OT: Lease Renewal Question

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Submitted by paramount on July 29, 2013 - 10:43pm

My current tenants lease expires on September 30, 2013. I haven't had any issues to date with my tenants.

When I leased the house I used a standard California Lease, and it contains the following language:

22. Ending or Renewing the Lease Agreement

A. At the end of the lease term, if the Landlord or the Tenant does not give any written notice to the other party to end this Lease, it will automatically continue on a month-to-month basis. To terminate this lease at the end of the lease term or any renewal thereof, the Landlord or the Tenant must give to the other party at least 30 days prior written notice before the last day of the Lease term or any renewal thereof.

The thing is, I'm not real happy to rent on a month-to-month basis and the lack of certainty of that arrangement - any advice on this matter? Thanks.

Submitted by jeff303 on July 30, 2013 - 7:15am.

I guess I'm missing something, but did you try asking them if they were interested in renewing for another year? If they're not, then give them the written notice since it's 30+ days before the end of the current term.

Submitted by SD Realtor on July 30, 2013 - 7:35am.

If you havent had any issues and you are happy with the tenants why don't you send them another lease agreement for a 1 year term?

Submitted by paramount on July 30, 2013 - 8:45am.

I asked my tenants about 2 weeks ago if they were considering renewing the lease, but never got a response or a reply.

Submitted by SD Realtor on July 30, 2013 - 9:39am.

Got it... well you can simply send them one, if they sign it great, if they don't then you keep them month to month I guess. Good tenants are nice to have but ya don't wanna scare them off.

Submitted by HLS on July 31, 2013 - 2:25pm.

I have had many month to month tenants in multiple properties over the last 30 years, most worked out very well.

A lease obligates you more than them. People break leases all the time, and it's a real hassle to get a judgment and/or collect.

A lease is not a guarantee that a tenant will stay there.. It IS a guarantee that it's a lot harder for a landlord to get rid of a crappy tenant when they are paying their rent.

If someone has a lease and wants to break it, do you really want them in your property as disgruntled occupants ?

Being a landlord comes with huge risks and obligations that most people seem unaware of, until something goes wrong.

If you feel better with a lease, you can raise the rent with 30 days notice, and offer a lower monthly rate, or keep it the same as now if they sign a lease.
I once had a month to month tenant stay for 13 years and the only reason she left was because I sold the house.
Month to month does have to be a bad thing.

Submitted by EconProf on July 31, 2013 - 8:07pm.

My policy has been to require a lease up front and then let it revert to month-t0-month thereafter. That way you have them for a set amount of time to cover your rent-up expense, and you both have the flexibility to terminate afterwards.
If you demand a new lease in order to stay, what if they were planning a move in 3 or 6 months and you are forcing them to move now instead? If they are good tenants, better for you to keep them on for a few months longer.

Submitted by Hatfield on July 31, 2013 - 9:52pm.

When the lease expires, I offer my tenants the option of signing a new lease or reverting to month-to-month. Some tenants like the perceived security of a lease, other prefer the flexibility of going month to month. If they're good tenants it makes no difference to me, and they seem to appreciate being given the opportunity to choose what option they want to take.

BTW, the law in California changed a few years ago: if the tenants have lived in the property for a year or longer, you must give them 60 days notice. It used to be 30 regardless of the length of the tenancy.

Submitted by FormerSanDiegan on August 1, 2013 - 8:57am.

I agree with Hatfield and HLS here.

Going month-to-month is in your favor.

However, if you really want them to choose a 12-month lease, then don;t ask them, just send them a notice of intent to increase the rent under month-to-month agreement and give them a form with a box to check to give them a choice between the increased month-to-month costs or a new 12-month lease at the same rent (or modest increase).

box 1 - Renew 12 month lease at $X (e.g. no increase in rent).

box 2 - continue month-to-month with $X increase (as of a date far enough in the future that you can give 30 days notice, so e.g. 45 dayd from when you send the letter.).

Submitted by livinincali on August 1, 2013 - 12:56pm.

FormerSanDiegan wrote:
I agree with Hatfield and HLS here.

Going month-to-month is in your favor.

However, if you really want them to choose a 12-month lease, then don;t ask them, just send them a notice of intent to increase the rent under month-to-month agreement and give them a form with a box to check to give them a choice between the increased month-to-month costs or a new 12-month lease at the same rent (or modest increase).

box 1 - Renew 12 month lease at $X (e.g. no increase in rent).

box 2 - continue month-to-month with $X increase (as of a date far enough in the future that you can give 30 days notice, so e.g. 45 dayd from when you send the letter.).

