Offering a tenant an incentive to move out.

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Offering a tenant an incentive to move out.

Chris L.
Triangle NC · Member since 2016 · 136 posts · 11 votes

I have heard of folksoffering an incentive to have a tenant to move out. I will be selling my property in NJ in a couple months and my tenant is on a month to month lease. A landlord can't ask a tenant to move out just because they are selling but I was wondering if I could offer an incentive that may motivate a tenant to move out. I would just like to sell the house without a tenant in place so that my buyer pool is larger. My questions are as follows:

1) Is it legal to offer a tenant an incentive to move out? I told the tenant she didn't have to move out because she doesnt; however,I want to offer her this option

2) How does this typically work?  Do you simply email the tenant and say Ihave a proposition. If you move out by x date I will offer you x dollars...OR do you say that you will offer them x dollars if they move out by x date but you must let me know 4 weeks prior in writing if you have Decided to move out by x date? 

3) For those of you that have done this, how did your tenants respond? Did they try to get more out of you? Once they knew that you would benefit from their moving out did they try to up the incentive?  

4) How did you decide what to offer them as an incentive?

Thank you for your input! 

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John CasmonPro Member
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
9y
You don't have to offer an incentive. Just provide proper notice that you are not renewing their MTM lease. Now if they refuse to leave you will need to think about an incentive or an eviction.
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  • Dan Bryskin
    Investor · Minneapolis, MN · Member since 2015 · 252 posts · 263 votes
    9y

    @Chris L.

    I don't know NJ laws, but in MN lease follows the property. So if tenant has 6 months left on the lease, tenant doesn't have to move. However my month to month leases have 30 or 60 day termination close. Meaning lease can be terminated by both, landlord or tenant. No reason needed, just a proper notification. What I do, I provide a notification in writing then e-mail, and then if possible sign a lease termination agreement, clearly stating a move out date. If you are going to offer intensive, put it in your lease termination agreement as well. Check on NJ laws and good luck :)

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  • John CasmonPro Member
    Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
    9y
    You don't have to offer an incentive. Just provide proper notice that you are not renewing their MTM lease. Now if they refuse to leave you will need to think about an incentive or an eviction.
    1Reply
  • Chris L.
    OP
    Triangle NC · Member since 2016 · 136 posts · 11 votes
    9y

    In NJ, you can't terminate a lease simply because you are selling the property. You either have to raise the rent and they have to refuse to pay the new rent or they have to have violated the lease in some way. You can't simply send a notice that their lease is up in a month-even if it's a one month lease. It's nutty, so I thought I would offer an incentive to move. The tenant originally had a year lease which I never renewed. When you dont renew a lease it automatically becomes a month to month lease. 

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  • Michele FischerPro Member
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    If it's a month to month agreement you should be able to give notice and get out of the contract relatively painless.  In my state it is 20 days notice from the end of a month to end the contract.  Except that you have told her that she can stay.

    If you want to give an incentive, I would document a few options on paper, go talk to her, and leave the paper with them to consider their options.

    Is the house likely to remain a rental, be owner occupied, or could go either way?  If it is in good shape, is in an area with high rentals, and has an established tenant, it may not be a bad idea to let her stay.

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  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    That's one nutty law.

    Can you not just double their rent?

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  • Chris L.
    OP
    Triangle NC · Member since 2016 · 136 posts · 11 votes
    9y
    Originally posted by @Michele Fischer:

    If it's a month to month agreement you should be able to give notice and get out of the contract relatively painless.  In my state it is 20 days notice from the end of a month to end the contract.  Except that you have told her that she can stay.

    If you want to give an incentive, I would document a few options on paper, go talk to her, and leave the paper with them to consider their options.

    Is the house likely to remain a rental, be owner occupied, or could go either way?  If it is in good shape, is in an area with high rentals, and has an established tenant, it may not be a bad idea to let her stay.

    The house is likely to be knocked down or, possibly, a move in but I do not believe someone would buy it as a rental. The house is old but in good shape;however, there are tons of new duplexes around that are much newer. I would most definitely say it's going to be bought by a builder and knocked down. Is it difficult to sell a house to a builder or other when you have a tenant in there on a month to month? I'm assuming that whoever buys it will raise the rent significantly because it's under market value right now. Just not sure of the best way to handle this. 

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  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    Your in a situation where you CAN increase the rent as HIGH as you want with PROPER notice, So double the rent. and only offer a month to month term. 

    Check your state landlord tenant laws it seems unusual that you can't give proper notice of non-renewal / vacate.. 

    Ask a attorney to be sure so you don't have unusual delays, on best way to proceed. 

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  • John CasmonPro Member
    Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Chris L. Wow, those NJ laws are restrictive....given that context, you can ASK a tenant to move out, you just can't force a tenant to move out.

    I would give her two options using the proper notice, which appears to be 60 days. Move out or rent will be increased to the maximum possible amount (give an actual number - this shouldn't be a threat, just two options). You can even offer a stipend to help pay for moving and write a recommendation if she was a good tenant. If you decide to go the rent increase route, note that the New Jersey state code says rent can not be increased to something "unconscionable," so find the highest conscionable comps and use that rent figure. 

