lease change the renter (a lawyer) wants to add about escrow

lease change the renter (a lawyer) wants to add about escrow

Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
  • Hello all.
  • Our future renter wants to put these two items in the contract, one is in case we put the house on the market. Note that she is a lawyer. We don't fully understand the escrow clause and how it might affect us if we do sell the place. The renter feared being kicked out by a new owner. We assured her we would sell it only if the market skyrockets but would write the sales contract with them as renters until their lease ends. We are wondering if these are both in our best interest as they are written or is there is anything we should add to protect ourselves?  One of my concerns was, if we do sell and the deposits are in escrow, who ultimately is responsible for any repairs when the lease ends? She said she knows us as landlords and trusts we will not keep the deposits unless there is a true issue, but is afraid the new buyer might keep the deposits just because they can.
  • We talked with her and she was upfront about the dog and thankful that we allowed him. With their income, they could rent four of our places. They love the lifestyle of the area.  They have sold their place and are building another. They were attracted to our rental because it was like they are with their house -- "so clean and obviously taken care of". We are charging them a "$1500.00 pet deposit" as they have a 7 year old lab.  We have scheduled four maintenance checks over the next year to check on the place and maintain the HVAC. This security amount, when added to the security deposit, equals the cost of replacing the wood floor in a worst case scenario. We just put in engineered floors in the first level (living) and they said they will put their oriental and another rug by the front door. The second level, all tile, has another living area, eat in kitchen and small dining area. They said have their dog groomed monthly including nail clipping. It's mostly going to be just her as her husband travels a lot. It is three stories. She works from home. It is a very dog friendly area. 
  • Here is what they want to add to the lease ---
  • The deposits are held in escrow if the property is sold in the Spring and that she is given reasonable time (12 hours) for showing if the home is put on the market."
  • "No maintenance deductible for repairs over $100. They accept the responsibility of repairing items as they come up that are under $100 or for anything they may have caused, however they do not want to pay for repairs that arise and are out of their control.

I hope I covered all the aspects that would help any of you with giving us guidance in this decision. Thanks for your help.

Chelle

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Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
9y

I'm surprised this lawyer doesn't know the expression "runs with the land." The lease runs with the land and is binding on anyone who may buy the property.

I'm also surprised this lawyer doesn't know that any potential buyer will be bound by the same rules regarding security deposits as you are. On a sale, you would transfer the security deposit to the buyer, and he would have to place it in a separate account. They can't just keep it, but would have to return it when the tenant moves out, minus any deductions for damages.

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  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    I have dealt with lawyers as tenants and aside from professional tenants they are the absolute worst to deal with. I would never rent to a lawyer. In your case there are a lot of red flags that indicate they have every intention of taking over your property as their own and you will have no end of problems controlling anything they do.

    I would strongly advise you either reject these applicants or tell them to rub salt on any suggested changes to the lease. If you want tenants that will own you these are the ones.

    Tenants do not ever dictate lease language and those that try should always be rejected. The signs are there you unfortunately do not know how to read them.

    Run away, do not walk, do not ever rent to these people.

  • St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    9y

    @Chelle Knijnenburg I have to agree with Greg, lawyers are not a protected class and there are lots of good tenants who do not want to renegotiate your lease with clauses that are in their favour. You do not want to sell your property now but life events occur and you might want to at some stage; you could be surprised by events. I would not put in clauses that potentially bind you or a prospective purchaser since these might serve to encumber your property and so depress its value. Something in their story does not hang together - they are just renting while they are building you say, but then they are concerned about you selling the property. There is a mismatch between their claimed rental period and their interest in amending your lease due to concerns of a sale. You say their income would allow them to rent four of your places. Have you properly verified this through obtaining two recent paystubs and ideally review of tax returns? This sounds suspect to me. If they are so wealthy why are they not renting something more upscale and in keeping with their claimed income?

    As to the dog, good luck deducting canine damage from a security deposit or worse still, suing them in small claims court. You would be completely outgunned in the event of your new floors being ruined. You may as well regard yourself as having no protection from a deposit and no recourse through the courts. They could tie you in knots for sure.

