Tenant not honoring lease, how do I go about getting payment?

Question

Hello all, I had a college age tenant sign a 2 year lease 18 months in advance near a university that is almost exclusively rented by college kids. It’s a 4 bed house and she signed and paid the deposit in full thinking she’d have time to get roommates. (The lease was specific about it not being the landlord’s responsibility to find tenants; the rent was expected to be paid in full regardless). Long story short, she backed out a month before school started, leaving me with a vacant house for the past 4 months and no luck in securing tenanats since school is well underway despite lowering the price and opening up the search. My attorney says I should wait until securing a lease before taking the client to Small Claims Court but it’s looking less and less likely I’ll be able to rent this out and I need the money now. What should I do? Thanks for reading!

Nathan Gesner · Answer

1. Don't ever accept a tenant 18 months in advance, particularly a kid. They have no way of knowing what they intend to do that far in advance. I would normally suggest you not accept a tenant more than 90 days in advance.

2. I don't recommend signing leases longer than one year. Even mature tenants can't normally plan that far in advance and the majority of them will break the lease before the two-year term is complete.

3. When you take a deposit and hold a property off the market, you are accepting risk. You can mitigate that risk by requiring a large fee that is non-refundable if they change their mind. The longer you hold it off the market, the bigger the fee should be. For example, if the house rents for $1,000 and you normally require a $1,000 security deposit, charge the tenant a $1,000 holding deposit that will convert to the security deposit if/when they sign the lease and move in. If they fail to follow through, you keep the fee to cover your losses and put the property back on the market. Be careful with your language: a deposit is refundable, a fee is not refundable.

4. I don't know what paperwork was signed or what evidence you have but I would contact the former "tenant" and let her know she violated the agreement and has caused me some major losses. Let her know you intend to take her to court to cover those losses and see if she's willing to offer to compensate you. You could wait until the unit is rented so you can determine the exact amount of losses suffered, but I suspect you're already pretty close to the limit of what you can sue for in Small Claims.

Marcia Maynard · Answer

Ditto to what @Nathan G. stated.

When you said "The lease was specific about it not being the landlord’s responsibility  to find tenants; the rent was expected to be paid in full regardless."  If you are allowing a tenant to sign a lease and then sublet to others without your involvement, there could be serious unintended consequences. I'd be curious to see how you worded this in your rental agreement.

Jason Mills · Answer

Thanks Nathan and Marcia. I’m this area it is actually commonplace and practically necessary for tenants to sign leases 1 or 2 years in advance because housing that is walkable to campus is so scarce in this area for students. I have 3 other houses in this area and this is normal as strange as that seems. The campus is in a bubble you could say. Hence why it has been impossible for me to sign anyone a month before school started. She did pay the entirety of the deposit as soon as she signed ($2500 18 months in advance) whereas most of the time a group of 4 people will sign at once and split up the deposit. What I meant earlier is that whether or not she gets roommates to sign with her, she is still responsible for the 2500/month going forward and she doesn’t get “an out” because she couldn’t get anyone. I probably didn’t make that clear to you guys but it is in the lease. Nathan, in the case of your third point, this was taken care of by me because she was required to to sign a non-refundable deposit, so I have that 2500 but not the 4 months of rent she still owes. So now the question is should I continue to wait wait someone else to sign or do I go ahead and take her to court now? She’s up to $10,000 owed. I have already contacted her and her father to no avail. Thanks again.