Landlord breaking lease with tenant

[dags]

Hi

We have purchased a property with a tenant and the have about 8months left on their rental agreement.(4 weeks to settlement)
We want break to the lease and compensate the tenant accordingly so we can get in the property for a reno.
Has anyone else been in a similar situation and what would be the best win win situation?

all replies are welcome
dags

 

[wylie]

We have never bought a house with a tenant in place, but if I did and they had eight months of their lease to go, I would think they would not want to go early without some monetary incentive. After all, depending on where the house is, they may have trouble getting something for the same price. I imagine they could well dig their heels in and stay to the end, but if you tell them they will be moving in eight months' time anyway, and offer to pay them their moving expenses, perhaps they would move. You may have to offer more than their moving expenses.

Wylie

 

[Peter_Tersteeg]

I've bribed tenants a small amount to leave early, it worked very well.

Depending on where the property is, this time of year can also be ideal to look for a new property. I'd approach the tenants directly and ask them what they want. Going through agents for this sort of thing often results in being quoted the tenancy act. Knock on their door, chat with them and figure out what they'd like. Chances are you can negotiate a win-win.

 

[dags]

I was thinking of giving them a thousand bucks.

it will pay for itself as soon as the renos done so no biggy.

dags.

 

[Xenia]

You can only break the lease by mutual consent THERE IS NO OTHER WAY IF YOU ARE A LANDLORD.

Find something that they will agree to $1000 sounds like a plan!

 

[dags]

thanks everone, I shall keep you all updated on how it pans out.
dags

 

[DavidMc]

Similar thing just happened to my Dad. He was on a month to month lease. Got given the 60 day 'no specific reason' get out, after my Dad pointed out that he couldn't raise the rent by $70 after previously raising it $30 2 months earlier. The noob REA tried to tell him they can do 2 rent raises per year. We corrected her, said it was 1 every 6 months. Next day we got notice to vacate.

 

[dags]

Hi David

I think that with a month by month lease, its perfectly viable for a landlord to give 60days notice as there is no "long term contract".

Yeah its definately only 1 rent rise every 6 months, and the maximum has to be no more than current market rent.

Thats pretty tough raising it by $70 bucks(weekly i presume)
What were the reasons the Landlord gave for the rise?(if any) and if so, did they have info to back it up?

dags

 

[DavidMc]

I believe the rent was undercharged for a while (say 200pw when it should have been 300pw), but yeah, a $30pw increase then less than 2 months later another $70pw increase. No reason for the raise or information. We suspect the reason is just so they can re-rent it out again at a higher rate.

 

[Tizzy]

We did this once. Tenants knew their lease would run out anyway within a few more months, so it was a win situation for them. We located a few possible rental options for them to chose from because they didn't enjoy the actual looking and then we paid all their relocation costs.

 

[Dazz]

I believe the rent was undercharged for a while (say 200pw when it should have been 300pw), but yeah, a $30pw increase then less than 2 months later another $70pw increase. No reason for the raise or information.

DavidMc,

What you've written there makes no sense to me whatsoever.

It appears what you've written in your first line was the reason.

Sounds like your Dad has been on a screaming bargain, and they wanted it level again....with the typical response of we can't pay market rates ??

How long and how much has your Dad saved by underpaying $ 100 p.w.

What does "but yeah" mean ??

 

[lizzie]

I believe the rent was undercharged for a while (say 200pw when it should have been 300pw), but yeah, a $30pw increase then less than 2 months later another $70pw increase. No reason for the raise or information. We suspect the reason is just so they can re-rent it out again at a higher rate.

i'm with daz on this. if your dad's been underpaying by $100/wk he's been on a darn good wicket, i'd be pretty anxious as a landlord to get the rent back up to market value - even if it meant i had to evict the tenant and get a new one in.

why should i, as a business person, literaly throw away $5,200 a year? i know you've let it get personal and emotional because it was your dad, but from the landlords point of view it doesn't make sense - business is business.

that's why i like to have a ppor.

 

[DavidMc]

What you've written there makes no sense to me whatsoever.

It appears what you've written in your first line was the reason.

Sounds like your Dad has been on a screaming bargain, and they wanted it level again....with the typical response of we can't pay market rates ??

How long and how much has your Dad saved by underpaying $ 100 p.w.

What does "but yeah" mean ??

