DOES A TENANT’S LEASE REALLY MATTER?
Drawing up a professional lease that will cover as many likely situations you and your tenant will face is just one of the many advantages of working with a property manager. Nexus Property Management® also offers a free tool to help you create your own lease if you prefer to go it alone. The fact of the matter is that you need to ensure that this initial contract is without errors or gaps. That being said, tenants don’t always live up to this agreement and some property owners occasionally doubt whether the lease even matters?
ANSWER: OF COURSE IT DOES…USUALLY…WELL SOMETIMES
A tenant’s lease is a convenient, loosely enforced document that spells out the terms of an agreement. It is effective in setting boundaries and making sure expectations are clear, but not all items on a lease, if violated, carry the same weight. This is where enforcement gets a little tricky.
When a tenant signs a lease, they’re agreeing to operate based on the language you’ve put forth, but you rely on courts and the legal system to enforce that agreement, and that leaves some wiggle room for tenants. Your lease might indicate that smoking is not allowed, or pets are not permitted, but courts tend not to evict for these types of fouls…and beyond eviction, you don’t really have any other great enforcement tools up your sleeve. This can be extremely frustrating for property owners.
LEARN MORE: WHAT TO DO IF TENANTS ARE DOING DRUGS IN YOUR PROPERTY
STAY TRUE TO YOUR GOALS: PROFIT VS. EGO
As upsetting as it can be to learn that your tenants are behaving in a way you thought they’d agreed not to, you still need to think about next steps in terms of what is best for your profits. As a real estate investor you are running a business, and as would be the case in any service industry, you need to keep your ego in check. We hear so often, “They agreed to it, they broke it, they’re out…I’m right, they’re wrong”. And that owner is not wrong in principle, but they’re wrong in approach. Evicting a tenant because they’re smoking in your property when they’d agreed not to can be broken down monetarily:
If you evict:
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You feel better inside because you’re defending the agreement
BUT…
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You need to pay court fees
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You may or may not prevail (these cases are tough to prove and judges tend to side with tenants when evidence is inconclusive/underwhelming)
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If you do win the case, you have a vacancy that needs to be filled (which means at least a month or two of no rental income)
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You’ll need to spend money to get the unit “rent ready”
If you don’t evict:
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You still have a steady stream of income from the rent being paid
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You’ll have to spend the same money to get the unit “rent ready” eventually, but not at this point. Depending on where the tenant is in their lease, you could potentially raise rent to cover the added costs of having to get rid of smoke smell or discoloration when the time comes.
Just because the tenant is wrong, doesn’t mean eviction is the right move. Your lease language sets a bar for what is expected and that bar is a guide.
LEARN MORE: HOW TO HANDLE PARKING DISPUTES AT YOUR RENTAL PROPERTY
THIS ALL SOUNDS SOFT: WHY AREN’T YOU TOUGHER ON TENANTS?
We haven’t touched on the most important part of the lease…the payment language. This is by far the most important and most enforceable section of your lease agreement. When it comes to nonpayment of rent, you should absolutely 100% evict as soon as local law allows. Do not accept excuses or undocumented agreements in terms of paying in a couple weeks, or paying double next month. Tenants that don’t meet financial obligations need to be taken to court. Again, you are running a business. Sneaking a pet in, or having a cousin sleep on the couch for a couple weeks are minor problems as long as the rent keeps coming in. When the rent stops, so does the tenancy. Case closed…and the courts are on your side on this one (assuming you’ve followed local statutes).
And to revisit the smoking scenario introduced above, beyond fire risk, no smoking policies are typically in leases to avoid other damages such as burn marks in carpets and lingering odor or paint/ceiling discoloration. When it comes to returning the property to rent-ready condition once the tenancy has ended, you will use the necessary funds from the tenant’s security deposit to cover any damage beyond normal wear and tear.
LEARN MORE: SECURITY DEPOSITS 101 (FREQUENTLY ASKED QUESTIONS)
YOUR OPTIONS
1A. EVICT:
You can move toward eviction if you really want to. Maybe there has been a history of conflicts and you feel that this tenant is interfering with your business model so it makes sense to you.
1B. 20 DAY NOTICE TO CURE:
In most states, you can issue a “20 day notice to cure” where the offense is spelled out and in 20 days you can inspect to see if the issue has been corrected. If there’s a pet where there shouldn’t be, you’re giving the tenant 20 days to get rid of it…same for that cousin on the couch. Sometimes this can be a useful tool…but it’s often easy to skirt around. That cousin can stay with another cousin for a couple days, and take the cat with him, only to return on day 21 or 22. However, if you do find evidence that the offense still exists after 20 days, you have grounds to evict, but you’ll have to prove your case, which is often difficult.
2. COMMUNICATE EFFECTIVELY AND HOPE FOR THE BEST:
Doing nothing is not an option. If you’re not going to evict, it is imperative that you communicate your knowledge of the issue to the offending tenant and do so in a way that is most likely to lead to a change of behavior without creating greater conflict. Letting the tenant know you’re aware of a violation and referring to language in the contract that they agreed to can be extremely effective. Keeping it simple helps you avoid judgmental language that can often lead to defensiveness and splinter a relationship. Always remember that hassle-free, long term tenancy is at the heart of your real estate investment plan.
Without communication, you’ve given the tenant no opportunity to fix the problem, and that is not in your best interest. Whether you’re a guy with flag tattoos or not, you should remember from High School Civics that in America you have the right to know what you’re accused of. Obviously this reference in our Bill of Rights is geared toward the judicial system, but the principle is one that can be applied universally. Spelling out what someone is doing wrong is the first step toward curing the issue…and if you skip that step you typically make things worse.
It’s also worth noting that written, dated communication will be helpful down the road should you need to take legal action at some point.
3. DO NOTHING:
Not an option…see above.
LEARN MORE: TENANTS ARE YOUR CUSTOMERS…AND YOUR BOSS
CONCLUSION: NEXT STEPS
Nobody likes to be lied to or deceived. In a perfect world, agreements would be followed to a T but that is not reality. Humans are going to act in (what they think is) their best interest more often than not, and often enough those actions won’t line up with the interests of those around them. It is not our job to ask people to be more perfect, it is our job, as real estate investors and property owners, to provide them with a comfortable place to live so they will pay us rent. With that in mind, an effective landlord has thick skin when it comes to lease violations that do not directly impact his or her wallets. Conversely, when rent is not paid on time, an effective landlord begins the eviction process as quickly as legally possible. Leniency in this area is inexcusable and potentially very costly.
Still have questions or are looking to learn more about the eviction process and options you might have with difficult tenants? Contact our team today!
Nexus Property Management® also offers franchise opportunities from coast-to-coast. We are currently the largest residential property manager in Southern New England and continue to grow throughout the region. Learn more about joining our team!
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