Sign lease with new tenant B4 old tenant has closing date?

Question

I think I already know the answer to this, but I'd like to bounce it off the veteran landlords in the house . . . FYI, I'm in SC.

My long-term tenant verbally informed me about a week ago that she is buying a house, has an approved sales contract, and is working on nailing down a May 7 closing date. She intends to spend a week or 2 fixing up the new place and won't leave her current rental until about May 20.

I stuck a sign in the yard, and the phone started ringing off the hook as usual.

I now have in front of me 2 very good tenant prospects, yet I'm hesitant to enter into a rental agreement with them for fear that my current tenant's home-buying plans could fall through. There's no particular reason why I think things might not work out--it's just that we all know stuff happens and closings fall through for various reasons.

If I do a rental agreement with someone, say, for a June 1 move-in date, and my current tenant's plans fall through and she can't buy her new house, I'm in a pickle. And so is my new tenant. And my current tenant.

The way I see it, my options are as follows:

(1) Do a rental agreement with one of the new prospects, with an addendum that outlines this problem . . . but how to word it . . . ?

(2) Hold off on accepting applications (or even showing the house!) until things are more concrete with the current tenant's closing. But I hate to do this, because actually a closing could fall through the very day it is scheduled. On the other hand, if I wait until the closing, then I'll probably have a period of vacancy in my rental property, and I hate that. I always have a tenant lined up and waiting to move in the moment the other one has gone.

Advice?

Account Closed · Answer

Send her a notice in writing that says you received her verbal notice that she will be out on May 20, 2010. Then you state that you are issuing a 30 day notice that she is to vacate the property by May 20, 2010, and that she must be out, or else the rent will be increased to 3 times the current rental rate and she must issue another 30 day notice in writing with a firm move-out date. This is a standard tenant trick. They don't know when they are moving, so they give a notice without a firm move-out date. Then they extend a few days at a time. When they finally move out, they won't tell you until the day they go. Then they scream that they should get all their deposit back because they gave a 30 day notice. You have to head that behavior off. It isn't a 30 day notice unless it has a firm move-out date. When a tenant calls and says they are moving, you tell them right then that you only accept a 30 day notice if it is writing. Otherwise they can make all sorts of false claims about what was said by either side.

Brian Levredge · Answer

I would try to get your current tenant to put her notice in writing with a a move out date on it. A verbal isn't really anything to go off of and you are correct to think that the closing could be cancelled or delayed. That's why it needs to be in writing. It's not fair to you to be held hostage by a tenant that may or may not be moving at a certain point in time. Until you get that 30 day notice in writing, I wouldn't plan on doing much else with your property.

Frank Adams · Answer

Terri wrote; "Do a rental agreement with one of the new prospects, with an addendum that outlines this problem . . . but how to word it . . . ?" Why would you have to write an addendum to either lease? Clauses spelling out the rights and remdies (money damages) of ALL THREE PARTIES should have already been in your leases. The following is rather OLD as I haven't had a rental since '99, but it's verbatim from the Texas Real Estate Commission lease in use at the time. HOLDOVER: IF TENANT HOLDS OVER AND FAILS TO VACATE ON OR BEFORE THE CONTRACTED MOVEOUT DATE (END OF LEASE TERM, OR ANY RENEWAL OR EXTENSION PERIOD, OR THE MOVEOUT DATE AGREED TO BY THE PARTIES), TENANT SHALL BE LIABLE TO PAY RENTS FOR THE HOLDOVER PERIOD AND SHALL INDEMNIFY OWNER OR PROSPECTIVE TENANTS OR PURCHASERS FOR DAMAGES (i.e., LOST RENTALS OR PROFITS OF SALE, LODGING EXPENSES AND ATTORNEY'S FEES). RENTS DURING THE HOLDOVER PERIOD SHALL BE DUE ON A DAILY BASIS. Frank

Terri Pour-Rastegar · Answer

Problem solved! Thanks to all the help I got here. Last week, I informed my current tenant that, although I appreciate her giving me verbal notice far in advance of what's required, I cannot move forward with a new tenant until I receive written notice from her. I explained that I do not want any of us to be in a bad position down the line. I advised her not to give written notice until she is absolutely committed to leaving on that date, and made sure she understands that she must leave on the date given, even if her plans fall through. I emailed her the Notice to Vacate that I require from my tenants who are leaving, so the verbage is very clear. She understood perfectly, and I received her notice on Saturday. So, all is well. Now I just have to choose between 2 fantastic new tenant candidates. I hate this part. Thanks for the great advice everyone!!!

Joshua Dorkin · Answer

Get the move out date in writing from them now. Then, start screening those applicants and get them moved in after your property is available. If the current tenant can't close on their deal, they will need to go elsewhere. As others have said, you can't let them hold you hostage, playing some kind of waiting game. This is a business and if you let others take control of it, you're going to lose. Good luck and keep us posted.

Terri Pour-Rastegar · Answer

Of course, all of you are right. I guess I just need to put my foot down and remember who is in charge here. Thanks.

Steve Babiak · Answer

She is supposed to move on the date she says to when she gives you written notice - PERIOD. They have self-storage and hotels to accommodate those whose plans don't hold together. BTW - I had this sort of happen to me also. Got written notice from tenant; found out from a neighbor that tenant now had a puppy (no pets violated). Did not bother to start eviction because they were moving; by the time I served notice to quit, and did the filing with the DJ, they should be gone. Their closing fell apart due to seller liens that could not be paid off from closing proceeds, and they asked if they could stay. I said NO! Their notice saved me from starting eviction against them - no way they were staying. And they didn't - and I don't know what they then did or where they went, since it wasn't my problem anymore. And BTW I was running an ad for replacement tenants too, so why start over? Remember it is a business, and that vacant time means money lost to you. So get the move out date in writing, and tell them you expect them out at the end of that last month for which they have paid in full. If they paid to month's end, but want to move on the 20th, they have a week to get their act together.

Terri Pour-Rastegar · Answer

That's what I was thinking too. But even if I get a written notice, and ultimately her closing falls through, I can't imagine forcing her to move. She will not have been looking for alternative housing--she'll be focusing on closing on her new house. I would feel awful forcing her to go through with her move-out.