    The biggest concern as Greg alludes is that this is not the start of troubles from lawyers, it is the beginning. What happens if they want maintenance and they do not like your response? Or anything else they do not like? They have a free lawyer - themselves. You would have to either capitulate or go and pay a lawyer to deal with them, meaning you lose money on this tenancy, and potentially a lot of money. This is not an appetizing prospect.

    There are tenants who do not present this baggage. Reject the lawyers and go find someone else. I would willingly give up a month's rent in order to keep looking and find someone who is both lower risk and simpler to deal with. Just do it in writing in a brief email, don't give a reason for rejection and don't be drawn into any discussion whatsoever. No good can come from this.

  • Residential Real Estate Broker · San Antonio, TX · Member since 2016 · 506 posts · 311 votes
    9y

    These decisions are made for me, as a PM. Accounting rules in Texas mean we have to escrow all deposits.  Escrowing the deposit will not protect them in the case of a sale, though, as the new owner has rights to the rents and the responsibility of holding the deposit should you sell.  We have to pull the deposit from escrow and the tenant is advised the new landlord has their deposit.  If they are an individual owner/landlord, at least in Texas, they are NOT required to escrow the deposit. 

    They do have to account for it, and a lawyer would know all the requirements of Chapter 92 of the property code when it comes to remedies against a landlord.

    The lease is superior to the sale, which means they can stay through the end of their lease term, but the new owner would be able to give notice/not renew after that.

  • Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes
    9y

    If this isn't already your tenant, and you are in a good market, I'd take a pass and find a new tenant. The fact that they are already "lawyering" before the lease is signed about unplanned, purely hypothetical situations, is a sign of things to come. 

    1. I am assuming you are using a state approved boiler-plate lease. I would explain, for your protection and hers, you won't be editing the language.

    2. Escrow instructions address any and all deposits, it doesn't need to be reiterated in the lease. 

    3. A new owner can't "kick out" a tenant with an active lease in place. A simple Estoppel would ensure the terms of current lease are preserved after the sale. 

    4. A proper move in procedure would eliminate any questions or ambiguity between you and new owner/landlord. I've never heard of putting a cap on the amount of repairs that can be deducted from the deposit. That isn't really negotiable. Again, they are negotiating hypothetical situations. 

    That's my two cents. After doing this for 10 years, I've learned if they are a pain before they even move into the house, they will be a pain the whole time. 

    GOOD LUCK! If you have any other questions, don't hesitate to ask. 

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    I finally got to read this and have to thank you all SO much!!  We are sending the leasing agent an email saying "we reject this tenant" and hiring another leasing agent.

    Any leasing agent suggestions for the Plano, TX area? It's a 3 story town home off a tollway and other major highways, near many large company headquarters. The area is a desirable, multifunctional development with town homes, shops, restaurants, dog park, walking paths, etc..

    Again, great big THANKS for saving us from a possibly negative experience.  I forgot to add she was debating the pet deposit and that should have been a huge red flag.  

    BP Rocks!!!

    I will update. 

  • St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    9y

    @Chelle Knijnenburg I think this is for the best. @Account Closed is right you know, if they are a pain before they move in they will be a nightmare once they have the keys. That is something I learned the hard way. As a landlord you have to be able to make good decisions during the application process based on relatively small amounts of information. In your case you had lots of information and it all pointed to one answer: reject. There are better tenants than this. Some tenants pay the rent on time but can be extremely difficult to deal with. Have one bad tenant like that and it will cure you from ignoring such signals going forward. Good luck.

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    @Thomas S.  Thanks so much for your insights. Your ten years saved me one year and I am so glad you took the time to share your knowledge.

    Thanks to you all for your mentoring and advice that I am sure is saving us time and headaches and money.  

    Update - the leasing agent jumped the gun and told them they were approved. Upon seeing that text, I became a bit worried. I try to be fair with people, but she was not explicitly told that we approved. We followed your advice and told her "no, we are rejecting them". She wanted a reason, first for them and then for herself.  Your advice has stopped me from giving her one.  Am I right to think a lawyer could cause some trouble based on her mistake?

    I am wondering about the leasing agent and how to learn more about finding a good one, plus a PM company. From the start, I told her I wanted her to guide us, she agreed BUT it appears she did not counsel us in our best interest.  Looking back, she did or did not do some things regarding renting the unit that would have been better for us to know.  I really wanted to give her the benefit of the doubt as she was 'the expert'.

