Backed into a corner- Call tenant's bluff?

Backed into a corner- Call tenant's bluff?

Dana Point, CA · Member since 2014 · 17 posts · 0 votes

Before my tenants re-signed a year lease earlier this year, they wanted to sign an even longer lease that would end in late October next year. But, that's such a bad time to find a new tenant when a year lease would have been perfectly timed to find a new tenant. 

So I rejected their offer and would accept a one year lease, which they signed. 

I thought that issue was settled until earlier this month the tenant blindsided me that they wanted to move and they had already found possible new tenants. They had already begun to advertise the place on Craigslist before informing me, and it seemed that they were ready to move out by by the end of this month according to the available move in date they posted on Craigslist. 

So, I assumed they had already found a new place already and signed a year lease so that it would end for them when they originally wanted to in late October next year.

I'm afraid that if I can't find any qualified tenant right now, then that place could easily sit empty through November and December.

I figured I'd win at small claims court, but it was an unknown variable how much rent I could claw back if it sat empty through November and December? Would a judge award me both months rent? Or, would I only get awarded one month's rent even if it sat vacant for two months and longer?

But, now, the tenants are telling me they won't be breaking the lease and moving out early on the condition that we sign a longer lease that ends next year in late October.  According to the tenants, they either need to break the lease now to sign a new one year lease somewhere else or get that longer lease that I didn't want because it'd be too difficult to move out when their year lease ended and find a new place that would agree to a six month lease.

I feel like I'm being more or less blackmailed by these tenants into agreeing to the lease they wanted all along but which I had already rejected earlier this year. When they asked to do this earlier this year, I knew I could find a new tenant at that time of the year and so I rejected it. But, by waiting till now to tell me they want to break the lease, my options are much more limited.

What would you do?

If I cave in to their demands, even though late October next year still isn't an ideal time to find a new tenant, it would still give me much more time to prepare and find a new tenant than what the tenants are threatening to do this year. And, I could avoid the drama of going to small claims court. There's also some road construction now nearby that limits the amount of drivers who might see the place for rent which won't be an issue by next year. 

But, if they can stay, then that means they haven't signed a new lease somewhere else. So, if I call their bluff, then they would need to find a new place and that will take them time to do that because I know they don't have a lot of free time to do that. And, if a landlord checks their references, there's no way I'm going to give them a positive recommendation. 

By the time they find a new place, maybe they don't move out till late November and it sits vacant only for December instead of both November and December. One of my biggest concerns with small claims court was how much rent I could claw back if it sat vacant for longer than one month. But, if it sits vacant only for a month and the judge award a month's rent, then its not as big of a hit vs the judge awarding a month's rent when it was vacant for two months.

My head says I should agree to their terms, but my heart...

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Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y

Don't get too flipped out about exactly when tenants leave.  You CANNOT control that, no matter what you do with leases.  Its VERY unlikely you will have a two month vacancy no matter when you have a turnover. I have found new tenants all times of the year.  Unless your market is really bad (I seriously doubt it is) then a two month vacancy is your fault, not the tenants.  A judge will want to see that you have made a diligent effort to find a new tenant.  If you do, there's no way you'll have a two month vacancy.  In our market, I suspect I could fill a Christmas day moveout before New Years day.

Personally I never do long leases at all, just month to month.  That way if I want the tenants out at any time I can just terminate the lease.  Vice versa for them.  If they need to leave, they will.  Perhaps you could offer them month to month at a slightly higher monthly rate.  

Do be careful about letting the tenants take control of the relationship.  If you've already made some decision, don't just back down because of their threats.  Instead, ask for some concession on their part.  E.G., the higher rent to convert to month to month.

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  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y
    Originally posted by @Justin Owens:

    @Sarah Lewis

    I would approach them with a new lease agreement that ends when they want it to, but with those extra months at an increased amount of rent, and you simply explain it to them that it is much harder to rent out the property that time of year. So you need to charge them more for those extra months to help cover your potential losses. You give them what they want and you get an extra amount of security to make it worth your risk.

    You need to approach it as you are doing them a favor and that you didn't not realize the timing predicament they were in with the Grad Program. But you also need to re-establish the King of the Hill in Landlord Tenant relationship. You do that by admonishing them for listing your property on craigslist, and make it a point that a lesser landlord would have moved to evict them or even sued them for misrepresentation and or trying to sublet based on the language in they used in the listing, mention the fair housing laws,  etc...

