Should tenant pay first before we send the signed lease?

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Should tenant pay first before we send the signed lease?

Vinh Nguyen
Rental Property Investor · Philadelphia, PA · Member since 2020 · 83 posts · 23 votes

Hi all!

I am new to this landlord thing. I am requesting the tenant to pay the first month rent, last month rent, and the security deposit. My question is do I request the tenant to pay the fees first before I send her the lease with my signature or vice versa? please advise.  

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Robert Johnson
Member since 2020 · 22 posts · 42 votes
5y

I wouldn't send out a lease with a signature. They could take that lease and sign it and show up and get a locksmith and move in. I've had people try all sorts of stunts over the years. I had this one potential tenant who went through a complicated process required by the HOA. After she was approved she showed up to move in. I had not provided her with a signed copy of the lease at that point. I take cash only for the first month and security deposit. Or a check 21 days in advance. She wanted the keys but said her mother was paying so I contacted the mother. The mother stated that since I had advertised on Craigslist there was some doubt as to whether I owned the unit or not. I asked her why she hadn't checked the property records but she stated that wasn't enough. She wanted me to let her daughter move in as a sign of good faith and I simply hung up at that point because she was obviously a scammer. The daughter then called me back and started screaming about me hanging up on her mother and I hung up on her also. Two weeks later I rented it to someone else who ended up staying for 3 years. Always get the funds up front. If they have a signing issue they can sign and overnight the docs at their expense. Without secured funds and especially now, you're screwed. Don't take a check without proper clearance times.

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  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y

    They show up 

    they give you the money 

    They sign the lease 

    You sign the lease

    You give them the keys 
    or you send them the lease 

    They sign send back with the money 

    You sign and give the keys 

    6Reply
  • Vinh Nguyen
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2020 · 83 posts · 23 votes
    5y

    @Michael Plante thank you but these people are from out of state and would like it all situated before they fly over.

    1Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y

    I never execute a lease until I have ALL the pre-move in funds. We do e leases through buildium (our property management software) but you might be able to sign up for adobe or one of the other electronic document signing services.

    2Reply
  • Vinh Nguyen
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2020 · 83 posts · 23 votes
    5y

    @Jill F. Thank you so much! Ive heard about buildium on one of the BP episodes. Will need to look into it as well! 

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    I get all documents in order including leases signed then I ACH the funds from their account - this works for me. Personally I would never pay someone without a signed contract, would you? Your tenant may feel the same. 

    2Reply
  • Robert Johnson
    Member since 2020 · 22 posts · 42 votes
    5y

    I wouldn't send out a lease with a signature. They could take that lease and sign it and show up and get a locksmith and move in. I've had people try all sorts of stunts over the years. I had this one potential tenant who went through a complicated process required by the HOA. After she was approved she showed up to move in. I had not provided her with a signed copy of the lease at that point. I take cash only for the first month and security deposit. Or a check 21 days in advance. She wanted the keys but said her mother was paying so I contacted the mother. The mother stated that since I had advertised on Craigslist there was some doubt as to whether I owned the unit or not. I asked her why she hadn't checked the property records but she stated that wasn't enough. She wanted me to let her daughter move in as a sign of good faith and I simply hung up at that point because she was obviously a scammer. The daughter then called me back and started screaming about me hanging up on her mother and I hung up on her also. Two weeks later I rented it to someone else who ended up staying for 3 years. Always get the funds up front. If they have a signing issue they can sign and overnight the docs at their expense. Without secured funds and especially now, you're screwed. Don't take a check without proper clearance times.

    10Reply
  • Michelle Harrington
    Rental Property Investor · San Jose · Member since 2020 · 44 posts · 22 votes
    5y

    On the lease it would say that they gave you the money (the advance and deposit), so I would make sure that the money is in your hands first.

    4Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Vinh Nguyen we require the deposit to hold the property and we sign a deposit to hold agreement. That agreement gives them rights to hold the property until a lease is signed and first months rent is paid. We do not release a signed copy of the lease until first months rent is paid. Our lease specifically states that the lease is not valid until deposit and first months rent is paid. Technically if a tenant has a signed lease, they have rights to enter your property.

