Tenants request to change the lease agreement.

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21

The problem is, many tenants lie. They sign a year long lease because it’s cheaper, or more available, intending to break it. They really don’t care if the landlord has to pay extra for move in-move out fees, rental agencies, advertising, cleaning, empty properties. It’s not their problem if they can get away with breaking it, and especially if they can manage to keep their deposit too. Hey, that deposit was for the last month’s rent, right? We will rent to someone who appears honest with mediocre credit, far sooner than someone who is lying, with perfect credit.

Totally different situation if the tenant has been in there for a long time and now they have decided to look for a house, though not legally different. New tenants—they probably planned on this in the first place. Increased rent for just a month isn’t going to cover anything. What would you have charged if it was originally a six month lease? Probably much more, or you wouldn’t have rented to them. People take advantage, and I don’t know why you should suffer financial losses because of it. I’m sure they are just fine with any loss you have to take. What does the rental agent say?

Certainly, people can ask for anything they want. They can ask for five years free rent, just so you have the honor of renting to them. But you can consider their request, and say no. If you feel that you want to agree to the month to month, you could resign with them, with an agreement that they pay all costs associated with the disruption, rent for the time it’s empty, all fees. But it may be very difficult collecting on that.

22

@mcat2: My folks had rental properties and dealt with tenant issues like this frequently. You don’t seem like the kind of person who just rolls with the punches–you worry and you fret. IMO there are people who can handle being landlords and there are other folks who make themselves crazy. My folks were in the make-themselves-crazy LL group. Good luck–hope you can work something out with the tenants.

23

Thanks for all the good advices/insights.

They are not new tenants, and are relatively good tenants in general. That is the reason why we are willing to negotiate, even though I think legally they just try to get out of lease prematurely. Yes, we did lease them at a somewhat lower price, hoping that they may stay longer.

We have never met the tenants ourselves. Our real estate agent handles this for us. Honestly, I think (just my guess though) our real estate agent may try to make this to happen: We sell the house to them. The tenants have expressed their interest in buying this house before (actually this time as well). But we are not willing to sell it now. (Maybe we are willing to do so in another 7-8 years? We prefer to keep the house at least for now, because we think owning it could help beat the inflation.)

I guess the tenants decide that if they are unable to buy our house, they are going to find other house to buy instead of renting forever. I think their main purpose is to buy a house and want the flexibility in when to move out. I have no idea how much progress they have made in finding/buying their own house as of today.

The tenants are good in general. But occasionally they seem to be a little bit on the “too frugal” side. An example is that when we first leased the house to them, I think they tried very hard to lower the rent even though we thought it was somewhat lower than the market price already (but it was not a hot season so they had an upper hand.) At one time, they asked for some of the wall paper to be replaced – not because it is old, it is because they think the color does not match with the color of the wall paper (or paint? Forgot the details) on the other side of the house very well. I think it cost almost a month worth of the rent to do so. (We used to lease a house too; we would never make a request for cosmetic things like this. But we do not have “much taste” in our “art department.” LOL.)

The only thing that seems to be not right to us is that even though they want to break the release, they should not ask that within short 15 days, they want to change the lease term from a year long lease to a month-to-month release. Even for terminating a month-to-month lease, I think it is typically expected that the tenants notify the LL one month in advance.

As an example, our family rent an apartment unit now also. If I go to the apartment manager before my lease is up and request that in 15 days my lease term be changed to month-to-month, do you think the apartment manager will agree to this? If they do agree, I think they will increase my rent quite significantly.

Just thought of this: I think if the real estate agent we hire to help manage the house has our interest in mind, should she at least help propose a deal that is acceptable to both sides, instead of just trying to get a “good deal” for the tenants?

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@Bromfield2, you have a good point. We may not fit to be LL.

My wife is very motivated in moving back to that house. If we retire this year, one choice is for us to move back there, and sell it in another 7-8 years when we need to move to wherever we want to be again in 7-8 years. Hopefully, I will be able to convince my wife to move overseas to a lower COL place at that time. (One reason for living there for another 7-8 years is that we want to avoid paying too much tax in capital gain due to the appreciation of the house. I think if a house becomes a rental property, we need to payy the capital gain tax when we sell it. This is one reason why we do not want to sell it now.)