If I received a form like this as a tenant it would probably piss me off a bit. I'd certainly go out and look to see if there might be something better out on the market. The thing about sending out a new 1 year lease is it's going to make the tenant go look at what's out there. If you're at or above current market rates the tenant might decide to leave while if they are on month to month they might not even bother to look. Rents in general have been rising but you never know what's going on it your particular submarket until you look.

Submitted by FormerSanDiegan on August 1, 2013 - 4:24pm.

livinincali wrote:
FormerSanDiegan wrote:
I agree with Hatfield and HLS here.

Going month-to-month is in your favor.

However, if you really want them to choose a 12-month lease, then don;t ask them, just send them a notice of intent to increase the rent under month-to-month agreement and give them a form with a box to check to give them a choice between the increased month-to-month costs or a new 12-month lease at the same rent (or modest increase).

box 1 - Renew 12 month lease at $X (e.g. no increase in rent).

box 2 - continue month-to-month with $X increase (as of a date far enough in the future that you can give 30 days notice, so e.g. 45 dayd from when you send the letter.).

If I received a form like this as a tenant it would probably piss me off a bit. I'd certainly go out and look to see if there might be something better out on the market. The thing about sending out a new 1 year lease is it's going to make the tenant go look at what's out there. If you're at or above current market rates the tenant might decide to leave while if they are on month to month they might not even bother to look. Rents in general have been rising but you never know what's going on it your particular submarket until you look.

If you are at or above market rates, I wouldn't send the tenant anything. SO I agree with that remark.

I also would not make the new month-to-month rate higher than current market (unless you wanted the tenant to move out for some reason).

The OP wants the tenant to sign a new 12-month lease, this is a way to make that happen (or get a new tenant).

Personally, for my rentals I've always just allowed the tenant to continue on the month-to-month. I've only raised the rent once after a couple of years of tenancy in one case. In that case I was considerably under market and didn't care if the tenant had moved out.

Submitted by paramount on August 1, 2013 - 4:27pm.

The upside to a new tenant is repricing - hopefully up.

I also wonder if the lease does revert month-to-month, do all other terms of the lease remain in effect?

Submitted by FormerSanDiegan on August 1, 2013 - 5:30pm.

paramount wrote:
The upside to a new tenant is repricing - hopefully up.

I also wonder if the lease does revert month-to-month, do all other terms of the lease remain in effect?

Generally, yes. But you'd have to read the lease to see.

Submitted by CA renter on August 3, 2013 - 12:33am.

livinincali wrote:
FormerSanDiegan wrote:
I agree with Hatfield and HLS here.

Going month-to-month is in your favor.

However, if you really want them to choose a 12-month lease, then don;t ask them, just send them a notice of intent to increase the rent under month-to-month agreement and give them a form with a box to check to give them a choice between the increased month-to-month costs or a new 12-month lease at the same rent (or modest increase).

box 1 - Renew 12 month lease at $X (e.g. no increase in rent).

box 2 - continue month-to-month with $X increase (as of a date far enough in the future that you can give 30 days notice, so e.g. 45 dayd from when you send the letter.).

If I received a form like this as a tenant it would probably piss me off a bit. I'd certainly go out and look to see if there might be something better out on the market. The thing about sending out a new 1 year lease is it's going to make the tenant go look at what's out there. If you're at or above current market rates the tenant might decide to leave while if they are on month to month they might not even bother to look. Rents in general have been rising but you never know what's going on it your particular submarket until you look.

Agree with this. Leave everything as is. Go month-to-month or kindly offer them any duration lease they would prefer at no additional cost, and highly recommend that you do NOT increase the rent if they are good tenants.

For as long as they abide by the lease, pay the rent on time, and take decent care of the property, consider yourself a lucky landlord. My parents had multiple rentals in multiple states for decades and almost always had very positive experiences because they were not greedy or obnoxious landlords, offered somewhat below-market rents to exceptional tenants, and gave the tenants a lot of leeway WRT improving/personalizing the properties (with the understanding that they would return things to their former, or an improved, condition upon move-out), etc.

Do yourself a favor and treat your good tenants very, very well. You will not regret it.

Submitted by sdsurfer on August 5, 2013 - 1:29pm.

Lot's of good advice above! Personally, I would let them stay month to month and not say a thing since everything in the current lease remains and they sounds like good tenants. If you insist on a new 1 year lease then do not increase the rent too. I love the idea of my tenants staying in the property and paying my mortgage and in return I do not raise the rent on them and keep everything in good standing. I also like the aspect that if rents are going up around them they are even more likely to stay where they are and continue the win-win relationship. You can always update the property a bit when/if they move out and jack the rent a little at the same time if you choose to.

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