Lease Termination

Posted by on June 8, 2006 under Landlord and Tenant FAQs | icon: commentBe the First to Comment

Your tenant wishes to vacate your premises, thereby terminating his / her tenancy. No doubt, as a first time landlord this leaves you wondering what steps you should take when a tenant wants to leave. There are two ways of terminating a tenancy and you can opt for either one or the other.

  1. In accordance with the lease agreement, or
  2. In violation of the lease agreement.

If you have a well-behaved tenant, he will issue you as his landlord, a Notice to Vacate within the timeframe outlined by your lease agreement. The notice period which normally is that of a month, allows the landlord sufficient time to prepare and find a new tenant for his rental property.

Most rental leases include a clause whereby tenants have to give their landlord in writing that they intend vacating within 30-days. But, if as a landlord you prefer 60-days notice, you can alter the clause in your lease with tenants. If you have no written agreement with your tenant, then most states require a minimum of 30 days written notice to vacate.

Bear in mind, a tenant is only required to give a Notice to Vacate if he / she is leaving before his / her lease expires, not otherwise. It is recommended landlords ensure they get notices to vacate in time by issuing Tenants Notice to Vacate Forms to tenants at the lease signing.

Once you have been informed by your tenant that he will be leaving in a month’s time, arrange with him / her to show the rental to new prospective tenants. As well, it is a good idea to send a Move out / Clean Up Reminder Letter, a couple of weeks before the tenant’s proposed move instructing the tenant that you require the property to be returned in the condition it was rented out i.e. cleaned inside outside with all debris removed. Inform them where to return the keys to the property, necessary if they wish to get their security deposit refunded.

A word of caution, do not refund security deposits on the day tenants are moving out. Better to do it after, as often damage to property is only noticed after tenants have left. You will find, as a landlord, it difficult to make a list of security deductions if a tenant is watching. Take your time inspecting the property once they are gone, as an upfront confrontation may cause more damage from a disgruntled tenant at move out time.

Let the move out proceed smoothly. Once tenants have packed and moved, you will find you have better control over their refund.

When Your Tenant Wishes to Use Security Deposit As Rent

Posted by on June 7, 2006 under Rents and Deposits | icon: commentBe the First to Comment

Not an unusual situation, many tenants faced with a financial crunch will often ask their landlord to use the security deposit as rent for the month. Some may even feel that if they are short of funds and in any case are moving out, the landlord will just have to use their security deposit for rent.

No doubt, this catches many landlords off guard and leaves them absolutely flabbergasted. Well, if you are in the rental property business, you should be aware that this is a common excuse tenants come up with to avoid paying rent, and you should be prepared for situations, such as this one.

One way to avoid this type of situation is to go over the lease carefully with prospective tenants at the lease signing. Read the security deposit clause with them carefully, explaining why the security deposit cannot be used in lieu of rent. Stress on and make the following points clear to the tenants:

  1. Security will be kept in a special escrow account for the entire lease or tenancy term.
  2. Security deposits cannot be used by landlords for any reason other than physical or financial damage resulting from the tenant’s failure to comply with the rental lease signed by them.
  3. Inform them failure to pay rent will result in eviction which in turn will have an adverse effect on the tenant’s credit rating.
  4. Make it clear, any delinquencies in rent payment will be reported to credit bureaus.
  5. Go over the security deposit clause which clearly states that it is not to be used as rent, and if the tenant intends to do so, they will be breaching the contract, which could lead to legal action.
  6. Lastly, in the event of defaulting on rent payment, remind tenants of the consequences of such an action, made abundantly clear in their rental lease i.e. the tenant will have to pay a late fee, in addition to rent collection costs, and lawyer fees if taken to court, along with a bad credit report.

This may or may not help to get your tenant to toe the line, but a warning letter from your lawyer will soon have them paying up. As a landlord, you will find tenants have a lot of tricks up their sleeve trying to hoodwink you, but as long as you have a water-tight lease, you can get them each time. The lease is the most important clue to being a successful landlord; the rest can more or less be dealt with, if your rental lease covers every tenant eventuality.

Dealing with Your Tenant’s Unauthorised Occupants

Posted by on June 6, 2006 under Landlord Tenant Lawsuits | icon: commentBe the First to Comment

I am sure like many another landlord, you have dropped by your rental property to check on how your new tenant is getting along, only to have a total stranger open the door in answer to the door bell. A stranger clad in a smelly, dirty t-shirt, an open beer can in his / her hand, a stranger who then has the nerve to question your identity! A stranger who, when asked where “your tenant” is informs you he / she is out and they also live here. Of course you have every right to lose your cool, after all this is not the person who signed the lease and pays the rent. How does it feel knowing someone other than your tenant is in your rental property without your having agreed to let them live there?

