A common mistake when renewing a lease is to use a standard lease renewal or draw up a new lease omitting any reference to money that may be owed from the expired or expiring tenancy. Late charges may have accumulated, the resident may owe for some damage, or there may be NSF charges or some other charges that have been incurred under the prior lease. Once the new lease is executed, while the resident may still owe you the money, there is no enforcement mechanism to collect it. You cannot evict under the new tenancy for money owed under the prior tenancy, UNLESS the new lease or renewal clearly spells out that there is a balance owed and states how the resident shall pay this balance.

What Might Be Owed From the Prior Lease?

A resident can easily have accumulated late charges, NSF charges, unpaid water, sewer or garbage bills, unpaid repair bills or almost any other amount that could have been incurred over the past year. The manager will most likely want to collect this money and does not intend to write the amounts off when giving the resident a new lease. The manager has a full expectation that the resident will pay these sums. But will he?

Tying in the Old Balance to the New Lease

When preparing the new lease, it is crucial that terms of the new lease contain the past or accumulated amount due, a definition of this amount as “additional rent” and the payment arrangements. We recommend that the amount is spread out in a reasonable fashion and due with the resident’s rent payment as “additional rent” until paid in full. Done this way, if the resident fails to pay, the resident can then be given a Three-Day Notice for non-payment, and an eviction can be instituted if necessary. We do not recommend that you accept the normal monthly rent without the resident paying the full rent amount and the “additional rent” at that time. If you wish to have a separate form for dealing with the amounts, terms and conditions we recommend a Past Due Amounts Workout Agreement

The New Lease Does Not Reflect the Past Balance; Is the Money Still Owed?

The execution of a new lease does not wipe out the prior debt, but creates two distinct problems. First, if the prior debt was debatable or in dispute, the manager’s actions in entering into a new lease certainly favors the resident, and secondly, the ability to evict the resident under the new lease for amounts incurred under the old lease are slim at best. With that said, the resident still owes the money, and the manager can at some time attempt to collect this money through litigation or other means, but much of the leverage is gone. Before you renew a lease, always check to see if money is owed, and carefully reflect this in the new lease.

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