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We had a multi year tenant who wanted to buy a house after several years of leasing, it was not cancelling the existing lease, but at the end of their lease period we went to month to month, but I asked for 60 days notice. Figuring most escrows are 60-90 days, they ended up with a short escrow and paid about 10-12 days of rent to me, but I got a person in pretty quickly.

The next person bought a home at the end of their lease, but refused to let us show the home (well, refused to make the house presentable for showing) which was weird and I had 40 days empty :frowning:

26

Thanks for sharing your experience, @somemom.

It is the first time we are LL. we do not know much. We actually think the current tenants are relatively good, i.e., did not give us much headache.

We were in their shoes before: We used to lease a house for a year before we bought our house. So I think I know their concerns. It is just a conflict of interest here now that we are on the other side of fence.

We were joking among ourselves: What kind of tenants do we want? The one who will pay the rent on time but will not live there very long (because they eventually want to buy their own house), or the one who will not be able to pay the rent on time but they can stay there for a long time (because they can not afford to buy a house due to various reasons)? Pick your poison. (The former is definitely better.)

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I want the tenants who pay on time, every time, and stay multiple years :slight_smile:

In OP’s situation, I would be much more agreeable/lenient if they had been a long-term, good renter. Someone on a new lease–not so much…I don’t like month-to-month leases, even after the original one year has expired. Cleaning, showing, dealing with prospective tenants is always a financial, emotional, and time drain, and even worse during winter months.

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How long have they been in the house, mcat?

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Slightly more than 2 years, if I remember it correctly.

We are only willing to cooperate with their (still undecided) move-out schedule to a certain extent. That is, we proposed that both sides compromise a little bit. We have not discussed whether the rent will be increased (and by how much) yet if they really want to go month-to-month after a certain day.

I actually secretly wish they could find their dream house soon and give us a firm day to move out. My guess is that they may not be able to close the mortgage within 2 months if they barely started the process. I actually heard the supply side of the housing market is tight because they want their kids to stay in the same elementary and middle school. I remember that when I bought that house, I participated in several “bidding wars” before I finally scored one. Although the market is not as hot as it was then, but I think if the tenants try to cut the seller’s price (like they did when they leased our house), they may have a hard time, in my guess. (If they do not care about which elementary/middle schools their kids are going to attend, it will then be much easier. There are just not many (say < 10?) houses available in that relatively small area. No new houses are built either due to the lack of “buildable” land in that small area.)

30

Are you saying that you would sell the house to the tenants now if you qualified for the Internal Revenue Code Section 121 exclusion?

https://www.irs.gov/taxtopics/tc701.html

31

How likely are you to find new tenants with 30 days notice?

32

mcat, you say you wish the tenants could find their dream house soon and move out. Keep in mind that if you modify the agreement so it is a month-to-month agreement, you have the right to give them notice on the same terms. So, if you agree to a 30-day notice period, you could give them 30 days’ notice and require them to move as soon as you find a new long term tenant. So, if you really want them to move, that may be your answer. I may have misunderstood your point, however in saying that you hope they find their dream house soon.

If you think this sould bother them, you might want to tell them flat out that if the lease is converted to month to month, you intend to start looking for a long term tenant immediately. My guess is, however, that the minute you agree to this change (if you do), they will give notice. Sounds like they want to move

33

If they have been in for over 2 years and have 6 mos left on the lease, well, that sounds like. They’ve been in for 2.5 years. If, and yes if, you decide to modify the lease, any tenant would expect a month to month rent to increase. You are taking the risk- not them. There should be a cost. ANd also agree, you should require 60 days notice.

34

Some of this question involves local real estate practice and housing demand. FWIW, in my area, they would keep the lease, but be able to sublease by finding new tenants and showing the place. The house I rent has had this scenario many times. My tenants usually find me a good candidate or selection of candidates, collect application forms, and show the place. I then communicate with the new tenants, pick one, and then go thru the hell of switching tenants. But the tenants need to communicate about dates to switch and so on, otherwise the primary lease holder is financially responsible. Sometimes it works to my advantage, for major painting or repairs.

At a point, I realized that no way do I want to do this in November or December, when rentals are slow and I have other priorities, so wrote this exclusion into my lease. Though this reminds me that I have forgotten this detail with recent leases.

