Tenant refusing to sign 1-year lease

Member since 2020 · 671 posts · 937 votes

4y

@Pavan Krishna I don't know where the local laws where your property is located, but I'd probably tell them that month to month would cost "x" more per month due to the uncertainty it will cause you over the lease terms. IMO, they can have flexibility, but they'd have to pay for it. Kinda like buying an option.

16 Reply

Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

4y

Are you in Oregon? If so, you lost control of your property a long time ago. All of your points are good considerations. Before making any decision, I would dig deep into the laws and make sure you are not missing something in lease vs month-month. Talk to an attorney or a local rental professional agency. There could be a danger in month/month that you don't see. 10 years, you probably know them pretty well, and maybe monthly would be ok. My suspicion is that they are planning to move and don't want to be tied for the year. Otherwise, why change what has worked for both of you? Call their bluff. Let them go. I had this same situation, I simply told them verbally to sign the lease, if you want to go I'll let you go. They bought a place two months later. AND that was ok with me. You could tell them sign the lease, just don't leave in Winter or I'll enforce it. Good luck.

1 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

Yeah, either a) move them along to maintain the owner control that is so important, or b) if you're even willing to accept it, up the rent...

4 Reply

Steven Foster Wilson

Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes

4y

Quote from @Pavan Krishna:

Hello fellow BPers, i've tenants in my house for 10+ years. For a while I engaged different property managers. But, due to various book keeping, timely rent payment and other issues, i had to let them go and self managing the property for the past 3 years. So far no issues with the rent payment with the tenants.

I've been renewing 1-year leases for past 3 years. The current lease comes for renewal in a month. When I approached them about their intent to extend the lease, they told me that they want to go to month-to-month. I prefer long term leases, at least 1-year. however the tenants do not want to sign it. I would like to tap into collective wisdom of this forum in figuring out my next steps. I see the following as my available options:
1. Try convincing them (again!) on need to sign 1-year lease. best option for me, but least likely. as we have been going round-and-round for the past 2 weeks on this with no resolution.
2. Go to month-to-month: they have been paying rent for 10+ years. there is high possibility they will continue to do so. 2 problems with this approach. a) they might vacate in middle of the winter, when it is least convenient for me. b) if tenants start dictating terms to owners, not sure where this will lead.
3. Ask them to vacate: they have been there for 10+ years. hate to lose them. but, if it comes to losing control over my house, i guess, i need to resort to it.

Has anyone else faced similar problem? please share your opinions/suggestions.

Thanks

If I ever do month to month, I charge more. You could do that. If not then find another tenant. There is always someone willing to rent.

6 Reply

Jill F.

Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes

4y

I PREFER month-2-month leases. At least in Ohio, a longer term lease gives the tenants way more rights than it provides in protection to the landlord. A long-term lease 'guarantees' you'll be getting rent for a certain amount of time but that guarantee is worthless for any tenant that does not have a high credit score and/or savings. You are not allowed to 'double dip' and if a tenant breaks the lease you have a duty to make every effort to re-rent and the lease breaker may only be charged for your actual losses and you'll be lucky if you can collect at all. If they need to move for a job-- you sure don't want them staying without a job.

With a month to month lease if there are problems I can non-renew and give no reason at all. I just want possession of my property back. My apartments are nice I know they'll rent quickly and the ability to get rid of trouble makers easily is worth way more than a worthless guarantee

10 Reply

Terrell Garren

Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes

4y

Tenants will move when they need to move. M2M rental agreements all day long. You can deal with misbehaving tenants immediately and they know it. I have tenants that have been on M2M for 10+ years.

6 Reply

Russ B.

Investor · Cleveland, OH · Member since 2017 · 319 posts · 330 votes

4y

I was in this situation as a renter, years ago - lease was ending and they wanted me to sign for another year or pay significantly more for M2M.

I was already looking at houses and not willing to wait another whole year, so that just motivated me to hurry up and buy something. The effect was probably the opposite of what they'd hoped for.

2 Reply

Jason Andler

Canton OH · Member since 2019 · 41 posts · 39 votes

4y

@Pavan Krishna

5 of my 6 units are M2M. After the initial lease ends the rent automatically increases for the M2M agreement. It gives the tenant more flexibility to move but you more flexibility to adjust rents not renew if they can't pay or start causing trouble in other ways.

Most people don't want to move in the winter, which I assume is why it's not ideal for you to fill it during this time. With it still being May, why do you assume they will move in the winter? I think it's way more likely they are thinking of moving this summer. If they moved in July or August would that be ok for you?

Have you directly asked if they are thinking of moving and if so why? That could give you some insight into thier situation. At that point maybe you sign a 3 month lease? Or a 9 month lease?

3 Reply

Greg ScottPro Member

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

4y

Seems like they may be getting ready to move. If I were in their shoes, I wouldn't sign a 1-year lease either.

