Who benefits from a lease?

You are a tenant, your lease runs out and the landlord is in no hurry to give you a new lease.  Should you press for a new lease or not?  The conventional wisdom is that you should and that you really need to have a lease, but in recessionary times that may not always be the case.

The first and most important point is that a lease protects the tenant and not the landlord.  The tenant can always walk away and while he may be sued by the landlord, the landlord is really the one left with the problem.  If there is a lease in place, then the landlord cannot change the terms of the rental, and would have great difficulty in evicting the tenant if the lease is still current. The landlord has far less options than the tenant.

Given all that, it would seem that the tenant should really be pressing to get a renewal of the lease.  However, in an environment where rents are dropping, buying time and not signing a new lease is probably the best course of action.  When the negotiation does finally happen, the landlord is going to have to acknowledge the reality of what the market rates are, and he may have to reduce the rental.

For instance, on Long Island right now the rates have reduced to potentially where they were 10 years ago. If you have had a lease that you entered into 10 years ago that had automatic 3% a year increases, then your rent is going to be almost 35% higher than market value today.  When you negotiate your new lease, you want to have that information and you want to use it to get the landlord to agree to a lower base rent.

When rental prices are dropping, the longer you can delay the better off you are and it is worth giving up the protection of a lease in order to secure that advantage.