Over the years GWM has seen several different early lease termination situations. They range across the spectrum in terms of ease and accommodation to all-out war between Landlord and Tenant, but one thing is for certain; without a legal reason for breaking the lease, there is going to have to be some sort of compromise or settlement between Landlord and Tenant if penalties are to be avoided.
In truth a Landlord may hold a Tenant financially responsible for re-marketing the property, leasing commissions, and lost rent. In reality, the Landlord would rather negotiate a flat fee settlement that is positive for both parties.
There are two typical settlements that we see that seem to leave both Landlord and Tenant walking away in a win-win situation.
The first settlement is when the Tenant pays a flat marketing fee (usually $200 -$300) and the Landlord begins to Market the property for rent. The Tenants assist with showings and when a suitable prospect is found, the property is leased. It is not a sublease, so the Tenants simply vacate the premises (following lease guidelines for moving-out) and their obligations are finished. The Tenant does a lot of the leg work with showings, etc…, but they are very much in control of how quickly the property rents.
The second settlement is where the Tenant moves out at the end of a calendar month. They agree to pay the next month’s rent, as well as leave the property in the condition outlined under the lease move-out terms. In addition to paying the rent, the Tenants also agree to forfeit their security deposit if the Landlord is unable to lease the property within 30 days. The benefit for the Tenant is that they are not responsible for showings, marketing or when or how much the Landlord is able to lease the property. The Tenants may lose their security deposit but they can forget about any future obligations with the property.
Of course, there are Tenants who try to “leave” their security deposit behind as they move out without notifying anyone. Often the properties are not left in good condition and the Tenant usually takes the attitude of “come try to find me and sue me.” But in reality, they will end up owing a lot more and if they ever have ever have a desire to lease a decent property, get a government job, by a car with a good interest rate, or buy their own home, they may regret that “middle of the night” move-out. Landlords are usually able to add marketing fees, penalties, unsubstantiated move-out repairs and charges, and without having to wait much more than a month get a judgment rendered on the Tenant’s credit. Then they just sit back and wait, sometimes having to re-file the judgment once or twice every 3-5 years. 50% of those Tenants with Judgments end of paying the entire judgment off within 5 years…people grow up and find they can’t run from their record.
GoldenWest Management specializes in residential property management in the Phoenix area. That being said it is nice to see evidence that the market is turning around starting with an area that was hit so hard by the real estate bubble. Now more buyers can purchase homes (primary residences or investment property) at a great price. Read the following article regarding Phoenix real estate leading the path to recovery http://online.wsj.com/article/SB10001424052970204653604577251232717986316.html
After completing hundreds of evictions in 3 states, it has become very clear that the most important thing that comes from those evictions is that the Landlord finally gets the property back and the Tenants are given the boot.
But the most common question our clients usually ask is “can we go after the Tenants for monetary damages, including lost rent?” The truth is you can definitely go after them…but do you really want to?
The time and energy it takes to file the judgment, track down the Tenant (and if in certain states like California, you have to find all of the Tenants), find where they work, file a writ against their place of employment to attempt to garnish wages, or turn it over to a collection agency and possibly get 30-40 cents on the dollar (if they can even collect) is often a lot more work and money than the judgment is worth.
Then there is the question of exactly how much can you get? Remember you are only going to be awarded damages to the property above normal wear and tear and you have to prove those damages. Also, you can only collect lost rent by month. For example if you have 6 months left on a lease when a Tenant is evicted, you are not entitled to all 6 months. You are only entitled to the vacant months until you re-rent the property.
Lastly, in the current rental market, many of the Tenants don’t have great credit to begin with, so threatening them with collections or judgments really has no impact. You may not be the first collection and if you have had to evict, you most likely will not be the last.
So what should you do?
Screen better: This doesn’t mean you become obsessed with credit score but rental history references and employment history will be key to decreasing the likelihood of eviction
If you do have to evict, don’t make it an emotional experience. Try to reach out to the Tenants and get them to leave before the eviction. This will save you money and potentially stop the Tenants from unnecessarily damaging the property (don’t bet on the property being cleaned, but its better when the home isn’t missing appliances and cabinets).
If you do evict and retain a judgment against a Tenant, pay the money to file the judgment where it will remain on record in the county where it is awarded for 3 to 5 years. This isn’t expensive and is usually enough to get the judgment onto the Tenant’s credit report.
If you choose to go the collection route, you can file a motion for a debtors examination or attempt to garnish wages, garnish bank account or have a writ of execution completed against the personal property of the Tenant.
