Edit: in the title, I meant to say "Holding tenants responsible for finding new tenants if they break the lease"
I rent long-distance to good tenants who want some flexibility in the coming year. I want them to sign a 1 yr lease and they wish to retain the option to break it without penalty if they help me find a new tenant (post ads, host open house and showings, etc.) If there’s no vacancy, no penalty for them and they get the deposit back. I am fine with that, but not quite sure what type of language to include in the lease to that effect. Also, I would like to ensure I have the option of raising the rent for new tenants (didn’t increase it at all for the current ones).
I hope some of you who have used this type of clauses in the lease can help me with suggestions. Thank you very much!
San Juan Capistrano, CA · Member since 2011 · 114 posts · 34 votes
15y
This is interesting. If it were me, I would just have them go month to month or pay the fee to break the lease.
It sounds great in theory to have them do all the work finding new tenants, but I can see some sticky situations too. Like what if they keep bringing you new tenants that don't meet your (at least I hope) strict requirements? They might think you're sandbagging them.
They don't have a vested interest to get you a GOOD tenant. Just a tenant.
Another unique idea would be to have a decreasing fee for breaking the lease. For example, $1k if they break it in month 1, decreasing to $100 if they break it in month 10. I just came up with those numbers, it depends on your rent.
Your idea isn't bad, it's just not one I would personally go for. It kind of defeats the purpose of a lease.
San Juan Capistrano, CA · Member since 2011 · 114 posts · 34 votes
15y
This is interesting. If it were me, I would just have them go month to month or pay the fee to break the lease.
It sounds great in theory to have them do all the work finding new tenants, but I can see some sticky situations too. Like what if they keep bringing you new tenants that don't meet your (at least I hope) strict requirements? They might think you're sandbagging them.
They don't have a vested interest to get you a GOOD tenant. Just a tenant.
Another unique idea would be to have a decreasing fee for breaking the lease. For example, $1k if they break it in month 1, decreasing to $100 if they break it in month 10. I just came up with those numbers, it depends on your rent.
Your idea isn't bad, it's just not one I would personally go for. It kind of defeats the purpose of a lease.
Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
15y
Christine,
How long is your long distance property? I would probably hire a property manager to just rent the property out. Property managers in my area charge 1/2 month rent to place a tenant in.
Another thing you can do is if you know other landlords in your investment area, you can pay them a reasonable fee to find you a tenant that meets YOUR criteria.
If you must have your current tenant find you a new tenant, then note in your lease that the new tenants that your current tenants find must meet your selection criteria. You can share your criteria with them, just so that they can prequalify some tenants before they pass the information to you and this way your current tenants won't think you are just messing with them.
Real Estate Investor · Baltimore, MD · Member since 2008 · 1k+ posts · 268 votes
15y
Do you think they will find a better tenant than you would?
If you feel they're shaky, go with other candidates. If they tell you they MIGHT leave before the end of lease, they probably will. Why go through a hassle of filling the vacancy in six to nine month if you can pick another tenant and avoid this?
Just my thought
Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
15y
I am a long distance landlord as well. I use a pm for 2 properties and I manage 8 my self. I actually do a better job long distance than the local pm. i had a tenant last year who was month to month and before she left she would show the house to applicants and have rental applications filled out. She moved out on the 30th and the new tenant moved in on the 1st. I did not have to even clean the unit as the tenant left it spotless. The new tenant is great and I think she will be with me for long term. You can put in the lease that the tenant is responsible for paying the rent if they break the lease until you find a new tenant who meets your requirements. I dont put this in my lease but I have heard it used before.
Property Manager · Farmington, MI · Member since 2011 · 61 posts · 20 votes
15y
I believe in Michigan this would be illegal as the tenant would then be performing "Property Management" and would be required to hold a broker's license.
Real Estate Investor · Cincinnati, OH · Member since 2011 · 119 posts · 59 votes
15y
You say you have good tenants, so there should be some level of trust to allow them to do so. Look at the alternatives suggested by the other posters, all come with some cost to you. They obviously know the area and will have a vested interest in keeping the place in tip top shape so they can get out as agreed upon.
Why not have them sign an addendum to the lease stating that they must find a tenant by a specified period of time, give them some guidelines as far as credit score/income level criteria(and you even throw a comment casually that you'd love to have as good quality tenants as they are) and they will know what would fit the bill. In that addendum, you say they're off the hook if the new tenants meet your qualification and sign a lease by X date. Good luck!
Thank you all for your feedback, you made some great points. It would have been useful for me to provide more background, I just didn’t want my post to be a mile long.
The condo is in DC. I normally would have done month to month, as the property is in a desirable area, and the market in DC isn’t seasonal. But I’m in New England, and expecting my first child this winter, so wanted to minimize the risk of dealing with all the logistics of finding a tenant with 30 days notice if the timing is bad.
They say chances of leaving are really small – one of them is on a two year fellowship ending next summer, walking distance from the condo; the other has a temp contract that runs out late fall (which is why they want a door open, just in case). They’re strong tenants, and everything I read here is along the lines of keeping good tenants for as long as you can.
Come to think of it, I don’t want them to process the applications, credit checks, etc; just want them to facilitate getting a new tenant – being VERY available for showings, and talking up the place. :D Paul, I hope this would address the PM legality issue. They offered to do more of the legwork of placing ads, etc. But in the past, Craigslist worked perfectly well for me.
So, after absorbing more of your wisdom, I’ll reformulate my question to be “what would be the strongest and most advantageous language to include in the lease that would hold them accountable for facilitating getting a new tenantâ€. I don’t actually want them to get me the tenant, as I can process applications and screening long distance. I hope this makes more sense. Thank you all.
Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes
15y
Hi Christine,
I have had pretty good experiences with having tenants show properties and take applications when they want to terminate early, but these tenants were not asking for this ability at lease onset. As a matter of law, the tenants under my leases are responsible for lost rent, etc. when they break a lease. So the tenants have every incentive to keep the place clean and be available to show it.
It will still be your decision who to accept or reject. Use all your normal criteria.
I don't know how your lease reads in terms of early termination. It may already be properly addresssed. A simple paragraph in the "additional terms" section at the end of the lease should be sufficient. "Should tenants desire to terminate the lease before the end of the lease term, tenant has the option to obtain replacement tenant applications for Landlord review. Tenant is not released from liability for lost rent and other costs to Landlord, if any. Landlord shall make all decisions regarding acceptance or rejection of any said application."
I've never had to do such a writing from the outset. When the question of early termination comes up PRIOR to application approval, I will generally reject the applicant. If they are asking prior to even moving in they do not fit my criteria of long-term tenants. Your situation is different as this is a renewal and they have proved themselves to be good tenants.
I am not familar with DC LL/tenant law, but understand that jurisdiction is very tenant friendly. I may be hestitant to add any addendum that isn't included in the standard DC lease When this issue has come up with my tenants, it's just been a verbal thing.