market conditions). On the other hand, if your landlord wants to keep your rent flat, or increase it by 1 or 2%, this would be considered below average (assuming normal market conditions).
Second: How does the proposed rent compare to current market conditions?
Is there a world in which a 10% increase is justified when you negotiate your lease renewal? Yes, possibly, and this is why you have to also understand the current market price for your apartment. Is your current rental price below or above what the prevailing “market” rate would be?
A landlord who proposes a 10% increase while you negotiate your lease renewal usually does so for one of two reasons: 1) They believe you are dramatically underpaying. They are okay if you don’t resign the lease because they feel they can find someone else quickly at a higher price. 2) Regardless of what the current market price is, the landlord is simply starting high. He or she is willing to negotiate. The landlord is also aware that the switching costs for you as the tenant are quite high (i.e. Who wants to deal with the hassle of moving?) Many tenants would be willing to pay a little more in rent just to avoid the headaches that come with moving.
To figure out if the reason for the dramatic increase is legitimate, you should educate yourself about current market conditions before you negotiate your lease renewal. If you used a real estate agent to find your apartment or know a good one, you should contact that person and get their opinion. You can also have a look at websites like Frele.com and get a sense as to what other units in your building or neighborhood are going for so you can discern the current market price for your unit.
4 Strategies to Negotiate Your Lease Renewal
Your strategy to negotiate your lease renewal depends on what your research has uncovered. It depends on how much of an increase your landlord is asking for and what the current market value of your apartment is. Here are proposed initial strategies for a few situations. You can use this as a guide and tweak the strategy depending on your exact situation.
Strategy #1 to Negotiate Your Lease Renewal: Landlord asks for a huge price increase BUT it is in line with the market value
A good argument to the landlord would be that this is not the rent you budgeted for when you signed the lease a year ago. Ask the landlord if there is room to negotiate this, because if not, regrettably, you will need to consider other options.
Strategy #2 to Negotiate Your Lease Renewal: Landlord asks for a huge price increase BUT it is out of line with the market value
A good argument to the landlord would be not only that this is not the rent you budgeted for when you signed the lease, but you are having a hard time understanding the reason for the renewal price increase given current market conditions. The landlord needs to know that you understand the market. This part is key to this negotiation strategy! Ask the landlord if there is room to negotiate this, because if not, regrettably, you will need to consider other options.
Strategy #3 to Negotiate Your Lease Renewal: Landlord asks for a small price increase AND it is in line with the market value.
While of course you could still try to negotiate this, my suggestion would be to consider accepting the proposed rental price increase. If you try to get too “cute” with the lease negotiations, you could wind up losing the apartment. Moving on to another apartment may not be what you really want to do.
Strategy #4: Negotiate Your Lease Renewal: Landlord asks for a small price increase AND it is OUT OF line with the market value.
We know a lot of you would still try to negotiate your lease renewal in this scenario, but even here my suggestion would be to strongly consider accepting the minor rental price increase. Of course, this assumes you really want to stay and do not want to leave. Generally, a minor price increase is standard under normal market conditions. Once again, if you try to get too “cute”in the negotiations, you could wind up losing the apartment.
Doing your research before you negotiate your lease renewal is critical. This puts you in a stronger negotiating position. The last thing you would want to do is to negotiate with your landlord without doing this sort of due diligence. You could lose the apartment before realizing your landlord’s proposed increase was fair.
For more NYC rental tips, please go to frele.com/learn.
This article was written by:
Phil Horigan, NYC Real Estate Veteran
Founder, Frēlē, the free and honest NYC rental marketplace
Producer, Phil’s NYC Rental Tips [YouTube Channel]
Blogger: flowfreely.com
Instagram: @philiphorigan
Phil has been a licensed NYC real estate agent since 2004 working for some of the top real estate brokerage firms in the industry. He founded Leasebreak.com in 2013, and Frēlē in 2017. Frēlē and Leasebreak are free and transparent rental marketplaces to search for or post apartments for rent in NYC
Go to frele.com to search for NYC apartments (free service).
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