     …… So, based on some of what you all so kindly shared, I am now realizing I need to do even more research and check in with BP more often. 

    For the future I would like to know,…..Can you fire a leasing agent or real estate agent that you have a contract with based on red flags from his/her behavior?  If the leasing agent approves the tenant even though we did not explicitly say yes, can that person cause trouble?

    Happy Thanksgiving!!

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    OK, I need some more advice. I just found the email. The leasing agent wrote

    "What is the reason for rejecting the application? I told them they were approved after reading Michelle's email this morning.

    If denied, I need to send them an adverse action letter letting them know why"

    If I have to say why, what can I say that a lawyer cannot go after us for?

  • Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes
    9y

    I would tell her you aren't willing to modify the lease to meet their demands and therefore won't be moving forward with them. 

    You can remind her how inappropriate it was to tell the tenant they were approved without confirmation from you. If you want to terminate the listing agreement and she gives you push back, I would just contact her broker. 

    Are you local? If so, you could easily market the place yourself. Save yourself money and ensure you are getting the best tenant. 

  • Realtor · Houston, TX · Member since 2011 · 916 posts · 296 votes
    9y

    Tell them the truth. They want to change the lease and yall cant agree over the terms. Maybe you can alsl say you dont want dogs especially puppies.

  • Investor · Atlanta, GA · Member since 2014 · 65 posts · 29 votes
    9y

    I choose to not rent to lawyers or employees of law firms..  

    Someone told me once "how hard is it for them to sue you?"  They know all about that subject, have all the paperwork ready to go! 

    #not me! 

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    @Account Closed  I truly take that to heart.

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    @Account Closed  I had a friend who lived in Fort Walton Beach. It is a pretty area you reside in!!

  • Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes
    9y

    @Chelle Knijnenburg It is lovely, we are about 35 miles East of FWB in Seagrove. I grew up vacationing here and my husband and I decided to move here full time earlier this year. We love it. We started demo, on our first flip here, this week. 

    I would sleep on this one. You are tired, stressed and confused and I never like making decisions under those conditions. If you wake up tomorrow and still don't want to rent to them, you should just be honest and say you changed your mind about the dog. You underestimated the repair costs to your flooring. People with dogs are not a protected class. They are obviously a bit desperate given their timeline, so hopefully they don't drop their dog at the pound and say, "we don't have a dog now," :-) 

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    <=My concern stems from the leasing agent who told them they were approved when we had not approved them  I am concerned with the agent looking to us to come up with a reason we are rejecting them.  They dropped their demands, but we are not comfortable with them any longer. Now that they were told they were approved, do they have type of case?  Looking back, we were naive. such as agreeing to check into accepting the escrow account and the large dog. We truly did not know how much damage a dog can cause. Now I feel we weren't guided correctly by our leasing agent. 

  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    The fact that they withdrew their lease demands so easily is another big red flag. You may be dealing with a con artist/professional tenant.

    Inform your agent that you have decided to changed your policy on allowing dogs. If you decide to reject them you should not have any personal contact with the applicants. Make sure you tell your agent that you never authorised her to approve them.

    Did your agent perform the  back ground, employment, criminal, eviction and credit check. Was the screening done by your agent or yourself.

    If no actual screening was completed you defiantly need a different agent.

  • Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
    9y
    Chelle Knijnenburg Theirs 4 things I see here. I'm not seeing why a lawyer is wanting to rent your unit if they can afford a much better place? That's a red flag. 2). The dog isn't the problem about the floors. I'm not privey to know what an engineered floor is but I gather they are pretty expensive. A rental is comparable to a work truck. If your an executive It's good to have a new $70,000 pickup to drive to the office every day but if you work on a farm you want an old truck that's strong and dependable. You don't want leather interiors and a fancy stereo system. You want rubber mats and a radio. Your rental is the Same way. It should have laminate carpet linoleum or tile floors. 3) your PM jumped the gun. It's his/her problem to streighten out with The tenant what they told them. Not yours. I would get rid of them. 4) if this tenant is really a lawyer then they know that most states (if not all) protect the tenants deposit fiercely. They also will know they have certain rights in a sale situation. Red flag number 2. Run from both that PM and those tenants. RR
  • Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
    9y

    I'm surprised this lawyer doesn't know the expression "runs with the land." The lease runs with the land and is binding on anyone who may buy the property.