Somemom, wouldn’t you just show the property regardless? The best tenants will be able to look beyond a mess to the bones of the place. Some might be turned off, but that is their problem. Another reminder, that there can be a stipulation in your original lease that the place must be kept in showable condition if exiting a lease. I’d need to check local laws to see if they would support this or not. Otherwise, cleaning fees would be deducted from the security deposit.

The bad part of taking over a lease is that the previous rent is assumed. The good side of an entirely new lease is being able to raise the rent by significant amounts without feeling you are burdening a good tenant excessively.

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@Madison, Thanks for the info. We would not. Currently, we prefer to keep the real estate property as a part of our “assets” for the diversification purpose.

@stradmom, Likely not. We are open to the idea to move back there because we may retire soon. I think we would give the tenants some flexibility of getting out of the year long contract in the last few months of the existing year long contract. If they want to continue to live there after those few months, we will insist on another year long contract if they want to sign the contract with us, otherwise we will take the house back after the lease is up. At least this is our “planned” offer to them, not sure whether they will accept this.

I may also consult this matter with our real estate agent.

36

I really do not like the fact that they do not spell out their end of deals clearly enough. No way I would accept that they just leave the house with a 15 days notice (e.g., it seems they said they want us to agree that they will be allowed to terminate the lease and leave the house as early as Jan. 31, 2016 – even though we were informed on Jan 14. I think they mistakenly believe we may agree to modify the year long lease to month-to-month NOW.)

I think my real estate agent would know that the proposal from the tenants is not fair to us. But so far she said nothing – as if she thought their proposal is quite “normal” and we should accept the lease modification now. (Yes, we have the written lease in our hand. I know when the lease will be up.)

If we continue to lease the house (to them or to other tenants), we want to avoid that the lease will be up in the winter (like Nov or Dec.) This is why the month-to-month lease is not acceptable to us. I think we would rather take the house back and we live in it, than lease it to others in a month-to-month lease with 30 (or even 60) day notice only. It is not easy to find tenants during winter.

37

Are the tenants using YOUR real estate agent to help find and buy a house? If so, then he/she would not have your best interests in mind. The real estate agent is looking ahead to their commission from a home sale.

38

It sounds like you aren’t really sure if your real estate agent is working for you or not. It’s hard to tell, maybe she is just passive, and passing things on. I would like to know what she says when you talk to her. Maybe you could ask her what she thinks, what she proposes, and does she really think it is acceptable that you should agree that they could leave in two weeks, leaving you stuck without a tenant? What does she recommend, and why? That would tell me a lot about her motives, and whom she is looking out for. Is there any chance she has found them another house?

In fact, why would they want to leave in as soon as two weeks? The only way someone would ask that, is if they had something lined up, and soon, in my opinion. A house closing would generally take 45-60 days, unless they had cash. If it is not easy to find tenants in the winter, then why even consider letting them go month to month? Unless they agree to cover all expenses, and pay rent until you get someone else in (as would be the case of breaking a lease in my state). I don’t think I like this at all. This would be a win (for them)/lose (for you) situation, even if they paid higher rent. And they haven’t even offered.

I think about what I would do in their situation, and no, I can’t imagine asking the landlord to change the terms of the lease, without offering something in return. I would feel that I had to hold to the contract, and if I couldn’t, I’d abide by taking the financial hit required by law, and the contract.

Sometimes I find myself worrying excessively about something that is happening with a tenant. They have a problem, how will they fix this, how can I help (even though it is not my responsibility). It can be far less stressful if you just think about it logically, and if logically their request is not reasonable because it will cost you greatly…you just say, “Sorry, no. We will abide by the terms of the contract”. And shoot, you don’t even have to tell the tenant that. Just the agent, it’s her job to pass on the bad news!

39

Like others have said, I think it is a weird request. You should tell them if they will to leave their lease early you will be glad to work with them, and perhaps set out the terms in writing. Often times the penalty for doing so is forfeiting the one-month security deposit, which is not unreasonable. But again, you sound like you want to be generous; they just need to spell out exactly what they want, and it needs to be a business transaction.

40

What state is this property in? That definitely makes a difference.