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  • Judy Parker
    Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
    9y

    @Chris L. Your Tenant does not have a Lease - they are on month-to-month.  Advise them that the property is for sale and the new owner will be occupying the property.  Thus, the Tenant must start looking for another place to reside and vacate within 30 (60?) days.  You can not raise the rent higher than the local Rent Control Laws allow.  Doing so would be construed as a "Constructive Eviction" and the Tenant could, conceivably, sue the Landlord.

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  • Chris L.
    OP
    Triangle NC · Member since 2016 · 136 posts · 11 votes
    9y
    The only thing about raising the rent is that I already told the tenant over a month ago that I'm selling. I gave the tenant two months notice but the tenant hadn't looked for a place and it seems tenang wants to take a chance with a new landlord. Could I just simply change my mind and say I've opted not to sell but I will need to raise the rent? 

       posted by @Deanna McCormick:

    Your in a situation where you CAN increase the rent as HIGH as you want with PROPER notice, So double the rent. and only offer a month to month term. 

    Check your state landlord tenant laws it seems unusual that you can't give proper notice of non-renewal / vacate.. 

    Ask a attorney to be sure so you don't have unusual delays, on best way to proceed. 

    0Reply
  • Chris L.
    OP
    Triangle NC · Member since 2016 · 136 posts · 11 votes
    9y
    Hi Judy
    Good to see a fellow jerseyite on here. I spoke to a real estate attorney a month ago and she stated that I can not ask a tenant to leave simply because I'm selling the property. There needs to be just cause-i.e. refuses rent increase, doesn't pay rent , etc.  so I do not think that I can tell them to look for another place. :(

    Originally posted by @Judy Parker:

    @Chris L. Your Tenant does not have a Lease - they are on month-to-month.  Advise them that the property is for sale and the new owner will be occupying the property.  Thus, the Tenant must start looking for another place to reside and vacate within 30 (60?) days.  You can not raise the rent higher than the local Rent Control Laws allow.  Doing so would be construed as a "Constructive Eviction" and the Tenant could, conceivably, sue the Landlord.

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  • Amit Patel
    Investor · Somerset, NJ · Member since 2012 · 95 posts · 45 votes
    9y

    I purchased a house with 4 tenants and this is the process I followed:

    1. I gave them a notice with a new lease raising rent from the 900 they were paying to the $1,250. They had 60 days to accept (which is by law). If not, then they would have to leave. This was more like a notice to Quit/Leave or pay the new rent. This was sent certified and I kept all the info. I also hand delivered it as well to each tenant. Note my town had rent control but our building size meant we were not under rent control.

    Here is what happened so you see in real life.

    Tenant 1 - Ok to leave as rent increase too much for her.

    Tenant 2- Ok to leave but asked for one more month at old rate. I said ok and she moved out.

    Tenant 3 and 4 (one elderly, one with 3 kids) complained to the city that it was unfair. I got a call from the city (I was prepared). I told them that the building was under rent control and the increases were needed as the building needed a lot of renovation or It would not be safe. I told them this is my legal means to do this for safety, etc. They didn't say anything else.

    Technically, they can take you to court for an unconscionable increase but this rarely happens and I made sure I covered by bases legally by  not going outrageous and also noting the things that needed to be fixed.

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  • Amit Patel
    Investor · Somerset, NJ · Member since 2012 · 95 posts · 45 votes
    9y

    FYI: Tenant 3 and 4 left a month later and we had to do give them 2 months at the lower rent basically. PM me if you need more info or a copy of that later (this will save you some money so you won't have to go to an attorney to have him draft the letter). However, if you are serious, it may look better coming from the attorney. I can also give you attorney who can do this for a low price if you like.

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  • Reaz H.
    Rental Property Investor · Raleigh, NC · Member since 2016 · 49 posts · 15 votes
    9y

    Double check your state law. Seems very unusual that they'd tie your hands in a month-month lease.  But the best options that I'd follow, perhaps all at once if there is enough time:

    1. Increase rent by at least 50%. Make sure you aren't in a rent controlled area or that your tenant is not section 8.
    2. Enforce items in the agreement that you've been lax on. Fees, restrictions, etc. 
    3. Cash for keys. Offer the security deposit for possession in return. Faced with increasing rent they might be eager to leave.
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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    Hi @Chris L. to see if he knows NJ laws or knows someone else who can comment on this properly. Other states would allow you to just not renew the lease, but like you said, you can't do that in NJ. 

    How much can you raise the rent and how frequently can you raise it? I would go as high as possible, as frequently as possible until she leaves. You could also push it off to the next landlord - try to sell as-is and see if you get a bite. Then you don't have to deal with it at all...

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  • Darren SagerPro Member
    Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    First off I would highly recommend you speaking to your attorney @Chris L.  There are a lot of people here with many opinions and some I believe are not legal (such as jacking up the rents).  In NJ a raise in rent without reason 10% or above is generally seen as an unconscionable raise. Most judges will shut down that raise.  Please confirm your attorney that in NJ, if you have a tenant on a month to month basis, you only have to give them one month to end the tenancy regardless of the fact you're selling the home.  So, for example if you tell them on the 5th of February and you're giving them one month, technically they need to be out by March 31 (since you're 5 days into February).   If they stay beyond that they would holding over (and in NJ you'd be entitled to double your daily rate).   Please confirm this with your attorney.   If they're on month to month, it would seem to me that there shouldn't be much issue in ending their tenancy and getting them to leave.  But we know that NJ is a tenant friendly state, so again, speak to your attorney.

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