New Tenant with Renter's Remorse

[Alan Y.]

Hi BP,

I just completed rehab on a duplex which is my first investment property.  I successfully placed 1 tenant in a unit.  I have a 2nd tenant that signed a lease and moved in on 11/1.  After 1 week he asked that he be allowed out of the lease and get his security deposit back. He started nit picking on little things that he didn't like about the apartment like no blinds provided, doesn't like the floors, etc. The unit is a brand new rehab with everything new so there is not much that can be picked on and he looked at the apartment twice before signing the lease so he knew exactly what it looked like.  I offered to install blinds if that would keep him in the unit and he still wants to terminate the lease if I will let him out of it. Upon signing the lease he paid up front with first months rent, last months rent, security deposit, and $500 non-refundable pet deposit. The property management company already took 1 months rent as a fee, so if I give him back the security deposit, I am left keeping the pet deposit and big headache starting a tenant search over again and dealing with transferring utilities, etc.  I am not obligated to let him out of the lease but I certainly don't want an angry tenant in my unit for a year.  Seeking advice from the community on the best way to handle it.. Thanks in advance.

Alan

[Bruce Woodruff]

My opinion only - I would not want a nit picking, fussy tenant in my property. He will not get better, only worse as time goes on. Consider this a blessing that you were forewarned about this one and let him go. Sure you will be out some $$, but a good tenant is worth their weight in gold and bad ones are the worst thing there is.....

[Kevin M.]

At least in Philly- It rarely benefits you to force a tenant into living in a property they want to vacate. My general advice is to retain as much as you legally can under the terms of the lease and let him walk. 

Use his complaints as feedback and improve the unit to find a new tenant. Assuming your PM collected first, last, security deposit you really shouldn’t be out of pocket for them to find you a new tenant. 

[Davartay Miller]

@Alan Y. This is unfortunate! It's never an easy process when this happens. I was actually in a team meeting this morning and discussing this with our Customer Service Department on situations as such. In this case your resident may or may not have posed any red flags from the gate. However, thankfully he did so now rather – later. Now why after signing the lease? Great question. However, I do not have the answer to that. 

What I do know is that we would let that resident out in a heart beat and refund them their money. It's okay to tell a resident: "Hey we might not be a great fit – and that's okay." Look it's nothing against the resident but the goal for most is Long Term. We like to think about the general picture. No one likes loosing money, no one wants the vacancy, no one wants another month on the market, etc. But what will keeping this resident cause me at the end? 

Best of Luck, 

[Joe Steinheiser]

I'd let him out with his deposit back as long as he moved out by the end of the month. Keep the first and last months for the month he stayed and the month you had to pay management. I would market that property NOW.

[Drew Sygit]

Wouldn't be so quick to cave in to tenant demands!

Force them to provide a written request for Early Termination with the requirement they must provide specific reason(s), excluding the documented "as-is" condition of the home upon their MoveIn.

If they still insist, tell them that they are legally liable for the rent + utilities until a suitable replacement tenant can be found. So, it is in their best interests, to cooperate with showings NOW.

Also, because you paid a Placement Fee already, that fee will be deducted against any refund they are entitled to.

QUESTION: why isn't your property manager guiding you and handling this for you?

[Mike McCarthy]

I’d have a conversation with your PM as well about the incompatible placement. Obviously it’s not fully their fault and it’s not worth souring a good relationship, but they likely have other candidates and may be willing to do a lower-cost 2nd tenant placement. Doesn’t hurt to ask.

[Alan Y.]

Thanks for all the responses. I am not legally obligated to return any funds paid.  I can charge a termination fee, equivalent to the security deposit (one months rent), but I am trying not to go that path. I am not sure it's worth the risk that he damages the apartment on his way out. Most of the above recommendations seem to be in-line with what I was thinking.  Keep the first month and last month rent and the pet deposit. I already gave up 1 months rent in tenant placement fee to the property management company which I will likely not get back but asked them to consider it. I won't have lost any income necessarily but that depends on how long the vacancy lasts before finding another tenant. @Kevin M., I am trying to get input from the tenant on why he is considering leaving after 1 week to see if there is a real reason that will help me improve the property or he's just being difficult and has renters remorse. Not the way I was hoping to start off. I haven't heard a thing from the tenant in the other unit after 2 months, which is good news!  Thanks for the input.