    Remember you you are dealing with Grad Students, which often means they are just dumb enough to think they are the smartest person in the room.  Hence they went behind your back to try and solve your eventual problem for you before you even knew about it. 

     Seriously?  Fair housing?  They'd laugh at her, if they were feeling charitable.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y
    Originally posted by @Sarah Lewis:
    Originally posted by @NA Jones:

    It sounds like your tenants have a very real need to stay until the end of next October, to the point where they are desperately looking for loopholes with your current lease.  Do you know why?  

    I found out this month that the tenants want to move out next October because one of the tenants is a grad student and their program will end in late October next year. They're 'negotiating' to have the lease end on a specific date in October, let's say the 26th, because that's when that program will be finished.

    But, even if I had known their reason for wanting to have a longer lease when they first broached this topic, I still think I would have rejected that offer. 

    To me, even if I was in their situation, I wouldn't have thought having the lease end on a exact date next October would be a must-have when they had other options. They didn't have to renew and could have found another place to rent that would accept those lease terms. Or, they could have honored their current lease and moved out next year to another rental on a month-to-month lease until their school program was completed.

     Just remember, it would have been very easy for them to say, "OK", renew the lease, renew it again when it comes up in the spring/summer, and then just bail on you next October.

    By trying to work a solution a year in advance, they are, if not doing you a favor exactly, doing better by you than they could have.

  • Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by @Richard C.:
    Originally posted by @Sarah Lewis:
    Originally posted by @NA Jones:

    It sounds like your tenants have a very real need to stay until the end of next October, to the point where they are desperately looking for loopholes with your current lease.  Do you know why?  

    I found out this month that the tenants want to move out next October because one of the tenants is a grad student and their program will end in late October next year. They're 'negotiating' to have the lease end on a specific date in October, let's say the 26th, because that's when that program will be finished.

    But, even if I had known their reason for wanting to have a longer lease when they first broached this topic, I still think I would have rejected that offer. 

    To me, even if I was in their situation, I wouldn't have thought having the lease end on a exact date next October would be a must-have when they had other options. They didn't have to renew and could have found another place to rent that would accept those lease terms. Or, they could have honored their current lease and moved out next year to another rental on a month-to-month lease until their school program was completed.

     Just remember, it would have been very easy for them to say, "OK", renew the lease, renew it again when it comes up in the spring/summer, and then just bail on you next October.

    By trying to work a solution a year in advance, they are, if not doing you a favor exactly, doing better by you than they could have.

    ME: *WHACK* (Kick you as hard as I can in the nuts)

    You: *Gasping for air*

    ME: You should be thanking me, I could have stabbed you.

    Again on a practical level you are correct that they could have screwed her over even more, but I can't get over how you condone and almost seem to admire these people's behavior.

    Yes they could be worse but that doesn't mean they aren't jerks that are knowingly trying to screw her over.  The 2 solutions she mentioned are in fact exactly what good people would have considered doing, and probably ONLY those solutions. 

  • Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    12y

    Please don't make this a power play. The tenant gave you a good reason for wanting a lease that ends in late October. Kudos to the tenants for being open and honest with you about their need. Do the right thing and accommodate if you can. Fear not about the timing. Rent ups happen at all times of the year. The tenants are not blackmailing you... see Webster for that definition. Our preference is month-to-month agreements, so we don't face the scenario of tenants breaking leases... so much easier! Welcome tenant referrals, but do let tenants know why it is important for them not to advertise your property on Craigslist or anywhere else.  All the best to you and them!

  • Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by @Marcia Maynard:

    Please don't make this a power play. The tenant gave you a good reason for wanting a lease that ends in late October. Kudos to the tenants for being open and honest with you about their need. Do the right thing and accommodate if you can. Fear not about the timing. Rent ups happen at all times of the year. The tenants are not blackmailing you... see Webster for that definition. Our preference is month-to-month agreements, so we don't face the scenario of tenants breaking leases... so much easier! Welcome tenant referrals, but do let tenants know why it is important for them not to advertise your property on Craigslist or anywhere else.  All the best to you and them!