Sorry my post is a bit 'gross'. It was a rushed post at work and I didn't put the time in it to make it clear, plus given the situation I was reluctant to post full details about it as it's still in progress.

When I said 'no reason' that was in response to dags question:

What were the reasons the Landlord gave for the rise?(if any) and if so, did they have info to back it up?

in that there was no 'specific' reason or substantiation given for the raise per say (not that any is required).

It seems that it was that it was brought in line with market rates (which is just the 'normal' reason IMO). This is only a guess as I don't know market rates in the area and am only hearing one side of the story.

i'm with daz on this. if your dad's been underpaying by $100/wk he's been on a darn good wicket, i'd be pretty anxious as a landlord to get the rent back up to market value - even if it meant i had to evict the tenant and get a new one in.

why should i, as a business person, literaly throw away $5,200 a year? i know you've let it get personal and emotional because it was your dad, but from the landlords point of view it doesn't make sense - business is business.

Ah yes Lizzie, but you are not allowed to just 'kick out' tenants in order to raise the rent. That is against the tenancies act. Business is business however it must be conducted on the right side of the law.

I can't believe you wrote the part I've bolded. This 'responsibility' thing works both ways. If a property is under market rent that is the fault of the agent and the landlord, not the tenant, and they shouldn't suffer for poor negotiation skills or lack of monitoring the market. The tenant isn't going to suggest a raise.

The situation as I understand it was:
1. My father rented a property on a 3 year lease @ $250pw.
2. At the end of this lease the agent/landlord realised this was under market and raised it by $30pw. My father accepted/agreed to this without question.
3. Two months later the agent contacts my father saying that the rent is going up again by an additional $70pw.
The following conversation takes place:
Dad: 'You can't raise the rent again yet'
PM (19yo kid): 'Yes we can, we can do it twice per year'
Dad: 'Twice per year yes, but only once every 6 months'
PM: 'No, that's not right.'
Dad: 'Yes it is. It's in the tenants handbook, look it up'
PM: '...OK...(click)'
Then the next day my Dad gets a 60 days 'no specific reason' notice to vacate.

Now I'm not the type to think 'the world owes me a living', I live a highly conscious existence and have a strong sense of self-responsibility. I don't expect anyone to fund anything for me or to provide for my future. That's why I invest in property.

No argument with bringing the rent up to a market rate. None whatsoever. Although raising the rent twice within a three month period (by a total of 40%) and then kicking the tenants out when they point out that you can't do this sound like something Mr Burns would do. I certainly don't think that's 'just business'.

In my view this situation exists due to either:
the poor negotiation skills of the agent/landlord,
the good negotiation skills of my Dad,
lack of monitoring market rents by the agent/landlord,
lack of knowledge of the tenancy act from the agent/landlord
and I feel my Dad is suffering now because of this.

(Side note - I know I'm only hearing one side of the story. Don't overestimate how emotional I feel about this, if the market dictates the price is $X and someone can't afford $X, that's life. There is no attachment to this house and I don't have a very strong relationship with my Dad - just thought I'd share the situation with the forum as it was relevant to the thread, it's not a 'whinge')

Now that I've provided more detailed information I'd be interested to hear what you think.

 

[Dazz]

In my view this situation exists due to

the good negotiation skills of my Dad,

I feel my Dad is suffering now because of this.


Now that I've provided more detailed information I'd be interested to hear what you think.

David,

I'm not here to have a go at you, but something fundamental just isn't adding up.

To me, it boils down to the fact that to have a cordial relationship, both the Landlord and Tenant need to convince themselves that fair market rent is being paid for the property in question.

It sounds very much like the owner has finally grabbed some nurries, and put their foot down when it comes to charging fair market rent, regardless of how the tenant 'feels'. If he pays - he can stay. If he doesn't agree, issue the 60 day "no reason" notice and move on. What they've done is perfectly legit and well part of the RTA.

It sound as though they stuffed up royally by only upping the rent a little bit the first time around. This is always symptomatic when the base rental previously was woefully too low.

I find it strange that you say that the situation may have come about by good negotiation on the part of your partner....and then the end result is he is suffering because of it....the hassle of moving out and having to re-establish himself somewhere else, where hopefully the Landlord will also charge him full market rent ?? If he is now suffering, and he was happy how he conducted himself during the negotiation, it sounds as if he didn't have his eye on the bigger picture.

