To Lease or Not to Lease?

Question

First post here...

My question/concern is this... good tenants will be good tenants regardless if there is a binding lease or not. Bad tenants will be bad tenants regardless if there is a binding lease or not.

I'm currently in a situation where I have bad tenants with a binding lease through August. If I didn't have a lease, I could simply say "get out" but I do have a lease and now I'm bound to it and need proof they broke the lease to get them out with an attorney.

So my question is... moving forward... Should I continue to use leases or not use leases?

Good tenants will be good... bad tenants will be bad. When I have a bad tenant I would love the luxury of saying "buh bye" without proof or attorneys.

Thank you

Ray

Scott E. · Answer

You absolutely need a lease in place with 100% of your tenants. Doesn't matter if you have a "good" tenant, a "bad" tenant, or if your tenant is your own mother.

Also, to get that bad tenant out prior to August, you might consider a "cash for keys" offer to get them out early.

Nathan Gesner · Answer

This is only partly true. Remove all the speed limit signs and people are more likely to speed. Remove all the boundaries of a written lease and people are more likely to do things you don't want them to do. There's also the chance you could end up in court some day and you'll want a written agreement to support your case. If it's a verbal agreement only, there's a greater chance you'll lose the case.

Even with a verbal agreement you are bound by the law. You can't just say "buh bye" without giving proper notice and serving it in the manner prescribed by law. If the tenant fails to leave, you can't remove doors or turn off the utilities because that would be a violation of the law. You still have to follow the same rules.

Did you know you can terminate a written lease when the tenant violates it? Is he paying late? Moving in three buddies and a dog? Partying all night and annoying the neighbors? If they violate the terms of the lease, you can give notice and terminate their lease. If they refuse to leave, you can try to evict through the legal system.

Brad Jacobson · Answer

Hi Ray,

You always need to have a lease in place because a lease does more than just keep the tenants in place for a certain time.  A good lease outlines and enforces the rules of the property and adds a slew of legal protection for you as the landlord.

Moving forward, I would still recommend keeping longer leases but just do a better job of vetting the tenants.  Make sure you're using a website that processes applications with a credit check, background check, and that you're contacting prior landlords for their honest take on the tenants.  The goal is to get great tenants in with a strong lease and try to create a scenario where they'll want to stay well after the lease expires!  I was so sad to hear when my last tenants moved out after their 12 month lease expired.

If you're struggling to find great tenants and don't trust standard lease timelines, read Brandon's book on property management. It should help a lot!

Good luck.

Drew Sygit · Answer

A lease is a contract.

Contracts can be enforced in court.

No lease, no contract, make evictions very difficult.

Also, sounds like you need a better lease with clauses allowing you to terminate with properr notice for violations.

Delina Ortiz · Answer

Hey Raymond,

What a great question. I can tell that you are really putting a lot of thought and consideration into your rental(s) and want to start by saying great job!

Per your question: As a property manager myself, I can see why one would think that opting into a 'lease-less' agreement is a good idea but I must say that I do not recommend that. A lease mitigates risk and allows the owner to have legal recourse when done properly. Although it might slow you down a little when you have big fish to fry, it is safe to say that you are running a business and that this business MUST be protected at all costs. Thus, taking the path of most resistance and doing the due diligence to protect your money will benefit you 10 fold. I hate to be biased but hiring a property manager will relieve all of your stressors about placing a rotten tenant.

If that is not your cup of tea though, then here is what I would recommend:

KNOW how to deny people and KNOW what red flags to look for. This can be tricky because with every city comes a different demographic of people. Meaning, you have to know what to say and when to say it. There is a lot of psychology involved in avoiding bad tenants, which I am sure you already know.

Typical things to look for when searching for red flags could be people willing to pay exaggerated amounts of rent ahead of time, or applicants who have an LLC that will "pay for their stay" (that usually means that they have been evicted and want to hide it through the organization). And so much more!!

I hope this answer helps and good luck!

Best,

Delina Ortiz

To Lease or Not to Lease?

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