Should I terminate the long term tenant's lease ?

Question

Hello All!

My tenant has been renting from me for over four years now. He paid throughout COVID and is often late in paying and I have to chase him a few times but he does pay. There are no arrears, however, he told me that sometimes its a struggle paying rent because unknown to me his relative and co-tenant moved out a while back but he continued to pay $2700.

Lease is coming up for renewal and I advertised the house to gauge interest and I can collect $3200 (to my shock). I would have to paint the house 2700 sq ft house and have the carpet cleaned etc. On the face of it, the answer seem obvious but in this area a lot of tenants seem to to live beyond their means. I can't imagine why someone would pay that much as it's a mediocre area at best but the house is fairly large compared to the surrounding areas. Would you terminate the guys lease? If I renew it, I might be able to raise the rent to $2800-2850. Anything above it, I can see him fall behind. A part of me feels bad to potentially put him out as he was up front that he won't qualify elsewhere due to his credit issues.

Any thoughts?

Nathan Gesner · Answer

Yes, I would evict because he is three weeks behind. If he has a full month deposit, I may tell him to get out by the end of June with no penalty. I would apply the deposit to the unpaid rent, eat the cost of turnover, and move on. But if he pushes back - even in the slightest - then I would just go forward with eviction and wash my hands of him.

Colleen F. · Answer

@Jacob Beg  I would likely  terminate.  You can give him extra time to find a place if you feel generous.  Is there something about his needs that make this property really attractive to him (parking etc)? If he has rotating relatives maybe it is just too much house for him and he needs to downsize since he is unwilling to get a permanent roommate.    I have had similar situations and have one now but that is a difficult to rent house and they are a few days not a few weeks late each month with an illness that will eventually result in a move.   You can weigh circumstances a little but your situation doesn't sound like a long term fit.

Nick Barlow · Answer

@Jacob Beg how many other properties do you have and how many can you afford to float if you have to go months with no rent evicting a new tenant?

Getting a new tenant doesn’t mean they’ll pay as well as he has-if it’s a mediocre area as you say.

If this is a “c” class property in your market, maybe you just do the rent raise you’ve suggested. This property sounds stabilized-which is worth more than a small rent increase in my opinion. $4800 ($400 rent increase annualized) is a rough cost of a turnover in my market-but I have $800/mo rents. If your turnover is higher, it might take 2-3 years to get your money back.

If it’s a “b” class, there are many on this forum that would advocate non renewal to get to market rent. I handle it on a case by case basis-the units for me that are tougher to rent get the smaller raises you mentioned on renewals: the easy units to rent are clearly more valuable, and priced-accordingly.

Great question

Nathan Gesner · Answer

My opinion is that mediocre tenants only get worse; they never get better. Chasing him for late payments today may turn into him not paying anything. Why would you take on that risk for a reduced rent rate?

Get rid of him and find someone willing/able to pay market rate on time, every time. There are plenty of them out there.

Jane S. · Answer

Dump him he's ripping you off with the constant subleasing to unknowns.

Jane S. · Answer

Dump him he's ripping you off with the constant subleasing to unknowns.

David P. · Answer

Im not sure how your state eviction are going but only thing that would scare me is that he may have nothing to lose and decide to not leave and then stop paying rent all together. I have a tenant sort of like this (pays always on the 5th day after rent is due) but is not too far from market rent but at this time I can't really say much. Only hope is California courts and eviction starts processing as normal then landlords will get some power back.

Bruce Woodruff · Answer

He has already broken your rules and will probably do so again. You don't have control of your own property. Think ahead a bit with what is most likely heading our way financially......increasing prices and then a possible/probable recession. Will this guys situation get better of worse? Probably worse, right? Better to deal with it now instead of waiting......my .02

Jacob Beg · Answer

@Nathan G. That's a valid point and is probably true for mediocre employees as well-I had to fire one who was unwilling to change his conduct over a year. I could have saved myself lot of headache by acting early.  I suspect my tenant will chip me for at least few months rent when it becomes clear that the lease won't be getting renewed unless I house him elsewhere with a smaller rent.

Since he is running a 3 week arrear, would you serve an eviction notice on that basis? In this county, you don't even need to serve a late notice and can move straight to filing for an eviction. It does create an adverse situation at that point especially when  I know that eviction process is taking up to 9 months in this county. The flip side is it puts pressure on him to pay but he won't be able to pay/afford the attorney cost.

I am leaning towards ending the tenancy.

Jacob Beg · Answer

@Nick Barlow On a second thought, the area has moved up to B- if there is such a thing. In reality, this guy never calls me for any repairs and that probably has more to do with the "revolving door" aspect where I suspect he has unauthorized relatives/sub-tenants staying at the property. I received multiple qualifying applications this morning and it's enticing to increase that rent but its a case of the devil I know is better than I don't.

However, there is an element of dishonesty on part of the current tenant where I was not told of this revolving door and the property is at some distance and I do self-manage. I can float at least two properties if I need to. In fact, I am floating three or four just now but they are rehab projects. The rent on this one is large enough that I will feel the pressure if he or someone else falls behind. He regularly pays two-three weeks late with a late fee and I have not been able to change that. It is almost as if he is one month in arrears.

Not returning phone calls or emails is another prominent feature of this tenancy so I sort of got stuck in this pattern but the rent does get paid late. My main concern with the current tenant is that he is probably at the very end of what he can afford. Even if he agrees to a nominal $100 increase- he might fall behind. In this county, there is a huge backlog for evictions due to Covid hangover so if I get entangled in the legal process I might be out by 30k+ in arrears and costs.

By the way, he is avoiding my attempts to arrange viewing for others. I think he has some sort of emotional attachment to the place even where rent is way beyond his means.

Should I terminate the long term tenant's lease ?

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