For most of my career I felt strongly that M-T-M was the only way to go if your tenants were lower income. About a year ago I rethought this. Okay I constantly rethink a lot of things we do on nearly a daily basis, it’s called optimization, but this time we did a trial test of year leases. I feel a lease for a term may be best in today’s environment, but have not recommended it across the board for other owners we work with.
My argument against year leases was that you could not compel them to pay the lost rent for the balance of the lease if they skipped out, yet had to keep the tenant to the end of the lease even if you would prefer they were gone. The exceptions of course are nonpayment and documentable lease violations. With a month to month it is 28 days without cause and 14 days with cause- no right to cure, speeding the process..
The following are possible advantages of using a year lease even if your tenants are marginally collectable at best:
Screening: Tenants that refuse to sign a year lease because they don’t plan on being at one address that long are not worth renting to.
Collections: In a M-T-M a 5 day can only be for rent due, not for other unpaid charges. With a lease the 5 day can include unpaid deposit, late fees, utility charges etc.
Bad behavior: In a M-T-M you can use a 14 day with no right to cure. This does not lessen your burden of proof and does not make the 90 pound pit bull “puppy” leave any faster. In fact it often causes the dog to stay for the remained of the tenants’ occupancy. You can also give a 28 day notice without any reason (or 30 or 60 if that is what you have in your written agreement.)
In a year lease you can use a 5 day. Sure they have the right to cure, but if the same breach occurs again with in the lease period you get to use a 14 day with no right to cure. The five day has sped up the resolution of some issues tremendously. Take the pit bull example. If the dog is gone within five days, never to return – great. If on day 6 the dog is still there you can file with the court. This can calm the other tenants and neighbors quicker because you seem more on top of the situation.
Yes, the tenant can argue that the breach did not exist. They could argue that with a 14 day notice under a M-T-M as well. That is why using a 28 day without cause was a method that worked for M-T-M. But you really do not want to be evicting willy nilly anyways. That makes you look bad and harms your bottom line. So adequate proof is not necessarily a bad thing. Plus if you find a dog on April 4th and decide to give the tenant a 28 day rather than duke it out with a 14 Day you have to put up with them until May 31st and then file an eviction on June 1st if they are still there. So it could be late June when they are finally gone. With a lease you could be in court as early as 18th or 19th
For me today it is use the year lease and document, document, document any breaches. Then, if you need to go to court to evict be prepared to some sort of stipulation. In the dog example you may wish to give them a move out that coincides with the last day of the month conditioned upon them keeping the dog elsewhere for those 12 days and paying the rent.
If the legislature gives us the same 5 Day rights under a M-T-M as we have under a year lease I may reconsider the use of leases, but I am not sure as I feel pretty strongly today that it is a bad sign if a tenant is unwilling to sign up for a year.
Ideally the legislature will also give us the right to use crime free addendums again. That will help owners deal more proactively with disruptive behavior problems