Am I a Shady Landlady?

General Landlording & Rental Properties
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Am I a Shady Landlady?

Julie MarquezPro Member
Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

All of our rental agreements are month to month. To incentivize people to stay longer, we charge a move in fee that can be added forwards the refundable deposit if they stay over a year. Example: rent is $1000, move in fee is $400, refundable deposit is $600. Tenant moves out after 11 months, he can get the max of $600 back. Tenant moves out after 12 months, he can get the max of $1000 back.

Being month to month agreement, I can raise the rent on my tenant with just 30 days notice. So, in theory, I could get a new tenant, raise the rent by $1000 on month 2, they decide to leave because it's so expensive, and now I can keep their move in fee! I have never done that - but the concept sounds so wrong to me.

In real life, I just raised the rent on a tenant after 6 months by 4%, and she let me know that she will look for different housing. And if she does move out before 12 months, I can keep her move in fee.

I am not predatory and I don't want to be shady to any of my tenants, but I realize that I could take advantage of them and they might not understand what this type of agreement entails. But it can also be a good alternative that I offer month to month instead of a typical lease, and they have to be aware the rent can be increased with the proper notice. Anyway, just my thoughts and wanted to see what comments the community had about my rental agreement.

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y

Well You can say it’s not predatory but it is in essence . Basically Your trapping them and that is shady business by being darned if you do and darned if they don’t . Nothing to be proud of

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    7y

    @Julie Marquez So best case you have deposit equal to 1 month, but their is incentive for the tenant to stay a year or longer to get a larger portion of their deposit back.

    I have a 1 year lease and I charge a larger deposit than one month. My tenants incentive is to stay the whole lease and leave place clean in order to get their large deposit back. If they break the lease or stop paying the rent I have a large deposit as a cushion.

    I tend to keep the same tenant for many years with cuts down on turnover costs and losses.

    9Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    This idea comes across very unethical to me. Seems like you're trying to do something similar to a lease-option to an unqualified tenant so that you can keep their deposit (but in terms of a loose contract that doesn't necessarily protect the tenant). 

    Why not take the full security deposit, plus one months rent? Sounds like a lot of effort.  May have a vacancy for a month not justifying a 4% return.

    7Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    7y

    I don't see a problem with the move in fee. In my area you can't go over a 1 month deposit.  I do wonder why you did a rent increase after 6 months, did the market change that much or do you just want this tenant to leave?

    8Reply
  • Bob B.
    Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Julie Marquez  Keep it simple.  You think you are giving them an incentive to stay and maybe you are but I'd just keep it simple.  Either it's a move in fee or it's a security deposit.  In my market it's a security deposit.  When you complicate it they assume you are trying to put something over on them.  Since all landlords are rich and greedy,  shady lady doesn't sound so bad. LOL

    4Reply
  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    7y

    The strategy itself is not shady, it depends on the execution. If you move them in and then raise the rent in month 2 to keep their $400 then yes, that's very shady. 

    17Reply
  • Eric Carr
    Real Estate Broker · Los Angeles, CA · Member since 2017 · 655 posts · 293 votes
    7y
    Originally posted by @Julie Marquez:

    All of our rental agreements are month to month. 

    Keep it simple. Vacancies and turn over gets expensive. In CA, it is illegal to charge anything non refundable in the way of a deposit, aside from actual rent. Keep it simple, charge a deposit equal to a full months rent, and make applicants sign a 12 months lease. The only way I'd do it the month to month way is if the rental was in a highly transient market and the 12 month commitment scared off applicants. Turn over is expensive. Most renters expect a 12 month lease, just give that to them 

    8Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    Well You can say it’s not predatory but it is in essence . Basically Your trapping them and that is shady business by being darned if you do and darned if they don’t . Nothing to be proud of

    21Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    As long as a applicant knows in advance what they are signing up for their is nothing wrong with it. If it works for you then congratulations.

    Tenants are not children and therefor are responsible for both their decisions and their actions.