    I'm also surprised this lawyer doesn't know that any potential buyer will be bound by the same rules regarding security deposits as you are. On a sale, you would transfer the security deposit to the buyer, and he would have to place it in a separate account. They can't just keep it, but would have to return it when the tenant moves out, minus any deductions for damages.

  • Rental Property Investor · South FL · Member since 2014 · 92 posts · 16 votes
    9y
    Originally posted by @Chelle Knijnenburg:

    <=My concern stems from the leasing agent who told them they were approved when we had not approved them  I am concerned with the agent looking to us to come up with a reason we are rejecting them.  They dropped their demands, but we are not comfortable with them any longer. Now that they were told they were approved, do they have type of case?  Looking back, we were naive. such as agreeing to check into accepting the escrow account and the large dog. We truly did not know how much damage a dog can cause. Now I feel we weren't guided correctly by our leasing agent. 

    First let me say I find it pretty out of line and arrogant of the lawyer to think they can dictate your terms of sale. ??? 

     Ok you have to look at this cut and dry. 

    1. The leasing agent made the mistake of telling the lawyer they were approved when they were not. 

    2. As any lawyer will tell you a verbal agreement is NOT legally binding. 

    Now you did not approve this tenant because of the demands, now the LA lets the prospective tenant know, and kawyer

    Says they'll drop their demands and now said leasing agent doesn't not want to own their mistake or loose whatever payment will come from leasing to the lawyer. 

    You are not bound by anything here but being afraid of the "big bad lawyer" they have no legal ground to stand on here. They can huff and puff, your inside a brickhouse, get it. 

    Just tell or better email leasing agent they did not have the authority to approve a tenant without you agreeing their mistake. 

    Sounds like LA is trying to "force" you into accepting this tenant so they can get paid- don't do it. 

    I would send a certified letter to the prospective tenant bypass the lease agent alltogeher stating that :

    1. Their original application was never approved and the leasing agent took it upon themselves to approve tenant without having been given authorization to do so or having any approval agreement from you the landlord. 

    2. The requests made in regards to the lease, escrow, and he dog are just not feasible and you are unable to accommodate those requests for any tenant at any time. 

    Then call a lawyer friend to look over the letter if you feel you need to. But I think it's simple lawyer wanted to dictate the lease in terms you may or may not understand the future implications of and leasing agent appears to be lazy and doesn't want to go through getting a new tenant. Then let the lease agent know you will no longer need their services at this time thanks. 

    I would drop them both fast and run away. LOL 

  • Rental Property Investor · South FL · Member since 2014 · 92 posts · 16 votes
    9y
    Originally posted by @Thomas S.:

    The fact that they withdrew their lease demands so easily is another big red flag. You may be dealing with a con artist/professional tenant.

    Inform your agent that you have decided to changed your policy on allowing dogs. If you decide to reject them you should not have any personal contact with the applicants. Make sure you tell your agent that you never authorised her to approve them.

    Did your agent perform the  back ground, employment, criminal, eviction and credit check. Was the screening done by your agent or yourself.

    If no actual screening was completed you defiantly need a different agent.

     I think you're right here this lawyer sounds very manipulative and it sounds like they've done this before or they're using heir law degree to intimidate mom and pop set ups to get their own way.  If this lawyer really just wanted a place to rent they wouldn't have even started with all those demands 

  • Rental Property Investor · South FL · Member since 2014 · 92 posts · 16 votes
    9y
    Originally posted by @Kathia L.:
    Originally posted by @Chelle Knijnenburg:

    <=My concern stems from the leasing agent who told them they were approved when we had not approved them  I am concerned with the agent looking to us to come up with a reason we are rejecting them.  They dropped their demands, but we are not comfortable with them any longer. Now that they were told they were approved, do they have type of case?  Looking back, we were naive. such as agreeing to check into accepting the escrow account and the large dog. We truly did not know how much damage a dog can cause. Now I feel we weren't guided correctly by our leasing agent. 