[Alan Y.]

@Mike McCarthy great suggestion. I did ask the PM to waive the placement fee if I needed to find another tenant. Waiting for them to get back to me. 

[Alan Y.]

@Drew Sygit I'd say the PM is giving me options but not really guiding me. They are communicating with the tenant and leaving it up to me to decide what I am comfortable doing. 

[Colleen F.]

@Alan Y. So you tell them you rented the apartment. I am happy to try to find another tenant. Here are your costs for that option. They pay until you find anew tenant. They pay turnover costs or whatever your lease says. If you are afraid they ll do damage are you going to be afraid of other circumstances. Use a good pm. I would push this back on this pm. The consequences of the lease break should be on the tenant and you should be made whole.

And there is some other reason for this break. I am sure.

[Bud Gaffney]

@Alan Y. Cut your losses. Let them go.

[Leland J Bennett]

@Alan Y. Hi Alan In this situation I would let him out of the lease . The headache of finding new tenants is ultimately part of the job. Grace can go along way in this situation. I ultimately wouldn’t have peace of mind knowing that my tenant did not want to be there. And how will they respect your property after sticking the letter of the law to them? Unhappy tenants are unhappy tenants. Consider Moving on to the next properly screened tenant.

[Theresa Harris]

Tell him he can get out, but he's responsible for rent until you find a replacement tenant and if you used a PM hopefully they put a clause in the lease about breaking it.  I'd also talk to the PM about their fee.  It will cost you to let him out of the lease-lost rent and fees.  If he wants out for things that he knew when he rented it, get him to follow the terms of the lease with the penalties.

[Curtis Mears]

@Alan Y.

I have had tenants in similar situation, but he was moving out of state for health issue. I informed the tenant that he is responsible for the lease, but I would work with him to get another tenant in the unit.,i,I, tenant he was responsible for the lease up to the time a new tenant signs a lease. He was ok with it and worked with me to get new tenant in.

[Maurice D.]

don't let him out for free, offer him he can leave for a termination fee and first and last month due to your costs.  he might be trying to leave because he found something cheaper or maybe a little bigger or closer to work etc.  don't let him off the hook, there is nothing wrong with your unit (state that), and he had a chance to see it before he signed the lease.  Be Polite, but firm.

Actually, your "property management" should have handled this.  they need a little education, and they are the ones that need to be polite and firm.  

[Joanne Tsai]

@Alan Y. He did sign a lease, didn’t he? It means he agreed to the terms and conditions. If in a month your next tenant also wants out, would you let him out again?

I agree I wouldn’t want some unhappy tenants but signing a lease means something. You should at least make him responsible for the rent till the new tenants move in. I have rented apartment from big corporations before, and that’s exactly what they would do or they would charge you the entire duration of the lease. They don’t let you out just because “oops, I change my mind”.

[Mary M.]

Let him out of the lease. Charge him the fee your PM charged. There is zero reason to want an unhappy tenant. 

[Mary M.]

Originally posted by @Joanne Tsai:

@Alan Y. He did sign a lease, didn’t he? It means he agreed to the terms and conditions. If in a month your next tenant also wants out, would you let him out again?

I agree I wouldn’t want some unhappy tenants but signing a lease means something. You should at least make him responsible for the rent till the new tenants move in. I have rented apartment from big corporations before, and that’s exactly what they would do or they would charge you the entire duration of the lease. They don’t let you out just because “oops, I change my mind”.

Many leases have lease break clauses.  If your lease does not have a lease break clause check your local laws -  but  importantly you must diligently try to lease the unit up to mitigate damages to the tenant....  

[Craig Janet]

Let him out of the lease but let me know it's going to cost him. The tenant needs to realize that signing a lease and wasting everyone's time and money has consequences. What likely happened is because the market is hot he jumped on the first place that was alright. Now he found a better place and wants out.

[Wale Lawal]

I would let him go. It is not worth having someone that doesn't want to be there. However, the tenant signed a lease, making him fully responsible for everything on the contract. Did you apply termination fee?

[Robert Williams]

@Alan Y. Seems like you care enough to to put up blinds. If they want out that bad, use that as 60 days notice to break the lease or keep him on the hook until you find a replacement tenant.

I agree that since he viewed the place he woulda known about the blinds. Maybe have a heart to heart and see what’s really going on. You may be able to come to an amicable solution.