All Forum Posts by: James Hsia

@James Hsia how is forming a second binding contract(promissory note) add value when it originates due to the first contract (lease) he violated.? This sounds like a terrible idea. In addition I’m not sure he has the legal power to use his deposit in lIeu of rent

@James Hsia if he can’t pay for the next two months then he or she will need to move out and find a friend or family member’s couch to sleep on. I would not even consider such a request because in two months when they are still there you will then lose more rent and court costs having to evict them. You will likely not be able to collect the lost money in rent, court costs, and damages. And you will be stuck with a winter vacancy when it is usually harder to find a tenant.

I would proceed with the eviction. If the tenant concerned about ruining their record by being evicted you could perhaps let them know that if they move out by Friday and leave the property in good condition you will not charge them any early termination fees and will drop the eviction. Then quickly find someone else to fill the vacancy. That is the most grace I would consider for these tenants.

@Marian Smith plus, you are getting close to the holidays if you end having to go through the whole eviction thing in October, not the nest time of year for a vacancy. Hate to preach hard heartedness, but they have friends and family...which you are not.

Wow - this is a tough crowd.  LOL.  I have had a lot of success helping tenants who are behind put together a budget and getting them caught up.  I move forward with the judgment but if they are willing will have them submit all their income statements and bills and we come up with a plan - geared around their paychecks - that will get them caught up in 6 months or less.  I only agree to do this if they are willing participants and it realistically looks like they can pay their bills and stick to their payment plan.  Lots of people make enough money but don't have the financial skills to know how to stick to a budget. As long as you have judgment and possession, you are in the drivers seat.  Even if they aren't successful, you can usually get several large payments before they fail.  In most cases when we put a plan together they are able to get all the way caught up.  Remember, the goal is to get you paid AND avoid vacancy. Coming up with a realistic plan isn't being soft - it is being smart.

My Suggestion is to evict unless this is a long lasting tenant that you have a great relationship with.  I have given tenants more time that has paid me back and tenants that have screwed me.  You really need to trust your instincts.  The times I didn't get paid I inherited the tenants from a purchase and I didn't trust my gut to evict.  

What I've learned that people behind in rent will lie and play with your emotions.  They will try to test you in any way possible to stay in the home.  They are not ethical.  They will tell themselves whatever they need to hear to justify their actions.  They do not think like you or I would and have no honor.

Originally posted by @Rob D.:

Originally posted by @James Hsia:

We were thrilled to find a tenant in California who was willing to sign a long term lease due to a project he was working on. The caveat was the rent was set at below market and fixed for the 5 yrs (rookie mistake).

The tenant just informed me he is planning to quit his job and will be breaking the lease. At this point what are my rights as a landlord? Do I have the right to keep his entire security deposit? Any suggestions or tips will be much appreciated!

Your rights? Whatever the law states you muat do in such case  as a lease break

First of all you CANNOT keep the deposit because they are breaking the lease. So get that out of your mind. A deposit is only for specific use in this situation. It’s used for damages. However there are specific ways a that you can keep the deposits other than damages but it’s specific reasons. Unpaid rent is one. 

In Ca. a landlord is required by law to mitigate in case the tenant breaks the lease.  

Now be careful as  you cannot mitigate and change the lease terms  by asking for higher  rent amount or shorter lease term from the new replacement tenant. You can only offer the  lease at the same terms as your current lease because that’s the lease you’re mitigating. Once you ask for different terms you have a different lease and the tenant can walk away due to this violation. So you can only mitigate the 5 year at x amount. Anything else is a different lease. 

What I would do is tell the tenant he needs to give you notice that he is breaking the lease and the the timeline of their departure. Let them know that they are still liable to pay the rent after they surrender the property ( as long as the terms are still the same) until you find a replacement. You also are required to actively search for tenants. You can deduct any costs associated with the mitigation. So you can charge for any advertising or agent commissions if you use a agent. 

You need t give the a notice to do a preliminary walk through two weeks before the surrender date. They are not required to do this and you are not required to do it unless they want to

Once they surrender the property you have 21 days in which to charge back damages and send a itemized letter of charges and any refund minus deductions. 

If you miss the 21 day cutoff the tenant can legally demand ALL their deposit regardless of the damages and amount of damages.

You need to remember that it’s August. The rental market slows down. If this guy isn’t leaving for another 60/90 days  you’re landing smack flat in October November which are gonna be a nightmare to find good tenants. Trust me I know.

What I would do

Start advertising the rental. NOW. Like today now. Call a agent and have them start to look for tenants. I think it costs about $400 for each agent. You can offer more to the tenants agent to sweeten the pot. Either way charge all costs back the tenant. 

Don’t go by what the agent says about the tenants they represent. Truthfully they don’t know crap abut them. So you’re due diligence. I hope you have a qualification rule set for your rentals. If you don’t.    Get one. 

Oh and NEVER EVER EVER do a lease for 5 years on a rental. You must be out of your mind offering such terms.  I wouldn’t never consider anything over a year. and believe me I had people ask for 2-3 year terms. No thank you.  After that year  it’s month to month only. If they are worried about a rent raise write in a guarantee 12-18-24-36 month no rent raise guarantee. But I wouldn’t even do that. After the year lease it’s month to month and if I need to raise the rent I raise the rent

Originally posted by @Joe Splitrock:

Originally posted by @James Hsia:

@Matt K. They are technically on hook for the entire lease term, but unless I take them to small claims court (which I am trying to avoid). Given the laws in California, the most likely outcome is to get them out of the unit and charge them for fees associated of replacement.

We set the rent just slightly below market given the long term lease agreement, something I terribly regret.

How do you figure they are on the hook for the entire lease term? Let's say they move out this month. Are you seriously going to take them to small claims court every month if they don't pay rent? You can't sue someone for future rents, only for loss you already incurred. The judge is going ask why are making no attempt to re-rent the property. 

Generally it is reasonable to charge them for one month after notice is given and one month's rent for "re-renting expense". My general agreement with tenants is that they are responsible for rent and utilities until I get it re-rented. That usually happens within a month. My advice in the future is never sign a lease agreement longer than a year, especially in California. You are giving the tenant all the power.

More importantly stop being afraid of vacancy. Leases do nothing to ensure a tenant stays long term. I have had tenants break leases after 6 months and I have had tenants on month-to-month agreements stay 10+ years. People move when they want to or need to move.