    Okay so here it that is:

    1. Blackmail is an act, often a crime, involving unjustified threats to make a gain or cause loss to another unless a demand is met. It may be defined as coercion involving threats of physical harm, threat of criminal prosecution, or threats for the purposes of taking the person's money or property.
    Okay now let us examine this:
    1. Blackmail is an act, often a crime(Breaking a legally binding contract, CHECK!), involving unjustified threats to make a gain or cause loss to another unless a demand is met(Extend our lease to next Oct or we are going to move out now with now and leave you with a winter vacancy right now, CHECK!) . It may be defined as coercion (Redundant but CHECK!) involving threats of physical harm(No), threat of criminal prosecution(No), or threats for the purposes of taking the person's money or property.(Not threatening to take her money but threatening economic loss, not textbook but CHECK!)
    So might not be perfect but pretty damn close to exact definition. Seriously WTF people?  I can't believe people are condoning these peoples bad behavior.  They might not be the scum of the earth but they are a$$holes that are screwing her over. If you have a tenant that ruins all the carpets in your place, punches holes in the sheet rock in every room, breaks the dishwasher and leave a dead cat in the closet when they leave do you send them a thank you card for not pouring concrete down all the drains???? Yes work with them since it will be the path of least resistance, but sure as hell point out to them that they were dishonest with you and that they should have either moved to a place willing to do their dates or planned for alternative housing once the lease they signed was up.  Agree to scrape the current lease and agree to do one through next Oct but put an increase on the rent.  Not excessive but say in the 2-5% range for the new one.  If they balk come back and say you will instead sign a renewal for the extra months for that rate and don't be shy about saying you want the extra rent to help defray the potential expenses during a vacancy right before the holidays when few qualified people will want to move.  Work with them but try to extract a concession if they are going to BLACKMAIL you.  Hopefully will teach the little $hit$ that there are consequences for poor behavior. 
  • Real Estate Investor · Fort Pierce, FL · Member since 2014 · 132 posts · 57 votes
    12y

    Allow the lease to continue out the rest of the yr, and tell them that with good behavior, and 100 more per month, you will do month to month.  This puts you back in control

  • Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    There seems to be an argument on here that not wanting a vacancy in Nov-Dec is "fear." I have had vacancies at all times of the year, and in my areas, it is not "fear." It is actually knowing your market. Yes, I may actually get a well-qualified tenant at normal rent rates during that period, but odds are much worse. While you cannot dictate when people will move if they want to go, it was their own choice to sign the lease and it will be their own choice to break the lease. They should be held responsible for that decision per the terms in the contract. I know in the areas I rent, there are short-term rentals available to cover them between the current lease ending and their Oct move date, although they are more expensive. If they knew next Oct is what they needed, they should have planned accordingly, not tried to make it your problem. Offering them an extension at a higher rent is a decent solution as it solves their timing problem and helps you with some of the extra costs you may incur. It's not ideal, but neither is their moving out early, leaving you with the hassle of turnovers and court costs to get rents from them while it's vacant. And them telling you about it instead of just signing another year then leaving mid-way through next Oct probably shows they don't want to create legal problems for themselves. 

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    No one is condoning anything.  We are suggesting the application of reason rather than emotion.

    "Blackmail" really does seem like hyperbole to me.  I have a valid contract with my cable provider.  If I call them and tell them I can get Dish for a better price unless they match it, I am not blackmailing them.  

    In this case, what I see is a tenant doing what he/she needs to do (and doing what I still maintain the OP should have known they needed to do at the time) and actually making some effort to mitigate the landlord's damages.  

    Yes, they should honor their lease.  If they cannot or will not, there is a remedy.  That remedy is that the OP can continue to collect rent on the lease while she makes reasonable efforts to re-rent.  That's it.  

    In this case, they are effectively giving a year or notice that they will need to leave in October 2015, OR attempting to find a replacement tenant so they can leave now with minimal impact.

    If they were such $hit$, they could have re-upped and then broken the lease with no notice next October.  They could have served out their current lease and then stopped paying, and fought through the California eviction process that would possibly allow them to stay in the unit through October anyway.

    Sean, since I believe you operate in NH (at least, your We Buy Houses ads are all over my local craigslist) then you know that here, they could simply have allowed their lease term to end next summer, and stayed month-to-month without a new lease.  They would be safe from eviction (or the ending of their tenancy) unless the landlord could show cause.

    People are going to move when they need to move.  You'll get a few weeks to re-let.  Deal.

  • Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y

    If you have a monthly contract that you can terminate at anytime then THAT is just negotiating.  If you have a term contract and you make that threat there is probably a buy out provision, which you will pay.  That is a contractual remedy to the issue.

    Not in these here parts but in many states you can have that kind of provision in the lease and they agree to pay 1 additional months rent and some other termination fee.  If that was in the lease then there would be nothing wrong if they exercised that right.

    You are also correct that at least around here if they weren't asked to sign a new lease they go month to month and could have just terminated it with 30 days notice for next Oct.  Not many people I know around here will in fact resign a 1 year lease unless they are on assistance and need to have a lease or are college students that know exactly where they will be for a full year.

    I have had people go month to month that rented in the summer and terminated in November.  It is a risk but one I take if they are good residents.  In that particular one I did carry it 2 months and eventually got someone good but at $75 less than the previous people, but she did a 17 month which got me into the spring.  When hers was up I asked for a one year at the same rent or a month to month with a modest $50 increase.  She wanted the discount but was worried since she knew there was a possibility of a promotion at work that would involve relocating.  We agreed that if that happened and she gave me 60 day notice and accommodated showings that she could break it and would not go after her for anything past 1 months rent which she agreed to pay if it wasn't filled.  She gave me that notice about 4.5 months later and was very good about showings and got someone in there right after she left and since it was a good time of year and rents had just done a hockey stick rise I ended up almost $100 more than the people she replaced and they have now been with me just under 3 years.  The difference in my stories is that in my case everyone did the right thing so while not the greatest for me in the first few things there was nothing to be upset about and in the end I got a kiss from karma for doing the right thing.

    BTW are you currently seeing ads on Craigslist from me?  If so that is awesome since I have not put up an ad on the NH one since June 16th.

  • Investor · Fort Lauderdale, FL · Member since 2012 · 1k+ posts · 465 votes
    12y

    I have an early termination addendum in my lease which equates to two month's rent.  I hold a security deposit of one month's worth of rent plus last month rent.  So if they terminate early the worst case scenerio I keep the SD + last month but won't be able to collect on any damages.

  • Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    I think you have too much concern for tenant turnover at what you perceive as a bad time of year.  It appears you have good paying tenants who wanted to renew for another year plus a few months? But you care more about a vacancy in November? How many vacancies have you previously had for this property due to to bad timing, and for how long? That decision doesn't make sense to me, dollar wise.  Another year without turnover with paying tenants is a good thing!

    If you believe the tenants will continue to pay in a timely way and not be a problem, I'd make the lease through October 2015.

    If they decide to leave now and break the lease, as Jon Holdman mentioned you do have to make a diligent effort to rent the unit before a judge will award you additional months of missed rent.  IMO the court filing fee of $400 would be better spent marketing the unit or creating a move-in special with reduced rent.

  • Dana Point, CA · Member since 2014 · 17 posts · 0 votes
    12y
    Originally posted by @Jon Holdman:

     Its VERY unlikely you will have a two month vacancy no matter when you have a turnover. I have found new tenants all times of the year.  Unless your market is really bad (I seriously doubt it is) then a two month vacancy is your fault, not the tenants.  A judge will want to see that you have made a diligent effort to find a new tenant.  If you do, there's no way you'll have a two month vacancy.  In our market, I suspect I could fill a Christmas day moveout before New Years day.

     But, I've tried to rent this place before in November and it didn't get rented till next year in January. 

    Looking back, I don't recall making any glaring mistakes- I posted in on Craigslist with photos; the rent was, if anything, slightly below what comps were charging; posted a sign outside; even posted it the newspaper too to cover my bases; repainted it; etc...

    There were one or two applicants I could have rented to but there were red flags with their application. And, so I kept the place vacant rather than rent to the wrong tenant. 

    It was the same thing with the replacement tenant that the current tenant found, where there were suspicious red flags about that replacement tenant. Will the judge force me to accept a sub-standard replacement tenant?

    Plus, there are some updates I am planning to this property. But, if the tenant moves out in late October, then I don't have any leeway or time to do those updates.

  • Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    12y

    Vacancies are a part of the rental business ,  as are damages , evictions , and sewer back ups .  Finding a tenant in Oct or June isnt the problem , finding a good tenant is the problem .   I have 1 for rent right now , been advertised for 2 weeks , 6 applicants , but none of them good .  4 out of the 6 were being evicted .  Do I worry ? , not at all its part of the game . Better to have an empty unit , bring in no money , than having an occupied unit bringing in no money .