    4Reply
  • Walmsley Gedeon
    Brooklyn, NY · Member since 2016 · 115 posts · 40 votes
    5y

    @Vinh Nguyen

    Whatever you do don’t give them anything until you have all that is required to move in. Under no circumstances do you give a signed lease and access until all parts of the agreement has been satisfied.

    And remember you do not have to accommodate anyone because this is a business transaction and should be treated as such.

    Good luck!

    6Reply
  • Reese Hamilton
    Chattanooga, TN · Member since 2018 · 20 posts · 23 votes
    5y

    They need to pay at least the deposit before they can sign the lease

    To do this remotely:

    1. They pay the deposit
    1. You send the unsigned lease (DocuSign or through your management software)
    1. The lease should note the rent monies required to move-in
    1. Once they sign you sign (the lease is now fully executed)
    1. First/Last month's rent or prorated amount due before keys are provided

    That is how we do it. Hope that helps!

    5Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    We send a sample lease they can review before they pay their deposit/Holding Fee.

    Then we get them to put in writing their MoveIn Date.

    We create the lease and send to them for signature, stating how much is still owed before they get keys.

    There's also a deadline they have to pay all funds or we can lease to someone else.

    Once we have all funds, we sign the lease and send to them and give them keys.

    FYI - check your state laws about what you can collect upfront. In Michigan, we cannot collect "last month's rent" AND a security deposit. They are considered one and the same and cannot exceed 1.5x rent amount.

    [email protected]248-209-6824
    Logical Property Management4.9450 Reviews
    WebsiteView Page
    2Reply
  • Daniel SmythPro Member
    Rental Property Investor · Rockford, IL · Member since 2019 · 471 posts · 342 votes
    5y

    @Vinh Nguyen

    Not only do they pay first, the checks or cards must clear your bank fully before that contract is signed by you.

    They can sign anything they want, but until I sign, they have no right to occupy.

    This should be in the lease and noted so as not to be overlooked. The fewer surprises the better!

    As well, make sure the deposit is not something that can be used for the last payment. Put it in writing! If they are paying the last month up front, stipulate this also in the lease.

    I return my deposits usually 30 days after they vacate. If I need to retain part of the deposit, my legal team sends the letter along with pictures, before the 30 days if possible.

    Good luck!

    [email protected]
    2Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    I put right in my lease that it is void if the XXX money is not paid in full within 24 hours of signing and also if the utilities are not turned on in their name by XX date.

    ALWAYS let the other party sign first.  You can send it to them on docu-sign, let them sign, then deposit the money, when you confirm that the money was deposited and is good, then you sign.  If the money is pulled back after you sign, you still have the clause that they had to pay within 24 hours, so the lease is not void.

    In person, take cash only for a new lease.

    0Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y
    Originally posted by @Mary M.:

    I get all documents in order including leases signed then I ACH the funds from their account - this works for me. Personally I would never pay someone without a signed contract, would you? Your tenant may feel the same 

     In Ohio, you'd be leaving yourself open to fraud. If a scammer got a key, a signed lease, and a record of your ACH and then requested a payment cancellation, you'd have to go through the entire eviction process to get rid of them even though you never received a dime. The store doesn't let you take their stuff home until you pay and/or sign a credit contract. I don't let people move-in until they pay (in CASH or with a cashiers check drawn on MY bank) AND sign a contract agreeing to pay for the term of the lease.

    2Reply
  • Kyle Varga
    Investor · UT · Member since 2020 · 26 posts · 22 votes
    5y

    @Vinh Nguyen

    I have it in my lease that if they don't pay by wire transfer within 24 hours after lease is signed the lease is void and keys will not be handed out without payment in full, proof utilities are switched and renters insurance. Which my pm software requires they provide when they sign the lease anyways.

    1Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    @Jill F.. I do the ACH before they move in with ample time for it to bounce.  I do my best to protect myself, but I dont do cash. 

