Q. I've owned a six-unit rental building for a number of years. Some of my tenants have been longer term, while others only stay for a year or so.
Last December, I rented a large three-bedroom apartment to a photographer for $5,000 per month. When he applied, I was aware that his application presented certain risks, mainly an extremely low credit score. He agreed to a six-month security deposit.
Last month, I asked if he would be renewing his lease, which ends on 12/31. He said he would not, and I let him know I would begin making plans to rent out the apartment.
Yesterday, I asked if he is on track to move out by the 31st. He emailed that he’s “been out of town a lot lately” and would “do his best to try to get out by the middle of next month.”
Now I’m concerned that he is going to overstay his lease and prevent me from getting a new renter in there. What should I do?
A. As a landlord, it's always important to lay out your expectations to a tenant from the very beginning.
In addition to selling a prospective renter on the apartment during a first showing, a good landlord (or their broker) should explain 1) what the application process will entail; 2) the basic qualifications necessary to have an application approved; 3) the basic terms of the lease (e.g. the number of months/years, renewal terms, the rent, security deposit, etc); and 4) any important house rules (e.g. pet policies, smoking policies, etc.).
Once an application is on track for approval, it’s important for a landlord to remind the prospective tenant of the expectations that were laid out during the first showing and to formalize them in writing.
The lease should address important issues such as the lease duration, the number of days required to give notice of termination or renewal at the end of the lease, and damages due to the landlord in the event of the tenant’s breach of the lease--which includes a 'holdover' provision that addresses what happens if the tenant fails to vacate when the lease ends.
The House Rules should be attached as an addendum to the lease. All of these key points should be verbally discussed with the tenant to make sure the landlord’s expectations are clear.
It’s also important that landlords reinforce their expectations throughout a tenancy by sticking to their policies and reminding tenants of their obligations when appropriate.
For example, when your tenant’s lease was nearing its end, you should have mailed a notice that the lease termination was approaching and reminded your tenant of his renewal options (i.e. how many days they had to renew, whether there would be an escalation in rent, etc.).
Once your tenant told you that he would not be renewing, it would have been helpful to send a notice of your move-out procedures that would have included tips on how to prepare the apartment so that the tenant’s security deposit would not be drawn on for repairs and a reminder of the penalties provided for in the lease should the tenant fail to vacate the premises by the end of the lease term.
It’s also important to remember that each interaction with a tenant sets the tone of the landlord/tenant relationship. When you asked your tenant if he was “on track” to fulfill his lease obligations (i.e. moving out on time) you opened the door for him to respond with an excuse as to why he could not comply with your agreement.
You also missed an opportunity to help your tenant remember his obligations and to streamline the move-out process by defining exactly how it will work.
At this point, I suggest that you reply with a reminder of what the lease terms are and insist that staying beyond the end of the lease is no longer an option and that doing so will result in financial consequences. You might also wish to send a copy of your correspondence via certified mail.
Lastly, you should schedule a “move-out inspection” before the 31st and provide the tenant with information about what he needs to do to get his deposit back.
Perhaps the tenant will be motivated by this incentive reminding him that if he complies with his obligations he will benefit from the prompt and complete return of his deposit funds.
You did buy yourself a good amount of protection with a six-month security deposit, but hopefully you will not need to rely upon that to make yourself financially whole. In the event that your tenant fails to vacate the premises by 12/31 you will need to look to the holdover provisions in your lease agreement for your remedies.
Many leases allow for prorated damages for holdovers that are greater than the prorated rent during the term of the lease. For example, the provision may state that the tenant owes 1.5 days of rent for each day that he stays after the lease termination.
However, such provisions are not always found to be enforceable and you may be restricted to your “actual damages” should the tenant challenge your enforcement of such a provision in court. Prior to that, your best course of action would be to deduct all damages that you believe you are legally due from the security deposit.
In the future, set the proper tone with tenants from the beginning of your relationship with them and you will find that most will respond by taking their obligations seriously.
Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.
Note: The information provided here is for informational purposes only. It should not be construed as legal advice and cannot substitute for the advice of a licensed professional applying their specialized knowledge to the particular circumstances of your case.