Not that anyone asked, but:
1) The tenants paid rent on time exactly 14 of the 36 months they lived there. So accepting month-to-month seems like I'm setting myself for lots more missed, late or unmade payments... hence the only reason I allowed them to remain: their offer to paid in full so I would no longer be on the hook to track down rent monthly.
2) During the 3 years they were under the lease, they were embroiled in a lawsuit with the HOA company and during that time fell more than $20k behind in their rent. As one of those landlords who give landlords a bad name, I allowed them to remain because we didn't want them to be homeless after their (adult) daughter who was on the lease left them high and dry and their (adult) son wound up on the pills and got arrested. They aren't from the area, and after the accident, both were disabled and unable to work, so booting them would have left the homeless.
3) After they received their settlement, they paid the full amount of back rent but did not pay any late fees that they accumulated to continue staying at my place. This is where our story picks up.
4) I intended to boot them out after getting the cash but they volunteered the agreement (again: THEIR idea). I believe that asking them to pay what they said they would is reasonable.
@Andrew B.
5) The new agreement makes no reference to a prior lease or arrangement. In response to your question "On a completely separate moral issue, how can you justify keeping rent for months in which you don't intend to provide the service? That's shady business practice in my mind." I agree completely, which is why this is not my plan. My plan is to ask them to pay what they owe IN THE MANNER OUTLINED IN THEIR proposed agreement. I'm not understanding how this is different than any other legal arrangement where someone doesn't hold up their end of the bargain: If you bought a car, put $5000 down and then stopped making payments, your car's gonna get repossessed and you will not receive a down payment refund. If you bought a house on a 15-year note, paid $50k down and then called the bank to say "I know I said I'd pay you $1000 every month, but I've decided (unilaterally and without talking to you) that I'll just pay you the full amount at the end of the 15 years," I'm confident you'd get foreclosed on them and the bank wouldn't return your $50k down payment. If any of that is inaccurate and/or if someone can walk me through how my analogy doesn't hold, I'm (truly, not sarcastically or defensively) all ears.
@Wayne Brooks - I don't want them evicted. If I were in front of the judge, I wouldn't be asking for them to get evicted, I'd be saying "Your honor, can you please have them pay what they said they would?" If tenants (in front of the judge) were to say "we don't wanna," I think I'd say "Since they aren't doing what the legal agreement says they should, can you evict them now?"
@Mary M. - In reference to them being a 'good tenant,' see above and then consider this, which is an exact quote from the tenants (after buying the car and the furniture): "We have the money, but if you don't mind, we would like to sit on the [settlement] money for a while. It just feels good to know it's there right now." So to clarify, I wouldn't be evicting them because of what they spent their money on. I could care less. I wouldn't even be evicting them because they HAVE the rent money they agreed to pay, they've just decided on their own they'd rather not pay it according to the terms of the agreement... I'd simply be evicting them because they are horrible at paying month-to-month and are in default of the agreement.
There were many things I was hoping to receive from this post, but the chance to justify evicting a non-paying tenant wasn't something I foresaw. Very interesting.
And YES: I'm well aware (now) I should have evicted them much earlier and then I wouldn't be in this position... but I didn't want injured/disabled individuals homeless if I could help it. I don't regret not putting them out on the street, even though I fully acknowledge that would have made my life, wallet and stress much better off. At that point (12 months into the 36 month lease), I just couldn't picture evicting someone my parents' age. After the last 2 years and knowing that they HAVE the money they just don't want ME to have the money, I can picture it.