LEASE EXTENSION 

A lease extension is a legal agreement that extends the terms of an existing lease. Lease extensions are commonly used in rental agreements, but the term can also apply to auto leases. A lease extension continues the existing lease for a set period rather than creating a new contract. Landlords usually extend leases for a short term, for example, three months. A lease extension is a legal agreement that extends the terms of an existing lease. Lease extensions are commonly used in rental agreements, but the term can also apply to auto leases.

A lease extension should state that the original agreement is being extended, name both parties involved in the contract, and state when the lease begins and ends. Understand how a lease extension works and how it compares to other options at the time a lease ends, so you can decide if a lease extension is right for you.

Cost of Lease Extension:

Certain factors need to be considered to arrive at the price of the extension. E.g., factors such as type of lease, the unexpired lease term, current lease value, and ground rent, if any, combined affect the lease extension price.

Apart from the above, there may be costs about valuation to be meted out for the asset/property and legal cost in case a legal expert has been appointed.

The price varies from asset to asset. In other words, the price for an extension for a car may be nominal, a few hundred dollars, whereas the same for a house property may range from a few thousand dollars to even more depending on the case.

Most importantly, it may be noted that to arrive at a price of the extension, various things are to be taken into consideration, along with the type of asset/product being taken off-lease, and there is no one size fits all solution for the same.

Process of Lease Extension:

You can apply for an extension in either of two possible ways: an informal process or a formal process. Generally, the lease extension process can be through roughly a few weeks to around a year. However, in the case of an informal, the process can be completed way faster.

In the informal process, you can talk to your lessor, make a reasonably good offer, and, once negotiated, go ahead with an extension

Signing a lease extension has both advantages and disadvantages to consider.

Advantage:

• Shorter process: Lease extensions are usually faster to complete than the original lease since you’re not renegotiating the terms of the lease.
• Cost savings: It’s usually less expensive to extend the terms of your current lease since your rent won’t increase. And you don’t have to spend the time and money to look for a new place to live.
• Consistency: If you’re happy with the terms of your current lease, a lease extension helps maintain them.
• Flexibility: If you plan to move but need a little more time, a lease extension can provide more flexibility while you search for a new place.

Disadvantage:

• Shorter time period: Lease extensions are meant to be temporary agreements, so they are typically shorter in length than the original lease. Therefore, they don’t provide the security you may want in a lease agreement.

• Same terms: If you’re unhappy with the terms of your current lease, such as the amount of payment, extending a lease does not change them.