Flipper/Rehabber · Member since 2019 · 2 posts · 0 votes
We have a property in California (Santa Clara County) that we are going to be leasing out to family at below market value (permanent resident instead of investment home). What is the maximum time period we can assign this? We have heard:
-That while there is no lease limit to commercial properties, a maximum lease limit for residential in three years in California.
-That contract parameters are up to landlord discretion as long as tenant agrees to it, even if it says "renews in perpetuity until mutual dissolution"
-That there is no maximum cap in California but you can only set years, not open ended.
So basically three different answers, three different sources. I tried looking at the state website for landlord guidelines but couldn't find anything about this specific question. Any insight? Regadless, we will have a lawyer draft the contract but as they are expensive on an hourly basis, we'd like to go in with an educated POV first. Thanks!
Property Manager · Los Angeles, CA · Member since 2017 · 216 posts · 110 votes
7y
I am not aware of any time limits to residential leases in California, but often leases are for 1 year and have the option to go month-to-month at expiration. Where did you get the 3 answers above? How are you renting the property? If you are working with a real estate agent/broker, a standard California Association of Realtors lease agreement should suffice and be much cheaper than hiring an attorney for 1 rental agreement.
Flipper/Rehabber · Member since 2019 · 2 posts · 0 votes
7y
Sources were 1) lawyer for friend 2) my CPA 3) online digging.
I didn't want to go into the details but there's a medical issue involved and some other family members pushing and pulling, which is why we decided that a longer lease would be good for documentation. We are renting directly to the family member.
So theoretically, if we wrote in 5, 10, or 100 years, it would all be the same in terms of legality?
Property Manager · Los Angeles, CA · Member since 2017 · 216 posts · 110 votes
7y
Although it seems there are lots of details you may be withholding, I won't hold it against you. Unless you are referring to land for mineral rights, agriculture, a type of ground lease or some other obscure condition that I am not aware of, then a residential lease may theoretically be for any number of years.
That said, if you are considering a lease anywhere near 100 years, I would strongly advise an attorney to draft an appropriate agreement. If necessary, you should be able to hire and attorney for a flat rate. My understanding is that for most legal documents to be enforceable, they must contain elements that make them reasonable (who is liable for maintenance and repairs? How and when is rent collected? How and when is rent escalated? And so on). I'm not certain that a standard California Association of Realtors rental agreement would be enforceable for 100 years.
Do you believe a lease longer than a few years your best option? Any lease may be easily renewed for a fixed length of time or go month-to-month. If appropriate, a new lease may be made as well. I suggest these options because a long-term lease may subject a property owner to significant restrictions over many years. Flexibility is generally a good thing to have.