Typically the rent is higher for MtM than it would be on a 1-year lease to offset the risk that you get the property back in at an inconvenient time, such as November. If the MtM rent was $100 higher than the 1-year lease, would you care if they left in November? If that isn't enough, what if it was $200? Hopefully your existing lease already addresses MtM costs. If it doesn't, the beauty of a MtM lease is that you can change the rate every month (except when prohibited by local laws). Tell your residents they have the choice of signing a 1 year lease or they can go MtM at rent+$X.

3 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

4y

Ask them why they don't want to sign a 1 year lease. My guess is the same as the others, they are looking to move. They've lived there for 10 years. Do a slightly higher monthly rent and make sure they have to give you 30 or 60 days' notice.

4 Reply

Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

4y

You said the lease comes up for renewal in a month? You've already lost. 2019 statute says you must give the tenant 90 days notice (min) before the end of the lease, otherwise it defaults to month to month. Also, is it true that rent increases are capped at 7 percent a year? If this is a low-income tenant, he will have his free attorney to tell you how to run your business. Did you serve the notice properly? Did it include the list of free legal services for your tenant? This is not Ohio, its Oregon! One of the worst states to be a landlord. 129 pages!! You can bet the 2022 version is worse.

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4 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

4y

Quote from @Jill F.:

I PREFER month-2-month leases. At least in Ohio, a longer term lease gives the tenants way more rights than it provides in protection to the landlord. A long-term lease 'guarantees' you'll be getting rent for a certain amount of time but that guarantee is worthless for any tenant that does not have a high credit score and/or savings. You are not allowed to 'double dip' and if a tenant breaks the lease you have a duty to make every effort to re-rent and the lease breaker may only be charged for your actual losses and you'll be lucky if you can collect at all. If they need to move for a job-- you sure don't want them staying without a job.

With a month to month lease if there are problems I can non-renew and give no reason at all. I just want possession of my property back. My apartments are nice I know they'll rent quickly and the ability to get rid of trouble makers easily is worth way more than a worthless guarantee

+1. We only use longer leases for first-time renters and if we get someone that's a good tenant but has to have a longer lease for some reason, like one of our medical students that needed it in place for funding. Otherwise it's great to have the option to raise the rent or boot them out any time you want/need. We have nice houses that rent in days any time of year. And a renter that really wants/needs to move will go anyway.

Longer leases are for the benefit of the tenant, not the landlord. The only exception to that really is when you have no idea how flaky a tenant is, since turning is costly, and want to establish some baseline with them. Most new tenants that aren't nutjobs want at least a 1-year lease in the beginning because they understand you can raise the rent or kick them out any time. So the first time around, it's just laying a good foundation that's not really necessary beyond that.

PS: When I first started doing this I worried about the vacancy thing and filling in winter. After many years I have filled vacancies all 12 months, including at and around Christmas, with no problems whatsoever. Good quality housing at a good price in a good neighborhood is always in demand.

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3 Reply

Michael Deering

Rental Property Investor · Lehigh Valley, PA · Member since 2017 · 200 posts · 191 votes

4y

No such thing. If they don't want to sign then they won't be your tenant. Your new tenant will sign a one year lease.

Or offer a shorter-term at a premium rent.

3 Reply

Quincy Lockett

South Holland, IL · Member since 2017 · 374 posts · 432 votes

4y

@Pavan Krishna

What @Jill F. said.

2 Reply

Nate R.

Real Estate Investor · Austin, TX · Member since 2015 · 214 posts · 234 votes

4y

I wouldn't care if lease renewal goes month-to-month if a tenant has a long tenure with me. Offer the MTM at a slightly higher rate.

When I was a renter and dealt with landlords that forced a one-year or longer lease renewal it always created problems for me, which made me resent them even more than I already did. Once, I stayed for an extra month despite them not offering a MTM renewal. I paid the rent on the 1st, moved out at the end of month 1, and I forced them to return my security deposit which they tried to hold on to with no explanation.

Put yourself in the other person's shoes.

2 Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

4y

@Pavan Krishna I think your first mistake is letting the tenants feel as if they are in control. It's your property. You offer them the opportunity and they can take it or leave it. There shouldn't be much negotiation going on.

I offer my tenants three options:

1. One year lease at $X rate

2. Month-to-month lease at 25% increase over $X

3. Termination at 11:59PM on [DATE]

When I give them this offer, it comes with a deadline to select their option, sign the form, and return it to me. If they do not return it, I automatically continue their lease at the month-to-month rate stated in #2. It's really that simple.

Of course, I understand you're in Oregon so none of this may apply.

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2 Reply

Lauren Sennet

Westerville, OH · Member since 2018 · 11 posts · 11 votes

4y

Many great recommendations already. One additonal may be to do a 1 year lease with an option to terminate. The tenant must give a 60 (or 90 day) notice and pay through that time even if they move out sooner.

It may not apply in Oregon but you may also add, the tenant agrees to make the property available for showings X hours 1 day/week during that time.