    5Reply
  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 614 votes
    7y

    @Julie Marquez While the process in which you're forcing the tenants to essentially perform in accordance to a 1 year lease to get all of their money back, yet you're officially having them on a month-to-month lease for your own benefit in case you want to raise rents, etc... is a little aggressive on the business tactics but I wouldn't consider you "a Shady Landlady".

    Personally I would never do it because I would never want to be put in that situation by a landlord if I were the renter.

    What property class are these assets? If you're doing it on a Class A or B property, the strong-arm tactics will hurt a little less, if you're doing on the working poor in Class C and Class D assets, that's a little tougher to say it's ok.

    While I hate to blame the victim, but at the end of the day the tenant is choosing to participate in this business tactic, It's voluntary and a part of the free market enterprise so enjoy your business strategy to make a little extra money.      

    4Reply
  • Robert Biggerstaff
    Contractor · Pensacola, FL · Member since 2018 · 303 posts · 240 votes
    7y

    Shady 

    11Reply
  • Terrell Garren
    Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
    7y

    I like M2M for several reasons.  However, move in fee + rent increase prior to 12 months = Shady-Lady.

    13Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    Not sure how you get away with rent increases more than annually but if it works and tenants don't cause a ruckus then do it.

    Another word for shady is cool.

    Cool Lady.

    4Reply
  • David Corboy
    Denver, CO · Member since 2017 · 17 posts · 10 votes
    7y

    To me this is incredibly shady. I realize that it might not be your intention but to get a new tenant and then raise the rent and then when they say they want to leave, to then not give them their money back is robbery. Again, I'm sure that wasn't your intention, but ethically speaking, this is immoral, unfair and predatory. 

    9Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    7y

    Would you get same effect replacing the stick with a carrot?

    Collect the full months security deposit. Raise rents 4% and tell them after they have stayed 365 days you will refund 1/2 of 1 months rent. 

    You’re better secured with a full security deposit, you incentivize people to stay a year, maybe a forced savings plan for people not known to save well. 

    4Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    Even if I was on M2M, as a tenant I would be pretty pissed to get a rent increase of 4% only  6 months into my tenancy.......if you started out at market rent at the beginning, then market rates rarely change that much in 6 months. Sorry but that's pretty shady in my book....

    In my opinion....and likely in most tenants minds...... is that the market is reassessed once a year and rent increased on an annual basis....not 2-3x a year.

    And the opinion that "well you are an adult and signed the agreement" is not justification to screw people. A large portion of people that get conned or scammed are adults and decent people.....doesn't justify the scam artist screwing them. All the people that got scammed by Morris Invest....Bernie Maydoff.......and numerous others......doesn't mean they got what they deserved and the scammer did nothing wrong. So if you have some ethics, don't justify doing something that has an excellent chance of being  a real bad deal for the other party just because the other party doesn't notice it.

    10Reply
  • Lee Bell
    Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
    7y

    If the terms are subject to abuse by you (or the tenant) then change them. You may have good intentions, but there is an appearance of potential fraud. You don't want the appearance, so make it simple like others suggest, imho.

    Name your company Shady Landlady LLC. ;>)

    7Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    7y
    Originally posted by @Julie Marquez:

    Being month to month agreement, I can raise the rent on my tenant with just 30 days notice. So, in theory, I could get a new tenant, raise the rent by $1000 on month 2, they decide to leave because it's so expensive, and now I can keep their move in fee! I have never done that - but the concept sounds so wrong to me.

    While you could do this, I do not believe that you would get away with it for long. Your M2M tenant has a reasonable expectation that rent for the unit will not be raised well above market rates. I suspect that if you tried this after a month, you would find a judge would rule that you acted in bad faith when signing the original contract and they may void it and/or award damages to your tenant.

    I personally cannot imagine ever finding the need to raise rents on a M2M tenant during their first year. You had the freedom to set rents at the level you wanted and then a few months later decide to raise them? That's a scummy landlord move!