  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    12y

    If it took you two months to get it rented, its overpriced.  Perhaps your market is really slow, but even that can be overcome with price.  

    You also mention having to accept a sub-part tenant.  That's also an indication its overpriced.  If priced right, you will have multiple applicants.  If overpriced the only applicants you'll get are the the ones that have been rejected elsewhere are are willing to pay your high price.

  • Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y
    Originally posted by @Sarah Lewis:
    Originally posted by @Jon Holdman:

     Its VERY unlikely you will have a two month vacancy no matter when you have a turnover. I have found new tenants all times of the year.  Unless your market is really bad (I seriously doubt it is) then a two month vacancy is your fault, not the tenants.  A judge will want to see that you have made a diligent effort to find a new tenant.  If you do, there's no way you'll have a two month vacancy.  In our market, I suspect I could fill a Christmas day moveout before New Years day.

     But, I've tried to rent this place before in November and it didn't get rented till next year in January. 

    Looking back, I don't recall making any glaring mistakes- I posted in on Craigslist with photos; the rent was, if anything, slightly below what comps were charging; posted a sign outside; even posted it the newspaper too to cover my bases; repainted it; etc...

    There were one or two applicants I could have rented to but there were red flags with their application. And, so I kept the place vacant rather than rent to the wrong tenant. 

    It was the same thing with the replacement tenant that the current tenant found, where there were suspicious red flags about that replacement tenant. Will the judge force me to accept a sub-standard replacement tenant?

    Plus, there are some updates I am planning to this property. But, if the tenant moves out in late October, then I don't have any leeway or time to do those updates.

    I'd stay from the idea that you are going to go to court to resolve a problem that hasn't happened yet. You wouldn't sue for damages for breaking the lease until you knew what the damages actually were. That would be after the tenant leaves and after you've found new tenants.  And after you reconciled whatever security deposit you could apply against what they owe you.  This also assumes the tenants don't settle with you after they are served the compliant.  

    If it gets as far as being in front of a judge in CA with you asking for missed rent for a vacant unit available or rent?  You can bet there will be scrutiny of the effort you made to find replacement tenants.  That scrutiny may not be in your favor. 

    If your tenants were to leave now, you'll have an immediate turnover cost plus likely missed rent.  Plus legal and court fees if you decide to attempt to collect missed rent. If they leave at the end of a mutually agreeable date in Oct. 2015, you have just the turnover and rerenting to contend with.  Given that a tenant can always change their mind and break the lease, why not go with an option that has them not breaking their lease?

  • Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    12y

    @Sarah Lewis Please complete your BP profile and include a photo. It is always helpful to BP community members to know more about people with whom they are networking. :-)

    You received some sound advice here. Do you want to save the tenancy or not? 

    You can choose to be flexible with your contract dates or you can try to hold the tenant to the terms of the lease as it stands and end up losing more than you would gain. You have a tenant who wants to stay until late October 2015, who is paying rent and taking care of the unit. This could be a win-win if you are open to letting that happen. Or, you could watch the tenant break the lease and you will have a vacancy now, with little time to prepare.

    In your original post you said, "My head says I should agree to their terms, but my heart..." and you didn't finish that sentence. What is your heart telling you?

  • Real Estate Investor · Carmichael, CA · Member since 2013 · 111 posts · 16 votes
    12y

    @Sarah Lewis I understand it's tough to get tenants during winter. but, this tenant is giving you 1 year advanced move out notice. I think they are trying to be responsible. 

  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    12y

    I find our market here is very seasonal so a Nov/Dec vacancy can be longer and I do relate to that.  Yes you can always drop the price and get somebody but not usually someone I want- that is our area. But you can't let that dictate your action.

    For this instance they signed the lease so it ends when it ends.  Me, I would let it go month to month when the lease ends. I would not sign a new one ending in October.   If they want to break it now they can do that but if you offer to go month to month when it is over it might  bring you all to the same place. Sign a new lease or we will leave, well since they have a lease and they are threatening to leave anyway what difference would a new lease make?   I would calmly say ok you can leave or we can do the following...keep the current lease and go month to month at the end. Now they may leave anyway or decide to wait it out.   Who knows where they will get to in a year?

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