This big "hammer" available to all Landlords of 60 day eviction notice for no reason for monthly rolling tenancies isn't used enough IMO, to force tenants to shoulder a reasonable market rental rate.

If he wants to stay on the lower rent, accept a lower standard of accomodation and move on. Disruption for both Tenant and Owner, but the ultimate decision to stay and pay resides with the Tenant.

Anyway, your father sounds like he can take care of himself, so he'll make his decisions and live with the consequences no doubt.

 

[DavidMc]

I'm not here to have a go at you, but something fundamental just isn't adding up.

OK, no worries. For some reason I felt you were putting me in the 'things cost money, woe is me!' whinger category. Apologies as I now know this wasn't the case.

To me, it boils down to the fact that to have a cordial relationship, both the Landlord and Tenant need to convince themselves that fair market rent is being paid for the property in question.

Agreed. However this rate must be achieved in a regulated manner that is fair to both parties. Rent increases are required to be 'reasonable' otherwise they can be challenged and can only occur so often.

It sounds very much like the owner has finally grabbed some nurries, and put their foot down when it comes to charging fair market rent, regardless of how the tenant 'feels'. If he pays - he can stay. If he doesn't agree, issue the 60 day "no reason" notice and move on. What they've done is perfectly legit and well part of the RTA.

Yes, but from my understanding it's not legit to re-let the place within a 6 month period if you kick tenants out for this reason. I haven't personally verified this, this is what my Dad tells me (and I am assuring he is very familiar with this section of the act now). I'm assuming the landlord isn't aware of this fact and plans to let it out immediately, as who would lose 6.5k - 9.1k in rent because they had to wait another 4 months before they could raise it the additional $70pw?

The rental amount wasn't disputed, although having the cost of rent put up $100 per week in that period is IMO unreasonable (I've owned properties for 6 years and none of mine are up more than $10-20 from the inital rent, maybe I'm too lax as a landlord. I think as you said I just set them at the right price to start with. I even had a tenant send me in a $2k maintenance list as a thank you when I raised one from $200 to $210pw after 2 years! The market is finally catching up in my areas... thank you cashflow...).

It sound as though they stuffed up royally by only upping the rent a little bit the first time around. This is always symptomatic when the base rental previously was woefully too low.

Yes, this is exactly what they did, and at the end of the day it's the tenant who will cop it. That's the bit that stinks. Dad's a good negotiator and I wouldn't be surprised if $250pw was very low to start with. Perhaps he got the landlord at the right time, took the lease out in Winter, the security of a 3 year lease warranted a slightly lower rent or it was just a newbie landlord but that doesn't mean they can at a later date break the law to get it back up to market rates.

I find it strange that you say that the situation may have come about by good negotiation on the part of your partner....and then the end result is he is suffering because of it....the hassle of moving out and having to re-establish himself somewhere else, where hopefully the Landlord will also charge him full market rent ?? If he is now suffering, and he was happy how he conducted himself during the negotiation, it sounds as if he didn't have his eye on the bigger picture.

No doubt he was a stubborn old bu66er as well. Yes, I agree he didn't have his eye on the bigger picture. Let's just say he's a good negotiator on price alone, but fails to see the bigger picture. Having said that IMO according to his story of that phone conversation there wasn't much negotiation in that final stage. He pointed out that rent could not be raised a second time in the same 6 month period (by an amount you could argue is unreasonable) and then they issued the notice. I don't know about you, but I certainly would have thought that they would have just held off for another 4 months, then effected the raise.

This big "hammer" available to all Landlords of 60 day eviction notice for no reason for monthly rolling tenancies isn't used enough IMO, to force tenants to shoulder a reasonable market rental rate.

Wait a second - are you saying agents should use the 60 day notice to force tenants to accept more than one rental increase in a six month period? In general, perhaps, but in this situation surely not.

If he wants to stay on the lower rent, accept a lower standard of accomodation and move on. Disruption for both Tenant and Owner, but the ultimate decision to stay and pay resides with the Tenant.

Well, he sort of didn't. He raised the legal issue then got the notice. There wasn't a counter offer of 'OK then, we'll wait 4 months then it's an extra $70pw'. That for me would have been a decent outcome for everyone. In this situation my father did not have the opportunity to pay a higher rent unless he forgave his legal rights which surely you would agree is unreasonable.

Having said all that - do you think that the agent and landlord acted ethically, legally and fairly in every way?

Would it be fair to say this situation 'kinda sucks?'