Explanation of Rent Differential and Lease Expiration
Below is an example of how to explain the differential between early termination and a lowered rental rate to owners.
In this example, the tenant has an early termination clause, with the lease set to expire on 6/30/25 at a rental rate of $2,295. We proposed offering a longer lease term that extends to 3/31/2026. Since the new expiration date goes beyond the original lease term, we need approval from the owner for this change.
Additionally, we confirm with the owner that they have no plans to sell the property during this extended lease period, following the same process as we would during the renewal season.
Even though the rental rate will be lowered to $2,095, we explain the benefits of moving forward with the approval:
- Avoid Vacancy: Be sure to provide the average days on market (DOM). Proceeding with this lease approval will help avoid any vacancy periods, which could lead to lost rental income.
- Avoid Make-Ready Costs: By securing a tenant now, the owner will avoid the costs of preparing the property for a new tenant.
- Avoid Leasing Commission: The owner will not incur another leasing commission through the new lease expiration date.
This approach ensures that the owner avoids potential costs and risks while keeping the property leased through the new expiration date.
Example Email:
Hi (Owner Name),
I wanted to update you that we have an application for Beechnut that is ready for approval. The applicant is relocating from out of state, and both their FICO score and income exceed our requirements. We propose moving forward with an approval for the lease term from 2/1/25 to 3/31/26 at a rental rate of $2,095.
Before proceeding, I’d like to confirm your approval of the lease expiration being set for 3/31/2026, as the original lease term ends on 6/30/2025. The early termination tenants will be charged $200 for the period February 2025–June 2025 (5 months) for a total of $1,000.00.
While the new rental rate of $2,095 is lower than the previous rate of $2,295, it's important to note that the difference of $200/month over the remaining nine months of the lease (July 2025 - March 2026) amounts to $1,800. I understand that this lower rental rate might feel challenging, but by proceeding with this approval, you will successfully avoid vacancy (Avg DOM for 2024 was 36), make-ready costs, and another leasing commission through March 2026. Once the property is leased, we'll return to our usual approach of providing excellent service and working to increase rents upon renewal!
Please let me know if you’re on board to proceed with this approval.
Thank you!