However, the situation is not an uncommon one, and every landlord always has to be on a constant lookout for unauthorised occupants. One way to keep the situation in check is by providing a clause in your lease that prohibits tenants from allowing unauthorised residents to live in your rental accommodation.

Ensure the clause specifies quite clearly that any guests your tenant might have over to stay are only permitted to stay over for 7-days, over that and they will be in violation of the lease signed. As well, the clause should state, in the event any other people occupy and live on your rental property, without the landlord’s written consent, will constitute a breach of this lease, with the rent being increased by $500.00 per person per month, and Owner at his discretion has the option to terminate the lease for this offence.

But, the lease won’t always stop these type of incidents from happening, though it does provide the means to solve the problem, allowing you to take legal recourse to enforce it, due to the clause contained in it regarding unauthorised tenants.

In case, you wish to enforce the lease, you do have the following 3-options:

  1. Allow the unauthorised occupant to become an authorised resident, and if he proves to be cooperative give him a rental application and go ahead and screen him, as you would any other tenant.
  2. If you approve of him / her, you can get him / her to sign the lease the original tenant signed, making them all 100% responsible for the agreement.
  3. Or else, you can issue a lease violation notice giving your tenant a notice period to rectify the problem and remind him / her the penalty fee to be paid for allowing unauthorised tenants the use of your premises, as per the lease signed. This allows you some bargaining power, but do also include a Tenant’s Notice of Intention to Vacate Form along with the violation notice to show the tenants you strictly mean business and have no qualms about losing them.

If you forgot to put in an unauthorised tenant clause in the lease, you can still redeem the situation by using a Lease Update – Change of Terms Notice form to modify your lease agreement.

It is essential you are able to take a tough written stance in such unwarranted for situations. The tenant has to know there is nothing that will stop you from rectifying the problem, either by legal eviction or by making them conform to the rules. Never let the tenant even catch a hint of the fact that you prefer to avoid legal battles and having to involve yourself in unnecessary litigation.

Talking about legal and court proceedings, this is as good a time as any to remind landlords, it is important to include a clause in your lease regarding the covering of landlord attorney fees and court costs at the tenant’s expense.

As you must have already deduced, tenants who bring in unauthorised tenants are usually the kind of people who don’t always conform to the rules. That is why a landlord should always be prepared to begin eviction proceedings at any time. It is always wise to avoid tenant problems by avoiding problem tenants!

Security Deposit: Key Issues

Posted by on June 5, 2006 under Landlord Tips, Rents and Deposits | icon: commentBe the First to Comment

Tenants have been screened, selected, with keys handed over; this is when the landlord asks his new tenant for the first month’s rent and a security deposit. According to American law he is entitled to it, and like the tenant, has to adhere to certain rules and guidelines that govern the issue.

1. What is a Security Deposit?

It is a sum of money equivalent to one month’s rent and given to the landlord, in addition to rent paid for hiring his / her residential premises. This sum is held as security by the landlord to ensure the tenant understands and performs all obligations and liabilities of returning the rental property, in the exact same condition as received.

2. Is a Landlord required to provide a receipt for a security deposit?
The law states, a landlord is required to give a written receipt to the tenant, stating deposit amount, payment date, and the premises to which it applies. Not to be considered an asset, the security deposit is to be held in trust by the landlord.

3. Is a landlord required to pay interest on a security deposit?
When refunding a tenant’s security deposit, a landlord is liable to pay interest for the duration he held it in trust. As for the rate of interest to be applied to the security deposit, it is set by the Security Deposit Interest Regulations under the Residential Tenancies Act.

4. What if a tenant is late in paying rent?

A tenant forfeits interest on his / her security deposit for any month they are more than ten days late in paying their rent, except when the rental agreement already contains a late charge for overdue rental payments.

5. What amount can a Landlord ask for as Security Deposit?
The amount a landlord can ask a tenant for as security deposit depends on the rental agreement drawn up between the two. If the premises are rented on a weekly basis, the deposit cannot be greater than the first two weeks rent. If a monthly or yearly rental agreement has been signed, the security deposit must not exceed three-quarters or equivalent of the first months rent.

6. What if the security deposit amount exceeds the legally stipulated amount?
If a landlord asks for a security deposit amount, more than is legally permitted, the tenant has the right to deduct the excess amount with interest, from future rent owed.

6. When is the Security Deposit Returned?
A landlord is required to return a tenant’s security deposit, within 15 to 30-days of the tenant vacating his premises, unless the landlord has a claim for all or a portion of the security deposit. If the landlord and tenant dispute or disagree over the status of the security deposit, either may file an application to determine disposal of the money.

Once a landlord has given the keys of a rental apartment or home to a tenant, by law he is required to follow basic security deposit rules. While, tenants are required to do the same in order to protect their money. If a tenant does not leave the rental premises in the same condition he / she received it, the landlord has the right to deduct expenses for returning it to its original state.

