The Benefits and Drawbacks of Signing a Longer Lease
Perhaps, instead of the twelve-month renewal offer you were expecting to receive, your landlord has surprised you by asking you to sign a three-year lease. Or maybe you’re moving to the city for the very first time and are scratching your head over why your landlord is keen to have you sign on for a sixteen-month rental period. While the ultimate decision in either situation would depend largely on your personal circumstances, there are a number of general reasons why a longer lease can be attractive to both renters and landlords—and also several factors that can make this arrangement less than ideal.
Why Would a Landlord Offer a Longer Lease?
Whenever a tenant’s lease expires and they move out of their apartment, the landlord is left with the responsibility of filling their vacant unit. This can be a time-consuming and expensive process, especially if the real estate market is in poor shape: the landlord will have to arrange showings, sort through tenant applications, and draw up new lease agreements, not to mention clean and repaint the unit to make it presentable. All the while, they will simultaneously be losing income from the rental unit as it sits unoccupied. Longer leases allow landlords to avoid this yearly inconvenience and its associated expenses.
Until the mid-1800s, nearly every residential lease in New York City expired simultaneously on May 1st of each year. (You can imagine the chaos!) Today, lease expirations are far more spread out but still heavily concentrated in the summer months. Landlords generally prefer that tenants’ leases end between May and October in order to take advantage of the booming market of summer renters looking for a new home. Thus, if you’re starting a new lease beginning in the winter, it’s not uncommon for landlords to request 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 down” for a longer period rather than risk taking on an unknown tenant for their next rental period.
Benefits of Signing a Longer Lease
Moving out tends to be a much bigger hassle and greater expense for tenants than it is for landlords. If you’re moving from a smaller apartment to another smaller apartment within the same neighborhood (say, from one Bushwick studio to another), you’ll still have to drop at least several hundred dollars on your move. Moving a full family into a new townhouse will likely set you back thousands—and that’s assuming that nothing valuable is broken or lost during the transition. Signing a multi-year lease will offer you a reprieve from the time commitment and financial burden of moving.
No matter how many tours you take and how much research you do beforehand, moving into a new apartment comes with a lot of unknowns. You may not discover that your upstairs neighbor is an insomniac Riverdancer with a dedicated late-night rehearsal routine until your first night in your new bedroom. If you are happy with your current lodgings, a two-year lease can be a good way to maintain the status quo and avoid any nasty surprises in your living situation.
There are also emotional tolls associated with relocating. While some find learning to navigate a new neighborhood thrilling, many of us are creatures of habit who enjoy having our favorite train routes memorized and knowing exactly which bodega on the block offers the most delicious coffee or the cheapest sandwiches. This is especially true for families with children, where moving might mean enrolling in a new school district and losing touch with their neighborhood friends. When you have set down strong roots in your immediate neighborhood, a longer lease can provide a comforting sense of stability.
Because longer leases are often preferable to landlords, you may also be able to leverage a longer lease to gain concessions in your lease terms. For example, some landlords are willing to offer reduced rent for the first several months of occupancy in exchange for an extended lease. It’s always worth trying to negotiate your lease terms to see if you can reap any added benefits.
Rent hikes during yearly renewals can be excruciatingly expensive. A longer lease means that you know exactly what you will be paying in rent for the next several years, which can help provide peace of mind if your personal finances are in question. Having a locked-in rental rate can also end up saving 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 balloon citywide.
Drawbacks to Signing a Longer Lease
Unfortunately, the financial implications of signing a longer lease are heavily 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 bound to continue paying the rent outlined in your agreement and will not be able to take advantage of any rent decreases your landlord might otherwise have offered. This was a problem encountered by many frustrated renters who signed lengthy leases in 2019 only to watch rental prices sharply decrease in 2020. To aid you in making your decision, pay close attention to market forecasts to get a sense of whether rental prices are expected to rise or fall in the coming years.
Perhaps the greatest downside to signing a long-term lease is that it greatly limits your flexibility. If you fall out of love with your apartment over the course of your first year, you’ll have little choice but to stick it out and stay put. Even if the apartment is ideal, your life circumstances could always change unexpectedly. A two-year lease on a fifth-story walkup could prove difficult if you should happen to suffer an injury that results in a permanent loss of mobility. And if you’re offered an appealing new job in a far-off part of the city, you could be stuck with an unpleasant and potentially draining commute for the duration of your lease. Even worse, you might unexpectedly be laid off from your job entirely and find yourself contractually bound to an apartment that you can no longer afford.
In the latter case, you would likely be forced to dig into your savings in order to make rent—or else even resort to breaking your lease. This could put you at risk for great financial consequences from your landlord, including the cost of your security deposit and missed rent. If you’re unable to come to an agreement about an early departure, there’s a very real chance of being sued. This is especially dangerous if you are already in a difficult financial situation, as any resulting debt or unpaid fees could result in damage to your credit score. Breaking your current lease can also make it more difficult to secure your next apartment, as it may impact your landlord’s willingness to write you a glowing recommendation.
To best protect your interests, it’s definitely worth discussing if your landlord would be willing to include an “opt-out” or early termination clause in the lease terms to minimize the potential penalties in the case that you’d need to move out early for any reason. This could potentially offer you the best of both worlds: the security of a long-term lease and the flexibility to move if your circumstances require it.