Tenants backing out

21 Replies

Last month I signed a tenant who said he loved the house, but two days into it he said he had to back out because his boss cut his hours. We soon got another prospective tenant who contacted me several times by e-mail saying she liked the house. She signed the lease after spending most of the morning checking the house out with her mom. We just got a call from her saying she has to back out because her "other job fell through, " and she did not think she could cover the rent and the utilities.

Yes we do extensive credit checks on all prospective tenants. We require income of three times the monthly rent. I do not get how these two people who seem intelligent could suddenly decide after they sign a lease that they can not do it.We are NOT high pressure landlords.

My concern is all the time we have wasted on these two tenants. We did the credit check, checked their references, employers, and we even went to their current residence to see their living conditions.

I would appreciate any pointers on time management. We have never had so much trouble getting a house rented.

Do you collect first months rent and deposit at the time of the lease?  If so, doesn't sound like a big deal to me...you should have 2-4 months of rent to cover whatever marketing time/costs are required to find the next person.

I wouldn't ever sign a lease without getting money (money order or cashier's check) up front and certainly wouldn't quit marketing/showing a property until the lease is signed.

If you didn't collect any money when you signed the lease then you ought to reconsider the leasing process.

Lease and deposit are taken at the same time. My lease has a break lease clause. It is 2 months notice, 2 months break lease fee. So when the above happens I get to keep the deposit. That prevents this from happening.

Originally posted by @Michael Seeker :
Do you collect first months rent and deposit at the time of the lease? I

We did for the first tenant since he actually occupied the house. We did not for this most recent tenant since she was not going to occupy it till July. I guess we will have to start telling these people they must have money on lease signing day or we will continue to show it.

We were even willing to accept the deposit split over a two month period since it is a lot of cash to pay at once. This house is in a good neighborhood, but it is just three blocks north of the border of Detroit, so we are not going to get tenants with a lot of income.

Originally posted by Elizabeth Colegrove:
Lease and deposit are taken at the same time. My lease has a break lease clause.

I like that! Could you please post or send me the wording of that clause?

I take applications until I get a holding fee.  The holding fee becomes a security deposit once the first month's rent is paid.   

Also I never take less than 1st month's rent and security deposit before I hand over the keys, because if they are having problems coming up with those funds they will continue to have problems paying rent.  For me it is much better to cull the problems out before the tenancy starts rather than accepting somebody knowing there will be problems with rent payments. 

Mark Forest I am at work but it goes something like  the below.

Tenant or Landlord has the option at any time to break this lease with no penalty other than two months notice (60 days) and two months rent fee (x amount). This amount will be paid at time of break lease. Two months notice does not begin until two months fee has been received.

if they are currently renting, they have their security deposit with their present landlord. most tenants live paycheck-to-paycheck so how are they going to fork up the additional deposit plus the 1st month's rent? if they could, they'd probably buy a home.

i require a nonrefundable deposit -and it is in bold - IF they back out. i still market the home.

sounds like you just had a little bit of bad luck. you will get it rented soon.

I guess we will have to start telling these people they must have money on lease signing day or we will continue to show it.

ABSOLUTELY.  Everyone signs the lease, they hand over one full months rent and the full deposit and I hand over the keys.  They now have a lease and I have a tenant.  Neither of us can "back out" at this point.  They can give notice, though, and move out at the end of the month.  I only do month to month leases.  But they can't just say "sorry, I changed my mind" and walk away with their money.

I will also do a hold for a short time.  A week, maybe 10 days.  Any longer than that and I'll tell them they have the right of first refusal if another applicant wants to move in sooner.

We were even willing to accept the deposit split over a two month period since it is a lot of cash to pay at once.

Yep, its a lot of cash all at once.   You better have it if you want my unit.  I've done split deposits and EVERY TIME I regretted it.

Originally posted by @Jon Holdman:

ABSOLUTELY.  Everyone signs the lease, they hand over one full months rent and the full deposit and I hand over the keys.  They now have a lease and I have a tenant.  Neither of us can "back out" at this point.  