    5Reply
  • Kristi Gray
    Rental Property Investor · Milford, DE · Member since 2018 · 16 posts · 14 votes
    7y

    A rent increase in the first 6 months?  That's a bit soon isn't it? Did you start off below-market, or did the market surge? I do like our month-to-month leases on occasion but it's so much more simple to do the standard annual lease and 1 month equivalent security deposit. I know more than half the tenants we've rented to are so excited to sign the lease and move in, they wouldn't all the numbers and stipulations your telling them and just sign having no clue. 

    2Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    Despite having this strategy outlined in the lease , I suspect if you had to actually go to  court over this arrangement, the judge would side with the tenant every time and throw the book at you for being predatory 

    7Reply
  • Rhonda Burlison
    Member since 2019 · 5 posts · 8 votes
    7y

    Shady!! Unethical and predatory! 

    3Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
    7y

    @Julie Marquez  Some people give the option of a month-to-month lease at a higher rate than a longer term lease.  I suppose this would accomplish the same thing - compensating you a little extra for the shorter tenancy.  People who know they may be moving out after only a few months (maybe they are new to the area and shopping for a house) would gladly pay a little more for the option.  If you don't want to offer a longer term lease of course this won't work.  

    [email protected]
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    3Reply
  • Andrea O.
    Rental Property Investor · Sykesville, MD · Member since 2018 · 18 posts · 20 votes
    7y

    Unethical.  If you want to encourage tenants to stay long-term, why do you only offer a month-to-month lease?  Just so you can jack up their rent as soon as they’re settled in?   

    2Reply
  • Adrian Orgill
    Real Estate Agent · Miami, FL · Member since 2010 · 71 posts · 31 votes
    7y

    @Julie Marquez just out of curiosity.  Other than the ability to raise rents at a moments notice  is there some other  local benefit to having a tenant sign a m-t-m lease rather than having them just sign a 1yr?   Just trying to see why you would need or desire to put yourself in such a quandary if there might be a better alternative option.   

    3Reply
  • Julie MarquezPro Member
    OP
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    7y

    Predetory! That's the word that totally describes this.

    I really like our M2M agreements. My dad has been using them successfully for the past 20 years in his rentals and we find them worthwhile. Not the predatory part, he is soft-hearted and returns the move in fee. "My tenants actually make me rich, I can afford this fee, they can't."  If someone is going to stay over a year, it doesn't matter if it's a lease or M2M. If it doesn't work out for either party, we can part ways without major consequences. It's a fee for the flexibility, and we make sure these unique terms are clear at the beginning.

    In my particular instance, I feel as the increase is still within the range (but high end) of market rate. I'm not trying to gouge her. We have had a lot of issues with her appliances breaking, and have had an even harder time servicing them with her large dog in the unit. When trying to troubleshoot her fridge, the dog bit me. So without being able to investigate further, I immediately bought her a new fridge, and we have the (still working) old one in our garage. Her unit is on our personal property and we aren't very comfortable with her dog here with our two young children. We also can't service the multiple things breaking in her unit without her being home. She pays her rent on time and is courteous and easy to work with (besides the dog).

    I feel like if something stemming from the landlord side is causing the tenant to leave, then the fee should be refunded. But if the tenant wants to leave early on his accord, then the fee is paid for the short term rental convenience.

    I appreciate all the feedback and hearing what you guys have to say! I'm following in the footsteps of my 35-year landlord veteran dad, but also learning new and better things along the way

    2Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    7y

    @Julie Marquez I wouldn’t be able to explain this to prospective tenants while keeping a straight face. I would crack up. I’m imagining you delivering this message like El Risitas the Spanish giggling guy meme: “Hahahahahaha first we make you agree to a month to month lease at a low introductory rate hahahahaha, then we take a $400 “move in fee” up front plus a deposit hahahahahahaha... then, just when you get done moving all your crap in and putting utilities in your name, we jack up the rent ahahahahahaha, and when you get pissed and move out, WE KEEP YOUR $400 AHAHAHAHAHA!!!

    7Reply
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