    In the end we all do the best we can and any type of payment is open to fraud. 

    As for your example of a store - i buy things at the store every day and take them home. I could easily call my bank and say the charges were fraudulent and i would have the stuff and my money.  Of course I wont do that - but NO type of money is safe. 

    ETA: also even if I took cash for move in, a scammy tenant could easily reverse the next rent payment.  So in the end doing a good job screening I guess is the best insurance we all have. 

    And finally the only tenants to date I have had issues with are ones installed by a PM. Go figure! 

    0Reply
  • Todd Pultz
    Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes
    5y

    @Mary M. Not completely accurate here. Your deposit and first months rent can be done via money order or cashiers check or cash which does not allow it to be reversed. We require one of those for move in.

    Why would they reverse the next month? They would just not pay and now we have a non paying renter to evict.

    If you give enough times for funds to clear before signing a lease your pretty good.

    Your right anything can happen, but part of our job as investors and property managers is to mitigate risk the best we can.

    2Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    5y

    I would receive all the signed documents along with the 2 months of deposit checks with me first. I would make sure the check cashes and then I would give them the keys to the place. 

    1Reply
  • Dillon Dale
    Real Estate Agent · Owatonna, MN · Member since 2017 · 221 posts · 152 votes
    5y

    @Vinh Nguyen do not provide keys until they provide payment

    1Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 403 posts · 474 votes
    5y

    Would you pay for something before you had a signed agreement? Probably not. Why would a tenant with half a brain give you essentially 3 months worth of rent before even seeing the contract you want them to sign?

    Send them the contract FIRST. Have them sign it. Then collect money after they have signed the contract. If you don’t want to sign it until they have signed and paid, that’s fine. But always have them sign the lease before anything else.

    I don’t provide keys until I have all of this:

    Signed lease, full payment in certified funds, proof of renters insurance with liability coverage showing me as additional insured, proof of utilities set up. The signed lease comes first. Then the money and the rest.

    1Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 403 posts · 474 votes
    5y

    Also I am utterly shocked at the number of folks in here saying no lease until taking money. That’s crazy yall. So then if someone doesn’t agree with the terms of your lease, after you took their money, do you keep their money?

    People don’t just move in because you sent a lease to be signed. If someone is going to break in and squat they will just break in and squat. They won’t jump through the hoops to get a landlord to approve them and send a lease to sign. Lol

    4Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    ask for cashier cheque.

    0Reply
  • Dillon Cook
    Realtor · Greater Tampa Bay · Member since 2014 · 218 posts · 130 votes
    5y

    @Casey Powers

    100% agree.

    Signed lease. Then funds then keys.

    Scammers in our area ask for funds first. We have to separate ourselves from them.

    0Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 403 posts · 474 votes
    5y
    Originally posted by @Dillon Cook:

    @Casey Powers

    100% agree.

    Signed lease. Then funds then keys.

    Scammers in our area ask for funds first. We have to separate ourselves from them.

    Same in my area. Scammers want money first. That’s not the correct way to do business. And of course landlords want to protect themselves, but the right way to do that is get the lease signed first, take money, then utilities and insurance, then keys last.

    0Reply
  • Adam Martin
    Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    I prefer to do things at the same time and have always had a signed lease with deposit and first months rent, they usually move in a few days to few weeks later.  I don't give them a lease they can use to claim residency in the event they don't pay, there are plenty of scammers who come up with a fake one to claim residency and I don't want to make it easier.  I require a certified or cashiers check and have them sign my unsigned lease by me.  After they sign I'll take it home, deposit the funds, and sign and get them a copy.  If you feel strongly about sending them a lease first at least don't sign it.  Part of my screening is telling them they need first months rent and deposit up front, if they don't have it or need to work out a plan they are not financially stable enough for me and I move on.  I also liked the idea of sending a sample lease maybe watermarked sample so they can know what they are agreeing to but tell them you don't sign anything until funds are paid.  

    0Reply
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