 I do one year leases.  I know there is no point in suing the tenant for the entire year, but can I keep the first month rent and the security deposit? 

Steve

I agree with Jon...at the signing of the lease all monies are brought to the table. I will not do split deposits..because if I did it would be an additional item that i have to chase the following month.

I would keep the 1st months rent and any expenses to re-lease I would deduct from the security deposit. 

@Steve Might I think every landlord has had a tenant do something like this to them.

Some things we do to protect ourselves as best we can:

- Once their application is approved they have 5 business days to give us a deposit (equal to 1 months rent)

-We explain to them that by them giving us the deposit its a 2 way street - A. We will not advertise the unit anymore AND B. Once they give the deposit and sign our deposit form, if they back out we keep the deposit money.

This way if they back out we still have a months rent and move on.

I collect the full security deposit in a money order upon lease signing, even if they can't move in for a few days/weeks. For our FL condos, the association approval can take 2 weeks. Once I have the deposit, I stop showing the unit. The lease states that if the association refuses to approve, they'll get their deposit back. They pay $100 for the association application and know in advance what the association wants (and doesn't) want from them.

For our SFRs, once they say they want the house, they pay a $25 background check fee. They need to sign the lease and provide the full security deposit. I'll stop showing the property and will give up to a week to move in with the first month's rent. Holding it any longer than a week and they'll have to pay pro-rated rent.

I don't do a break lease clause, because if the tenants decide to break the lease and know they'll lose their deposit anyway, there is no incentive for them not to damage the property or leave it clean. I'd rather have the property left in good condition and be able to rent it ASAP without repairs.

1st month, last month, security deposit at lease signing....unless you have a voucher. Takes 2 months to evict a non-paying tenant in baltimore. Bu the time i kick them to the curb, i have last and security to cover me. Money talks..bs walks.

Ah, they probably found a place they liked better elsewhere and used any excuse they could think of.

No deposit and 1st months rent? No lease.

Then if they want to back out, they're out at least first month's rent and deposit. No excuses accepted- money in hand, lease signed.

I would never accept partial deposits. They could easily not pay it (isn't it hard to evict for lack of deposit payments there?) or damage the place the first month they live there then walk away. And if someone is that broke, that's just red flags all the way across. Unless we're talking a $4000 rent and $4000 deposit... reasonably affordable places a tenant knows they'll need a deposit upfront in order to move into.

I would be careful having a '2 month out' in the lease if your going to finance or refinance any other mortgages.

When you refinance rentals, the underwritter normally wants to see copies of all of your leases, any lease less than 12 months is a problem. If your in the last month of a 12 month lease that doesn't seem to be a problem, but if its a lease of less than 12 months I've had them not want to count the income on that property.

Having a 12 month lease with a 2 month out will probable not be questioned, but if they get really picky you never know.

andy

Wow   Thank you to all of you for the advice. This is a good thread.

you limite your pool when you ask for 1st months rent and the deposit at lease sigining. most renters dont' have a pot to pi$$ in...same way with most Americans these days.

In the past, I've run into this situation many times. Honestly, I always give folks the benefit of the doubt as circumstances can change. Also, it's best to start off the relationship on the right foot.

When marketing, I keep a backup list of folks interested in the home. That way, if something falls through there is always someone next in line. Also, all of my marketing stays up until things are definite.

Sorry to hear about your experience. Hope that helps!

Never ever, ever, ever stop advertising until lease signed and 1st month/deposit collected.  Most prospects understand the cost associated with moving(app fee, deposit, 1st month) and comes prepared to meet those expenses..Usually the move is planned..However, be careful when money is thrown at you quickly or tenant needs to move today..

Recent story...Met  prospect to complete application..explained documents/qualification over the phone, completed application..I asked some questions about recent address on license and different on app...got a story..requested app fee to complete process but prospect not willing to put $50 on line...great way to weed out scammers...why would you look for a "house" if you can't afford application fee?...

We take $150 non refundable deposit at signing, then trade remaining move in money for keys at move in. We implemented this policy after someone failed to move in and left us holding the bag. Having a signed agreement helps them enroll kids in school and set up utilities timely.

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