An indefinite rent concession in a lease agreement can destroy your property valuation. If a tenant's lease shows a $545/month discount "for cleaning services" with no end date, the lender assumes that discount runs forever—and underwrites your NOI accordingly.
On December 30th—one day before our Freddie Mac submission deadline—our broker flagged Unit 23. The lender's checklist read: "Please provide any documentation of termination of the cleaning rent discount."
We had a lease from 2021 with an auto-renewal clause. The tenant, Breana, had been getting a $545 discount on her $845 rent—paying only $300/month—because she helped clean common areas when she first moved in. Four years later, she wasn't cleaning anything. But the lease still said she was entitled to the discount.
The math that scared us: $545/month × 12 months = $6,540/year in "permanent" lost income. At a 7% cap rate, that's $93,428 in lost property value. For one unit.
Why This Almost Killed the Deal
Freddie Mac lenders don't just look at what tenants pay today. They look at what tenants are legally entitled to pay based on their lease documents.
Our rent roll showed Breana paying $300/month with a note: "Concession Active (Terminate 1/1/2026)." But the actual lease document—the one we uploaded to the lender—showed something different:
"Section (c): Tenant shall receive a monthly discount of $545.00 in exchange for cleaning services..."
No end date. No termination clause. An auto-renewal provision that kept rolling the lease forward with the same terms.
The lender's legal team would see this and do exactly what they're trained to do: assume the worst. They would underwrite the property as if Unit 23 would pay $300/month forever. Our NOI would drop. Our DSCR would tighten. Our loan proceeds would shrink.
The B-Tier Response
A B-tier analyst would have uploaded the lease, flagged the issue, and written:
"Hey, this tenant has a concession. What should we do?"
Then they would have waited for the lender's legal team to demand a fix next week—after the rate lock period started burning.
The S-Tier Response
We didn't ask what to do. We drafted the solution ourselves.
Within 30 minutes of seeing the lender's checklist item, we had:
- Drafted a lease addendum terminating the concession on 1/1/2026
- Called Breana to explain the situation and get verbal agreement
- Sent the addendum to her for signature
- Documented her verbal confirmation via text message
- Packaged everything for the broker before the lender even asked follow-up questions
The Lease Addendum We Used
Here's the actual template we drafted. You can adapt this for any concession termination:
LEASE ADDENDUM: TERMINATION OF RENT CONCESSION Date: [DATE] Property: [ADDRESS] Landlord: [ENTITY NAME] Tenant(s): [TENANT NAMES] RE: Amendment to Lease Agreement dated [ORIGINAL DATE] This Addendum is hereby attached to and made part of the Residential Lease Agreement. 1. TERMINATION OF CONCESSION The Landlord and Tenant agree that the "Discounted Rent" provision (Section [X] of the original Lease), which provided a monthly discount of $[AMOUNT], shall permanently expire and terminate on [END DATE]. 2. ADJUSTED RENT SCHEDULE Effective [END DATE], the monthly rent obligation shall revert to the full base rent amount of $[FULL RENT] per month. No further discounts shall apply after this date. 3. GENERAL All other terms and conditions of the original Lease Agreement shall remain in full force. ________________________ ____________ Landlord Signature Date ________________________ ____________ Tenant Signature Date
What We Sent to the Broker
Same day, we sent the broker this email:
Subject: Re: UW Checklist - Unit 23 Lease Amendment
Attached is the unexecuted draft of the amendment terminating the rent concession on 1/1/2026.
I have also attached proof of the tenant's verbal confirmation regarding these terms. We will provide the wet signature copy later this week once the holiday schedule allows.
By giving the lender the unexecuted draft plus proof of agreement, we turned a red flag into a "resolved pending signature" item. The deal moved forward.
The Timeline
| Time | Action |
|---|---|
| 10:15 AM | Received lender checklist flagging Unit 23 |
| 10:45 AM | Drafted lease addendum |
| 11:30 AM | Called tenant, explained situation, got verbal "yes" |
| 12:00 PM | Sent addendum to tenant via DocuSign |
| 12:15 PM | Screenshotted tenant's text confirming agreement |
| 2:30 PM | Sent package to broker (draft + proof) |
Four hours from problem identification to resolution. The lender never had to chase us. The deal never stalled.
Why This Matters
An indefinite concession isn't just a revenue issue—it's a valuation issue. Lenders capitalize your NOI to determine property value. Every dollar of "permanent" lost rent gets multiplied by 12-15x when calculating what your property is worth.
$6,540 ÷ 7% cap rate = $93,428 lost value
By terminating a concession that should have ended years ago, we protected nearly $100,000 in property value—and ensured the lender would underwrite our actual rent roll, not our outdated lease terms.
Lessons Learned
The Playbook for Concession Issues
- Audit every lease before submission. If a concession exists, verify it has an end date in writing.
- Don't wait for the lender to ask. If you know there's a problem, fix it before they see the file.
- Draft the solution yourself. Don't ask "what should we do?" Present the fix and get buy-in.
- Document verbal agreements. A text or email saying "I agree" is bridge documentation while you wait for wet signatures.
- Package everything together. Original lease + amendment + proof of agreement = complete narrative.
The difference between a deal that closes and a deal that dies is often who controls the narrative. Don't let the lender discover problems—present them with solutions.