2 Reply

Louis P Lessor

Janesville WI · Member since 2019 · 55 posts · 36 votes

4y

I would put them on a month to month and increase the rent. These interesting times, all it takes is for them to lose their job, unplanned bills, etc., and they could fall behind on rent. I am a big fan of the month to month right now.

2 Reply

Ryan KellyBusiness Member

Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes

4y

@Pavan Krishna check with your state laws, but if there aren’t any negative concerns, feel free to go month-to-month and make sure to get it in writing. As others have said, you can charge a bit more as well.

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2 Reply

Jacob H.

Rental Property Investor · Orlando, FL · Member since 2018 · 64 posts · 54 votes

4y

As long as there is a decent amount of demand, you have more options. We always found that month-to-month leases were a good opportunity to increase the rent above market rates. This can be used as leverage to get them to sign a 12-month lease. If they are set on going month-to-month, they'll just have to pay more. If they decide to move out, you can find someone else pretty quickly as long as the demand is there.

Depending on demand and how quickly you think you can get it rented if they decide to vacate will be a determining factor in how much the month-to-month rent will be.

2 Reply

Pavan Krishna

OP

Investor · Lake Oswego, OR · Member since 2016 · 11 posts · 3 votes

4y

Hello all! This is the original poster. THANK YOU for all of your advice. It has been very helpful. Couple of pieces of additional information: I'm in Oregon. However the property is in bay area California. Yes, I'm an out-of-state landlord. The summary of the thread so far:

1. First of all, The 1-year lease seem to be favoring tenants than the owners. In fact, month-to-month may be preferred option. This is a new learning for me.

2. It seems majority of the recommendation is to go with Month-to-Month with $x additional rent.

3. Second popular recommendation is: Ask them to sign the 1-year lease with an option to terminate the lease with 60/90-day notice.

4. Give clear options with a deadline to decide and roll with it. Do not spend too much time negotiating. I'm only weakening my position by doing so.

Thanks again for everyone's input. It has been very helpful.

1 Reply

Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

4y

Quote from @Pavan Krishna:

Hello all! This is the original poster. THANK YOU for all of your advice. It has been very helpful. Couple of pieces of additional information: I'm in Oregon. However the property is in bay area California. Yes, I'm an out-of-state landlord. The summary of the thread so far:

1. First of all, The 1-year lease seem to be favoring tenants than the owners. In fact, month-to-month may be preferred option. This is a new learning for me.

2. It seems majority of the recommendation is to go with Month-to-Month with $x additional rent.

3. Second popular recommendation is: Ask them to sign the 1-year lease with an option to terminate the lease with 60/90-day notice.

4. Give clear options with a deadline to decide and roll with it. Do not spend too much time negotiating. I'm only weakening my position by doing so.

Thanks again for everyone's input. It has been very helpful.

Sign them to a Y2Y lease best of both worlds

0 Reply

George Azita

Los Angeles · Member since 2022 · 97 posts · 96 votes

4y

It seems like a selfish reason to want tenants to sign a new lease after the tenant has been in the rental more than one year. The reason landlords demand a 1-year lease is so the landlord does not have to manage his rentals like a hotel where tenants move in and out too frequently. The 1-year lease is to get the tenant to stay long enough to cover the cleaning costs and other costs for when a tenant moves. After one year those costs should be covered and the landlord should not be selfish and should not try to force the tenant to commit to another entire year.

We don't charge tenants more at the end of their lease when they go to month-to-month. That also seems like a greedy play. Especially, when you have a nice tenant who pays their rent on-time and takes care of the rental unit.

We don't want our tenants to commit to another full year because when tenants move it gives us the opportunity to rehab our properties, to increase the rents to the max the market will bare and to increase the value of the property.

We don't charge a different amount for rent because a tenant wants to stay on a month-to-month basis. We have tenant who have been in our properties for 40+ years and we charge every tenant as close to the same amount as possible when considering the same size units.

0 Reply

Ron H.

Investor · Melbourne, FL · Member since 2017 · 159 posts · 116 votes

4y

The tenant has been there 10 years. A landlord's cost does not go up with a 1 year vs monthly once you have covered the turn cost. Things like forcing tenants to pay extra for a monthly lease over continuously renewing a yearly lease is what gives landlords a bad name. The only exception to this is if the area is very seasonal. I do first year as a 1 year lease to help cover a possible short term turn then go month by month, with normally once yearly lease amendments for fee and rate increases.

personally I have moved out of places earlier than planned at end of initial lease period due to landlord planning to charge a much higher rate to go monthly. This greed from the landlord caused the unit to turn sooner, thus raising his costs.

Dont be short sighted and greedy folks.

0 Reply

Kelly Asmus

Real Estate Broker · Portland, OR · Member since 2018 · 123 posts · 71 votes

4y

The rental market is VERY strong. I posted a SF for rent early May and got no less that 40 interested applicants for one 2000 sq ft house at market rent. Cover your bases, make sure the rent is to market and that legally you are protected.

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Tenant refusing to sign 1-year lease

Tenant refusing to sign 1-year lease

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