By Tia Politi, Lead Property Manager for Acorn Property Management, Rental Owner, and ROA Board President.
As a rental owner, most of the properties hubby and I purchased were vacant or were our primary residence before being turned into rentals. We did have instances however, when we purchased a property with a tenant in place, and in my career as a property manager, certainly it happens all the time. The procedures do vary depending on whether you have a month-to-month (MTM) agreement in place or a fixed-term lease (FTL). So, step by step, here’s how I approach the changeover.
Whether the tenants are MTM or FTL, I send a nice letter introducing myself and letting the tenants know the effective date of the change, where they should pay rent in the future, and how to make maintenance requests. For MTM tenancies (or tenancies with only a verbal rental agreement), I also include a new rental agreement and addendums for them to sign and return to our office. I add a sentence that basically says, “Enclosed you will find a new rental agreement and addendums, please sign and return them to us within 30 days. Should you fail to do so, this is your official 30-day notice of our intent to change the terms and conditions of your rental agreement. Whether you sign and return the documents or not, all the provisions therein, shall take effect 33 days from the date this letter was mailed.” This is the easy part. More often, the difficult part is no application, uncommunicative or uncooperative tenants, or fixed-term leases that are contrary to your current practices. But in the case of MTM tenancies, this “official notice” will cure any waiver problems that could have been created by the previous owner or manager for failing to enforce their terms and conditions, and establish that there’s a new sheriff in town.
Should your tenants decline to return the forms, there is also some risk that you would not have proof that they acknowledge receiving the forms. I’m especially reminded of a presentation by the EPA. If you take over a property built before 1978, they audit you, and you have no signed form from the tenant acknowledging that they have received the pamphlet, “Protecting Your Family from Lead in the Home,” they will not be happy about that, to say the least, and you could incur substantial fines. If the former owner/manager didn’t get one to them, you could inherit a major problem. So, can you make your tenants sign these forms? Not really, but you can serve a 30/14 (Notice of Termination with Cause), which would give them the choice to sign or vacate.
Fixed-term leases present more difficulty as their terms are “fixed,” so while you can request that the tenants sign your lease, you cannot require it without agreement of all parties. For example, if you took over a lease that set the late fee at $25 and requires you to provide lawn care, you are stuck with those terms until the lease expires. You can, however, change things like where to pay rent and make maintenance requests. I have been pleasantly surprised on many occasions though, when tenants in a lease will agree to sign new forms. Also, if there was a missed addendum such as the Lead-Based Paint Addendum that never got properly signed, I believe you can press this issue as it is simply an acknowledgement, not a change in the terms.
Illegal provisions in a rental agreement are another potential hassle that you may inherit from the previous owner/manager. Remember that a tenant cannot waive their rights under landlord-tenant law (even with their agreement), so if you have inherited a defective agreement, whether MTM or FTL, and the tenants won’t sign a new one, and you’re choosing to not push the issue, just don’t attempt to enforce those provisions. Some common illegal provisions that have crossed my desk include usurious late fees; premature grace periods, such as three days instead of the minimum four; allowance for abuse of access; and unreasonable restrictions on legal activities, such as no overnight guests or visiting children.
Habitability issues can also rear their ugly head, so be careful in regards to the condition of a property you purchase or take over for management. If there are substantial problems, I would decline to purchase or manage until or unless the tenants were removed so that I don’t inherit a legal claim for damages from the prior owner/manager. Should you choose to take on that risk, deal promptly with all true habitability repairs.
What if you take over a property containing a difficult tenant? If they are in a FTL, you will just have to find a way to put up with them through the term of the lease unless they directly violate their rental agreement. With MTM tenants, you can serve a no-cause notice of termination, as long as the termination is not retaliatory for any protected behaviors such as reporting maintenance issues, complaints about neighbors, organizing a tenant rights group, or for being a member of a protected class, among other things. I’ve had people (somewhat jokingly) say, “Well, I’ll just raise the rent $300 a month and they won’t be able to afford it and will have to move out!” Unless your unit was under-rented by that amount prior to your taking over, and you can prove that to a judge, this is called Constructive Eviction, and it is illegal.
Just like other areas of life, courtesy and kindness go a long way to drawing people to your way of thinking. Transitions can be particularly difficult for some people and a pleasant, calm, helpful demeanor is always a good idea. I have occasionally had tenants who struggled with the transition at first, but then settled down, so don’t assume that the first reaction you get will be how things go forever. I also had a mentally ill tenant who refused to accept the transition, kept sending rent to the previous manager and was evicted by us for non-payment. You can’t make everything perfect, but in most cases, your attitude will definitely influence the response from your new tenants, so be mindful of that and your chances of a successful transition will increase exponentially.
This column offers general suggestions only and is no substitute for professional legal advice. Please consult an attorney for advice related to your specific situation.