Tenant won't sign new lease, but is still sending payment. What to do?

Question

My parents have a tenant that had a lease expire on the last day of the month in August.  A few weeks back the tenant expressed interest in a month to month lease, as he was looking to possibly buy a house.  During the discussion, my parents informed him he can go month to month, but it would be $50 more in rent.  In his old 1 year lease, he was paying $675 a month.

Here's the problem:  He has sent in payment of $675 for the month of September, but he has not sent his lease back stating whether or not he was going to go month to month or yearly.  My parent's thought is that he wants to go month to month and is avoiding signing the lease because it would mean an extra $50 a month.

I have two questions: How should they handle this?  They haven't gone over to the house, but so far, he is not returning their phone calls.  My second question is, how much more a month do you think is fair to go month to month?  As I stated, they charge $675 for a 1 year lease.  Is there a rule of thumb regarding how much more you should charge to allow this option?

Curt Davis · Answer

Has he always paid rent on time?  Is he a good renter? Personally, leave the rent the same and let him do month to month.

Joel Block · Answer

For $50 bucks, I would leave the situation alone and feel good about having a good relationship with a quality tenant.

Steve Babiak · Answer

At first thought, the gesture of goodwill to leave things as they are sounded like a good idea.  But I will give an opinion that it isn't as good an idea after all.  See, this tenant has already given information of their intent to move - so they will not be staying on as a long term tenant.  What good is goodwill when they are no longer your tenant?

The fact that they say they want to buy a house is now your target for negotiations on getting paid.  What is one thing that can foul up a loan getting approved?  Something popping up on the borrower's credit, like a judgment - like say a judgment from a landlord for unpaid rent amounts. Use this line of reasoning to get them to pay the increased amount.

Lastly, everybody should have their lease include renewal terms.  And the renewal terms should have a built-in automatic rent increase when the lease renews; don't be afraid to make this a 6% to 8% increase per month.  You can then send a letter prior to the automatic renewal that gives two choices: month to month under the automatic renewal terms (with the percentage of rent increase spelled out), OR sign a new lease for a specified term with a rent increase that is say half of what the automatic renewal would be.  If they are planning to stay, they will take option 2; if they are planning to go, then option 1 at least gets you paid appropriately.  Remember, real estate investing is about getting paid too.

George P. · Answer

Looks like the tenant is trying to set the rules. To me it's a HUGE no-no. The landlord should stay in control.

Shanequa J. · Answer

Most leases state that when the lease ends and the tenant remains in the property, the new lease is month to month. The only problem is that the lease might not say how much the month to month rent is. If not, than anyone can argue that the rent is the same. You can charge what ever you want. They can cash the check because the lease is month to month. With month to month, you can increase the rent anytime you want with proper notification. Options: give him a letter stating when the increase will be effective, accept the $675, or tell him to get out.

Jon Holdman · Answer

Almost certainly the existing lease states it converts to month-to-month.  That has the implication the lease stays the same.  Your parents should have notified him in writing at the proper time before Sept 1 what the new rent would be.  Typically, that would have been on August 1 (a month notice) or August 2 (30 days), but it depends on the lease and local laws.  If that have done that, its binding.  A verbal discussion is almost certainly not binding.  If that's all that happened, then they're stuck with the rent as is for September and, at this point, probably for October.  However, they could now notify him that starting Nov 1 that the rent will be the new amount.  In that notification state that existing lease is terminated as of Oct 31 and that he needs to either agree to the new lease or needs to move out.

If your lease and local laws allow, you may be able to make this happen quicker.  My lease says I can terminate with only ten days notice, and this has been verified as legal here by my lawyer.  So, up until Sept 20 I could give notice that the lease is terminated effect Sept 30 (has to be at least ten days before the rent is due.)

James Endress · Answer

they should not cash the check until something is signed stating the new rent and lease term.  if they cash the check the lease will be implied and if it goes to court there will be nothing in writing stating what the new rent is adn the court will rule in favor of the tenant.  tell him to sign the lease for get out.  $50-$100 increase seems fair.

Robert Steele · Answer

I am not sure that is necessarily true. My lease (Texas Real Estate Commission Promulgated Form) states that I will accept partial payments. So if I sent written notice (in compliance with the property code) that the rent was changing to $725 and the tenant sent me $675 they would still owe $50 even if I cashed the check.

Uwe K. · Answer

May depend on the state, too. My leases state, and I believe it is in the WI statutes as well, that I can accept partial payments (e.g. cashing checks) and the remainder is still due. It's worded more professionally, of course.

However, accepting any amount after the lease is over usually creates a new lease agreement (month-to-month) as far as the courts go, even witht he first payment, no matter what the lease says.

Paul OConnell · Answer

If he was properly noticed, then I would say you could cash the check and send him a statement showing his past due balance and any applicable late fee.  But I am not a lawyer, nor do I live in Missouri, so that is just a guess.

Tenant won't sign new lease, but is still sending payment. What to do?

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