Long-term leases, good or bad idea?

[Leigh Mueller]

Hi BP family,

I have a group of med students who would like a long-term 4 yr lease. Has anyone had any experience with long-term leases? Are there any specific clauses I should add to my lease? 

When to sign lease? They asked to hold the unit for a month (they meet all minimum qualifying requirements). I am collecting the Deposit to Hold right away, but not sure when to sign lease and collect first month's rent. The Deposit to Hold will transfer to Security Deposit once the lease is signed. 

Thanks,

-L 

[Wesley W.]

I've always found that the term leases (anything over 30 days) always obligate the landlord, but never the tenant. I only offer month-to-month (MTM) leases in my properties.  Here's why:

Let's say I sign a tenant to a one-year lease, and 3 months in, their personal/professional situation changes, and they break their lease and move out after a 30-day notice (or maybe less).

I am required, by law in most areas, to "mitigate my loss" by remarketing the unit, making it rent-ready, and starting up my lead generation machine to get applicants, funnel them into my screening system, identifying good candidates and ultimately leasing them up. This takes a LOT of my time.

If I went to get a judgement against this tenant for the balance of the lease (if I could even find them to serve court papers), the judge would tell me to go pound sand, absorb it as a business expense, go re-rent the apartment, move on with my life and quit bothering him with this "nonsense."

Another situation. Joe "pain in the a**" Tenant just signed a year lease. He is noisy and obnoxious and leaves trash in the common areas. I get numerous complaints from my "good" tenants, complaining about Joe. Joe's lease has provisions against this, so I properly serve him a "10 day notice to cure" using a process server ($$). He gets better for a bit, then goes back to his old ways. So, I serve him again ($$). This goes on.

I finally get so fed up that I serve him ($$) with an eviction notice for breach of lease. I spend time and money getting the petition and go to court. Joe tells the judge he "promises" not to do it again and shows receipts from all his on-time rent payment, so the judge gives him "one more chance. " Invariably, I'm back in court AGAIN. I may or may not get a warrant for eviction this time, but meanwhile two of my good tenants have moved out, exasperated by their neighbor, Joe.

Sure, my lease states that Joe is financially responsible for my expenses associated with the enforcement of the lease provisions, but good luck with that.

In each of these cases, the lease favors the tenants, and limits my rights as the landlord.

My month-to-month leases give me the right to terminate the lease for no reason or any reason, including being an "a**." If they don't leave, I get a holdover eviction warrant on them. I find this is a MUCH easier judgement to get than for breach of lease or even non-payment, since the tenant can "cure" his non-payment by showing up to court with the unpaid balance. Meanwhile, next month he starts neglecting rent payments all over again.

I always found that GOOD tenants love the flexibility that the MTM lease affords them if their personal or work situations changes. I tell them I don't want anyone living in my properties that doesn't want to be there, and that is precisely what would happen if they signed a year lease and their situation changed. 

I explain to them I am not in the business of whimsically kicking people out, because that costs me money (see the lead generation paragraph earlier in my post), and my goal is to find really good people to call my properties home and then take good care of them so they want to stay a long time. In contrast, bad tenants don't like the MTM leases (another form of self-screening) because they know they'll be out on their ear in 30 days. So, if a tenant pushes back on the MTM, to me that's a red flag, because there really is no down side for them unless they are up to no good.  If they are good tenants, they don't worry about it for a single second because they expect to follow the rules, and they rest easy at night knowing their neighbors will have to do the same.