    First let me say I find it pretty out of line and arrogant of the lawyer to think they can dictate your terms of sale. ??? 

     Ok you have to look at this cut and dry. 

    1. The leasing agent made the mistake of telling the lawyer they were approved when they were not. 

    2. As any lawyer will tell you a verbal agreement is NOT legally binding. 

    Now you did not approve this tenant because of the demands, now the LA lets the prospective tenant know, and kawyer

    Says they'll drop their demands and now said leasing agent doesn't not want to own their mistake or loose whatever payment will come from leasing to the lawyer. 

    You are not bound by anything here but being afraid of the "big bad lawyer" they have no legal ground to stand on here. They can huff and puff, your inside a brickhouse, get it. 

    Just tell or better email leasing agent they did not have the authority to approve a tenant without you agreeing their mistake. 

    Sounds like LA is trying to "force" you into accepting this tenant so they can get paid- don't do it. 

    I would send a certified letter to the prospective tenant bypass the lease agent alltogeher stating that :

    1. Their original application was never approved and the leasing agent took it upon themselves to approve tenant without having been given authorization to do so or having any approval agreement from you the landlord. 

    2. The requests made in regards to the lease, escrow, and he dog are just not feasible and you are unable to accommodate those requests for any tenant at any time. 

    Then call a lawyer friend to look over the letter if you feel you need to. But I think it's simple lawyer wanted to dictate the lease in terms you may or may not understand the future implications of and leasing agent appears to be lazy and doesn't want to go through getting a new tenant. Then let the lease agent know you will no longer need their services at this time thanks. 

    I would drop them both fast and run away. LOL 

     Adding those reasons are why you're declining their application and cannot rent to them. 

    Then keep their name on a list or something so if you have more properties you have your "professional tenants list" 

  • St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    9y

    @Chelle Knijnenburg Well, further to your post to @Account Closed saying you are no longer comfortable about the big dog and are beginning to have doubts you will be able to recover damages, I have news. These tenants have no intention of paying for any damages to your property and if you try and deduct damage against a security deposit or sue in small claims you will face a world of trouble because you will have invited lawyers into your property. They won't pay a cent without a fight, and they certainly will not admit any liability for their dog's damage.

    So you are going to reject but your leasing agent had already accepted without consulting you. Further, the agent now asks for reasons for rejection to give to lawyers. What could possibly go wrong? Give no reasons, say you are rejecting the tenants and fire the agent. Find someone else who will follow your direction and not try to establish a contract with tenants who you have not approved yourself. You need to act decisively to get beyond these tenants so that you can find people who are more suitable and unlikely to cause trouble. Then if you insist on using  an agent to help find tenants you should find one who will not commit you to tenants without your approval.

    A word on leasing agents or realtors as sources of tenants. I am afraid most are fairly self interested individuals. They seek deals and commissions in the easiest and fastest way possible. It does not make any difference in the amount they are paid whether they have you lease to the first tenants that come through or to the twentieth tenants that come through. Their commission will be the same. Therefore their bias is to have you rent to the first even marginally viable people who come through because then they will get their payment fastest and they can move on in search of the next payday and devote their time to the next commission. They will not compensate you if the tenants they have found are a PITA or default on the rent. Simply put it is better to advertise and find tenants yourself because you are likely the best guardian of your interests. This agent acts without your permission, tries to commit you to lawyers as tenants, and then wants to get reasons from you that could be used as the basis for litigation by said lawyers. Fire the agent.

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    @Kathia L. --  @Stephen E.  I just got back from vacation. Thanks so much for taking the time to share your knowledge. The follow up is that the advice to reject these tenants and move on from the leasing agent was taken. 

    I SO APPRECIATE all the advice and knowledge sharing done by everyone. I wish you all success and a happy holiday. :-)

  • Rental Property Investor · South FL · Member since 2014 · 92 posts · 16 votes
    9y

    Good for you, Happy Holidays ! 

  • Chelle KnijnenburgPro Member
    OP
    Homeowner · Colleyville, TX · Member since 2015 · 85 posts · 17 votes
    9y

    Follow up. We did go with another agent and it is now rented to a nice gentleman and his son. Thanks to all of your for your guidance, support and sharing your knowledge. I am very appreciative of the BP community.

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