Inherited tenants - OK to do different rents when lease comes up?

Inherited tenants - OK to do different rents when lease comes up?

Investor · Lutz, FL · Member since 2016 · 66 posts · 17 votes

I recently acquired a triplex, each unit is $200 below market rent. Tenant A is month to month, is a disabled elderly woman on low fixed income. Her son who doesn't live in the area told me it would be very difficult to move her, there is a rental shortage in the area and she can't afford market rent. At son's request, I verbally agreed to do $50 discount from market rent and do month to month lease as she may not survive a year as per her son. Now tenant 2 has lease ending in Sept and wants to renew at below market rent and is arguing that I am giving Tenant A a discount and not her (she talked to Tenant A). This is the first time, I am handling this kind of situation. Am I obligated to charge all tenants the same rent? I was being considerate of Tenant A's situation but don't want to under rent the other two units as it was purchased as a value add deal based on current market rents. I know I do have the option of not offering other two tenants a new lease and get my own tenants. In general, is it a bad idea to work with tenants based on their particular situation? Can I be accused of discrimination? I didn't find anything specific in FL landlord statues regarding this. Any suggestions/ideas/comments? 

Thanks to all the people who contribute their valuable advice to newer BPers like me. Much appreciated. 

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

    This is a sticky situation, not sure how I would proceed.  I would think for discrimination charges I would want to document ho the units are different and justify different rent amounts.  If they are truly identical, you probably need to charge the same.  Can you do a small upgrade to the other unit to help justify that it is closer to market condition?  Keep discussions on the market and the unit, or behaviors (does one pay sooner or more consistently, stayed longer), not on the specific circumstances of the tenants.

    Whenever we have an opening we bump rent to market, so newer tenants are often paying more than older tenants.  For existing tenants I normally charge them 50% of the gap between current and market rent, adjusted annually.  This helps us make progress toward market rent but also rewards long term tenants.  Turnover can add up to more than $50/month in a heartbeat.

  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Your most appropriate action at this point  would be to inform tenant A that you can not give her a discount as you offered and help her move.  Tenant B has a justifiable argument that you simply explain to tenant A and her son.

    In the long term this is your best business decision.

  • Investor · Lutz, FL · Member since 2016 · 66 posts · 17 votes
    9y

    @Thomas S. and @Michele Fischer.  Thank you both for great advice. It seems Tenant B wants to move so its easier to get my own tenants. 

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