Understand that Number 4 can be extremely time consuming and may not bear fruit. As always, consult your local attorney for their expert opinion, but remember the key here is determining whether the “Juice is worth the squeeze.”
As always, if you have an emergency, please do not hesitate to call our office as we will have our after hours team available. Managers are always monitoring the calls in case of property emergencies. Enjoy the long weekend!
This question is asked all the time by prospective investors and homeowners who are thinking of renting their home. Afterall, payment to a property manager is an expense that cuts into the margin of the home owner. The truth is that there are times when you can manage the property on your own without a professional…but the real question is WHY WOULD YOU WANT TO?
Even if you live close to the property you are going to rent out, and this isn’t your first rodeo, You must have several resources at your disposal – Time, Energy, and contacts. The only time that it makes sense to do it yourself is if you have the time to field phone calls at random hours of the day and night, the energy to commit to tenant requests for repairs and issue resolution, and have a list of trusted contractors on speed dial to help you with specialty skills. When things are good, of course managing the property on your own is easy. Tenants who pay on time, and rarely ask for things to be fixed (or if there is something needed, they fix it themselves) are great.
Unfortunately that is not always reality. Statistics show that over 15% of Tenants are late paying rent each month and that over the course of a one year lease, Tenants are late at least twice 35% of the time. Throw in that evictions occur at least 10% of the time and you might want to get familiar with the inner workings of the local court system.
Repairs can be an even a bigger hassle. Do you have the Tenant who nitpicks everything expecting the house to be like a brand new car just rolled out of the assembly line? Are you ok with weekend and after-hours calls about everything from repairs, to “chit-chat” about all the things that are wrong with the home but the Tenant “is ok with for now.”
Landlord-Tenant law…do you know it? How often are you going to do inspections?
For 8-10% of the monthly rent, you don’t have to deal with all these potential headaches. For peace of mind why would you do it any other way? If you have just one major issue – is all your time lost worth less than $100 per month?
You be the judge. Why else would you or would you not manage your own property? Let us know in the comment section below!
One of the biggest mysteries is how to find the best houses, or at least the ones closest to campus every year. It seems that most students can’t find a home that is decent around the UofA campus unless they start looking in January, roughly 8 months before they will move into that new place!
For many this means trying to find out who their new roommates will be just as they are finally getting used to (or sick of) their current roommates. 10 years ago students wouldn’t start looking for a new home or apartment until after spring break. Today the same can be said, except those students are the same ones who call our office desperately trying to find something within biking distance and are constantly told “we don’t have anything else that close.”
This year GWM has put together a few simple rules to help you secure that great home close to campus without losing your mind.
Start Early – If you haven’t started looking at homes by the first of February, you are going to miss the best deals.
Determine what side of the campus you want to live (sam huges, between park and mountain, south of the stadium) and try to find out the ballpark price for homes or condos on that side of school.
Figure out if you want a house or an apartment…the best rule of thumb for this is if you will only live by yourself or with one other person, then look at apartments (or condos). If you need a yard, want a garage or want to be with a bunch of friends for the year, then start focusing on a house.
Don’t try to identify all your roommates right away. Instead If you can identify at least one and in the best case a third person, then you are in great shape. Landlords don’t need everyone, but they will want one or two Tenants plus Guarantors (yes, that means mom or dad most likely).
Get your Co-signer or Guarantor(s) ready! Every college student will need a guarantor because most of them don’t have credit history, a job (that pays enough to cover 2.5 times the rent) or references from previous rentals. This means that a parent or guardian will most likely have to fill out an application and submit it with your application in order to be approved for that house you like.
Remember – its first come first serve! So the longer you take to turn in applications or come up with the security deposit, the more likely another organized group of students will come in and rent that house from beneath your nose!
Despite the lowest mortgage rates in years, renter nation rages on! Some think that the new Dodd-Frank financial reform legislation isn’t helping matters for the under-privileged. This article discusses how mortgage rules favor the wealthy.
Arizona homeowners have some protection when it comes to Construction Loans. According to a release by Jaburg & Wilk, “Arizona homeowners, for the most part, are protected from their home mortgage lenders attaching other assets such as the cash in the bank, vehicles and jewelry following a foreclosure or trustee sale of their home”.
This is good news for homeowners who run into issues during the construction process.
This question about reasonable notice was asked by a landlord on InmanNews. Sometimes Landlords must enter a property to make repairs, but what is considered a reasonable right to enter? The true answer is, “as much notice as possible”, but the tenant must make reasonable effort to let a repairman in. As we know with repairmen, this usually leads to windows of time, with little notice. If a tenant makes an unreasonable request, like 48 hours notice, then you should set expectations that they probably won’t get the repair that they request.