Late Rental Fees Lease Clause

Posted by on June 2, 2006 under Landlord Tenant Lawsuits | icon: commentBe the First to Comment

For a landlord, the most important element of a residential or commercial lease is the late fee clause. In order to encourage timely rental payments, every landlord is advised to have a stringent charge for late rental payments. This clause as part of your rental agreement is only a part of protecting yourself against late rental payments.

From the very beginning, explain and warn the tenant about late rent fee charges at the time of the lease signing. In fact, advise them not to to put their signature on the lease, if they think late rental payment could be a part of their future. Advise the tenants that you may report late payments and that this may adversely affect their credit rating.

If they plan on buying their own home someday and value their credit, a warning should be sufficient to ensure they always pay rent on time. Remind them about the importance of prioritising rental payments in order to keep their credit record clean.

As to the late fee amount, the charges should be high enough to hurt but they not so high as to cause a struggling tenant to fall even further behind in his payments. They should be painful enough to make tenants avoid having to pay them ever again. Note that your state may have specfic guidelines regarding late fees.

As a rule, tenants incurring late fees do not really mind paying the late fee in their own time, which is why it is important to slap on an additional Daily Late Charge Fee to the initial late fee. The additional penalty add-on is the incentive that causes tenants to pay the initial late fee before it gets even more painful.

Another item to be included in the Late Fee clause is the Bounced Checke penalty. It is a good idea to charge the same amount as the initial late fee. Remind tenants, if the rental check bounces, it means they will be late in paying rent and, in addition, will be responsible for a late charge, as well. With luck, a warning upfront will ensure timely rent payments and no bounced checks. Note that your state may have specific guidelines regarding bounced check fees.

Although, there are clauses in leases to protect you, it is also up to the landlord himself to empower his lease. Don’t be afraid of destroying a friendly relationship with tenants when it comes to enforcing the rental lease. They are occupying your property and tenants should live up to his / her agreement with you. Send out late fee notices and make the tenants pay penalty charges without worrying about their opinion of you. Remember, the reason you rented out your place is because like everyone else, you also have bills to pay!

What To Do If The Tenant Doesn’t Pay

Posted by on June 1, 2006 under Landlord and Tenant FAQs | icon: commentBe the First to Comment

The biggest problem faced by landlords is non-payment of rent, but if adequate steps are taken, one can minimise the loss of no rental payment. If your tenant is in the habit of not paying rent or of making partial rent payments, many leases deem past due charges, such as, unpaid late fees to be payable as added rent, which means unpaid added rent, the same as unpaid rent is valid ground for eviction.

And, if you wish to collect unpaid rent, legal process has to be followed, with landlords prepared to take quick action, collecting rent before too much time elapses. It is not fair to yourself to let a tenant string you along, be firm and take the following steps to bring an unruly tenant to heel:

  1. Late Rent Notice: Promptly issue the tenant a late notice if rent is unpaid past the grace period i.e. if rent is to be paid by first of the month, you can keep a grace period of five to seven days. And, when you issue late notice, ensure you inform tenants about late fees, as long as your lease provides for them.
  2. Telephone: If you haven’t received rent or the tenant hasn’t responded within a reasonable frame of time i.e. 2-4 days after issuing the Late Rent Notice, it is time to give him / her a call to ask why rent has still not been paid. Explain to him / her late fees can build up on a daily basis. As well, inform him / her that on so and so date, the account will automatically go to your lawyer’s office for eviction proceedings, with legal fees added to the rent owed. Again, you have to ensure legal fees are a part of the lease deed.
  3. Eviction Notice / Lawyer’s Letter: If you prefer, you can send a lawyer’s warning letter (optional) instructing the tenant to pay all rent and late fees before you actually commence court eviction. Always handy, ask your lawyer to prepare a warning letter for pre-eviction situations, which you can send along with a Notice to Pay Rent or Quit demand for payment. At the same time, the notice should warn tenants that non-payment of rent means, you have the power to make a negative impact on their credit history.
  4. Eviction Process: If the time limit in your eviction notice expires and the tenant has not paid up, be prepared to go forward with a court eviction. If you are unfamiliar with the tenant eviction process, it is recommended you use a lawyer with experience in landlord / tenant eviction cases. It is not at all advisable to conduct proceedings on your own the first time, unless you are an attorney or an expert in landlord tenant law.
  5. Credit Bureau Reporting: If a tenant owes you money, whether you’ve gone to court or not, you have the ability to report bad debt onto the tenant’s credit record, which will stay on it for 7-years.

Non-payment of rent is a serious matter and should not be ignored. Do give a tenant enough notice to pay up rent and late fees, but if he / she still does not pay up, be firm and go in for court eviction. Fair is fair, if they are using your property, should they not pay you for its use? You cannot and must not let them rip you off!