The Pros and Cons of Multi-Year Lease

A lease is an agreement between, the landlord or the property manager, and the tenant. One of the most important aspects of it is the duration. Typically in Massachusetts, we have a 12-month lease, but we want to make sure that our leases will always end anywhere between June, July, August, or September. Sometimes, if you’re starting in the middle of the year, you might do a longer or a shorter-term lease to get it on that cycle.

What Landlords Should Keep in Mind Before Offering Multi-Year Leases

Before handing a multi-year lease across the table, landlords should make sure to do their homework. It’s not just about locking in tenants for the long haul—there are a few key things you’ll want to think through:

• Understanding the Commitment: A multi-year lease means less flexibility if your plans change or if you need to adjust rent to keep up with the local market.
• Tenant Screening: Take a close look at who’s signing up for the long term. A great tenant can make a multi-year lease a breeze, but the wrong fit can become a headache that sticks around.
• Market Conditions: Consider whether rental rates are likely to rise (or fall) in your neighborhood. Long-term leases can sometimes mean missing out on rent increases if the market improves.
• Maintenance Planning: With tenants staying put for a while, regular property check-ins and clear communication become even more important to avoid any surprises later.

Weighing these factors can help make sure a multi-year lease makes sense for both you and your tenants before you put anything in writing.

What Is a Multi-Year Lease Agreement?

A multi-year lease agreement is a contract between a landlord (or property manager) and a tenant that extends beyond the standard 12-month period. Instead of renewing the lease each year, both parties commit to a longer timeframe—often two or more years. This approach can provide extra stability for both the tenant, who knows they have a secure place to live, and for the landlord, who can count on consistent occupancy and less frequent turnover. It’s less common than a typical yearly lease, but it’s sometimes used when the landlord and tenant have already built a solid, trusting relationship, or when both are looking to avoid the hassle and costs associated with finding new tenants every year.

The Pros

Regardless, there’s a lot of landlords out there that love two or three-year leases. This allows them the stability to know that they have tenants for the long term, and they don’t have to worry about their renewals. Or worry about whether their property is going to go vacant. Generally, that’s a good idea to have security but let us discuss the cons of having a long-term lease and why we don’t do them as a property manager.

When Does a Multi-Year Lease Make Sense?

Now, you might be wondering, “Is there ever a good time to give a tenant a two or three-year lease?” The answer is—sometimes! If you’ve got a great tenant who takes care of your place, pays on time, and wants to stick around for more than a year, it can be tempting to lock in that predictability. Multi-year leases can be a solid choice when:

• You’ve had positive experiences with the tenant (think: zero headaches).
• The tenant specifically requests a longer stay, and you’re open to it.
• You have no plans to sell or renovate the property in the near future.
• You’d rather avoid the hassle of turning over the unit each year.

In these cases, a longer lease may offer peace of mind—for both you and your tenant—by cutting down on vacancy, turnover costs, and the stress of annual negotiations. But remember, long-term leases are best reserved for tenants you trust, and only if it aligns with your plans for the property.

The Cons

When you have a tenant that have a two or three-year lease, they might start misbehaving. If they’re bad tenants, it’s going to be much harder for you to be able to evict them. You have to deal with them until the contract ends.

We send out our renewals early, typically January for September move-ins. With that, we were able to lock them in for another year, about three or four months after they started the lease, so there isn’t too much difference with that.

Many times, a landlord does a two-year or three years at least. What they do is keep them at the same rate. However, you as a landlord have to remember that your expenses go up. Your water, your taxes, your insurance, none of these ever go down for you. In addition, you always have to account for 3% of inflation, and this will slowly eat your profits if you keep the runs the same.

Us having a year-by-year lease allows us to reevaluate. Usually, we do that at the beginning of the year to check what your expenses were like for the previous year. We then decide if your expenses went up one or 2%, plus the inflation. We might go up 4% or 5% to be able to help you offset that and make you at least the same amount of money that you didn’t the previous years, and you will in the future, if not to make more.

Addressing Rent Increases in Multi-Year Leases

For landlords considering a multi-year lease, one way to handle potential rent increases is to spell out future rent adjustments right in the lease. This could mean establishing a set percentage increase—say, 3% per year to match inflation—or tying increases to a specific index like the Consumer Price Index (CPI). The key is to lay out clear terms upfront, so there are no surprises down the line for either party.

Of course, any language around rent bumps needs to be compliant with Massachusetts law and local regulations. Before baking these details into your lease, it’s a good idea to touch base with a real estate attorney to make sure everything checks out. That way you can keep your investment profitable, stay protected, and maintain a good relationship with your tenants.

That’s important as a landlord. You own the property because it’s an investment you wanted to be able to provide you return. Those are the two big reasons why we do not do multi-year leases.

The third most important aspect of it, is that you can’t change terms once someone signs an agreement, a legally binding contract. Sometimes, things change in both our lives as well as the tenants. They might get a pet, or maybe you feel something different about a certain rule or regulation with a neighbor. You’re going to change those lease terms every single year. We’re also going to review our leases, make it a little bit better, a little bit tighter, to protect you, our landlord, and us.

When Should You Skip the Multi-Year Lease?

So, when is it smart to steer clear of locking in a longer lease term? There are a few situations we recommend you avoid multi-year commitments:

• If Your Tenant Has a Rocky History: Maybe they’ve paid rent late, caused property damage, or just brought a little too much excitement to the neighborhood. In cases like this, a multi-year lease basically guarantees you’ll be stuck with the problems much longer—and, especially in Massachusetts, local laws can make it tough to part ways, even when the lease rules are broken.
• If You’re Not Confident in Their Fit: Sometimes a tenant just hasn’t demonstrated the qualities you want to see long-term. In that case, there’s no harm (and plenty of wisdom) in opting for a shorter lease or avoiding automatic renewal altogether.
• If You Anticipate Expense or Regulation Changes: Longer leases can make it trickier to adjust rent or update terms to fit your changing needs. Yes, you could try to bake in scheduled rent increases or policy updates, but navigating those waters can get complicated—and it’s best to consult a real estate attorney if you’re considering doing so.

The bottom line: Multi-year leases have their place, but sometimes keeping your options open year by year means more flexibility, protection, and better returns for you as a landlord.

Multi-Year Leases and Flexibility for Renovations or Selling

Another key consideration with multi-year leases is how they can limit your flexibility when it comes to renovating or selling your property. Let’s say you decide you want to refresh the kitchen with new cabinets or you’re ready to tackle that long-awaited bathroom makeover—if you’re locked into a multi-year agreement, your hands are tied until that lease is up.

Similarly, if the perfect opportunity comes along—maybe the market heats up and you’re thinking of selling or refinancing—a multi-year lease can complicate things. Most buyers prefer having the flexibility to occupy or re-lease the property on their terms, and a long-term tenant agreement restricts those options.

So, before you commit to signing tenants for multiple years, make sure you’re comfortable with waiting on any big changes or potential sales. Shorter leases give you built-in moments to pause, plan for improvements, or even list the property if that’s what feels right.

Overall, those are the top three reasons why we do not do multi-year leases as well as the pros and cons of them, and we will let you make the choice and make the decision.

If you’re looking for a property manager that is proactive, think about these types of things in the small nuances of even doing and making sure that you’re both protected and maximizing your profit, please think of Green Ocean Property Management, you get more than a property manager, you get peace of mind.