Every Monday after the 5th of each month, our company sits down to discuss our properties. Something we talk about during our meetings is upcoming lease renewals. I think it’s important to look ahead and actively manage your renewals for a few reasons:
- It’s important to know what vacancies are coming up so everyone on your team can be aware of properties that will need to be filled.
- It gives you adequate time to notify your existing tenants that their lease is going to expire and to get a new lease signed and in place.
- It gives you the time to discuss tenants that you may not want to renew.
To help us decide whether or not we will renew a lease, we ask a number of questions:
1. Does the tenant pay on time? If not, how many late payments has he or she made?
The more late payments a tenant makes, the less likely we are to renew his or her lease. If a tenant pays on time and has responsible money-management skills, we will be much more likely to renew his or her lease.
2. Did the tenant have any NSF checks? If so, how many?
Again, the more bad checks a tenant writes, the less likely we are to renew his or her lease and vice versa.
3. Did the tenant uphold the lease?
If a tenant has violated elements of the lease over the duration of their rental period, we will probably avoid renewing his or her lease. This would include things like creating unsightly conditions.
4. Has the tenant been difficult to manage?
If the tenant under consideration has been unnecessarily needy, time-consuming, or difficult to work with, we will probably not renew his or her lease. We don’t intentionally keep problematic customers, and if our property manager tells us that a tenant is difficult, we will not renew his or her lease.
Along with asking whether or not we are going to renew a lease, we also look at the rent rate and evaluate whether or not it is at a fair market value. Renewal is the perfect time to increase rents and give adequate notice to the tenant.
Notifying the Tenant
If we decide not to renew a tenant, our property manager will call the tenant 60 days before his or her lease expires and explain that we are not going to renew the lease. When we choose not to renew a lease, that tenant will already see it coming. We never keep it a secret when we have problems with a tenant or when he or she is violating the lease. This way, we don’t surprise them when we decide not to renew. If we decide that we will renew a lease, our office assistant will contact the tenant 60 days before the lease expires with a renewal notification and notice of an increasing rent price, if applicable.
Terminated Leases and Evictions
In the past, we have had a few issues with tenants not moving out after we terminate their lease. If tenants remain in the property after their lease expires, we will put an eviction notice on their door and immediately notify our attorney. 99% of the time, an eviction notice will be enough for tenants to move out within a couple of days.
An additional advantage to an eviction notice is that it is visible to the whole neighborhood. The notice itself is a big, yellow document that we post on the outside of the tenant’s door. Not only does the problematic tenant see the notice, but the neighbors do, too. This visibility is especially important if you own other properties in the neighborhood because it can remind other tenants that you take your business seriously.
Eviction procedures will vary by state. Some states are more friendly to tenants, while some are more friendly to landlords. In any case, it’s important to work with an attorney during the eviction process and ask for his or her opinion on how to proceed. Our attorney has told us that it’s okay for us to put a notice to vacate on the door of a problematic unit. Our eviction notice includes the following components:
- Date of eviction posting.
- Tenant’s name and address.
- Notification to vacate the property.
- Timeline for vacation. (In some situations, you can post a 10-day notice, in others, you will need to post a 30-day notice. Talk to your attorney about this.)
- Clause of certification, verifying that the notice was posted.
- Landlord signature.
If the tenant still doesn’t move out after the eviction notice has been posted, then you will need to talk to your attorney again. At this point, your situation may go to court, and you will need to obtain a Writ of Possession, issued by a judge. Typically, this Writ of Possession will need to be served by a court’s registered agent. Your attorney can advise you on the most efficient way to accomplish this. After the document is served, the tenant typically has three days to move out (this may vary by state). If they still don’t move out after three days, then you have the right as a landlord to move the tenant’s belongings out of the unit yourself.
In the past decade or so, we have only had to get a Writ of Possession four times. Two of these times, the tenants waited as long as they could before they had to move out, then they moved after getting served with a Writ of Possession. Another tenant declared bankruptcy in the middle of the eviction process, and the final tenant disappeared completely.
An important note on evictions: if people are truly struggling to pay rent, it’s important to just be honest with them about your own needs as a business owner. Sometimes, you can work with people to avoid evictions. People don’t want to be treated as projects, and they can tell if you’re being genuine or if you’re just being a jerk. In the early days, I sometimes had to approach problematic tenants and be honest with them about my own struggles and why they needed to make their payments. Usually, this approach worked. As our company grew in scale, the line between being empathetic and being financially practical became harder to walk. It’s important to be merciful, but as a landlord, you must also be responsible and just. In all honesty, nothing is more uncollectible than a previous month’s rent, so we try to never let a tenant go more than 30 days without paying rent or figuring out what needs to change. With every interaction, whether or not we choose to evict, we treat all of our customers with transparency and respect.
In Summary:
- Before we renew a lease, we ask ourselves a series of questions about whether or not renewal is a good idea.
- We notify our tenants 60 days before their lease expires whether or not we have chosen to renew their lease. If we decide not to renew, our property manager contacts the tenant and tells them with plenty of notice.
- If tenants refuse to leave their unit, we post an eviction notice on their door. In the rare case that this eviction notice doesn’t work, we will try to obtain a Writ of Possession.
- It’s important to treat tenants with reason and respect. While it’s important to be empathetic and merciful, there must be boundaries in place to handle financial responsibilities.