Q: I am a landlord with a high-end rental property located in a very nice, older part of town. The rental is a 90-year-old home in good condition but without a lot of remodeling. It has 4 bedrooms, 3 1/2 baths, two fireplaces, a spectacular view, a garden and a one-car garage. A little less than a year ago I rented the property for $4,800 per month. I thought that the rent was very reasonable at the time, as I had many prospective tenants. But this year the rental market has clearly softened and the tenants have already indicated that they may want to move just because other rental homes are more affordable.
I am really hoping that they sign a new lease and would like to offer them a fair rental rate. Can you tell me by what percentage rentals of this type have come down since they originally signed the lease? I really want the current tenants to stay because they have kept up the property and not caused any problems, but this property is an investment and I need as much income as I can get to pay my own living expenses. What would you suggest?
A: You are quite fortunate to have great tenants in your rental home. I would strongly encourage you to work with the current tenants and see if you cannot mutually agree on a reasonable rental rate for this unique property in the current market. Many rental homes are unique, but a 90-year-old home with a spectacular view is not easy to match when looking at comparable rental properties.
However, other than simply negotiating directly with the tenants to find out what they are willing to pay under a new lease, you need to perform a market survey. While finding comparable properties in your area (if any) will be difficult, I would suggest you contact real estate agents and property managers — or your local apartment association or another real estate organization or even a local governmental agency — to see how the general market rents have fallen in the last 12 months.
Use all of this information to get a general idea of how much rents have declined in your area and then contact the tenant.
While you want the highest possible rent, it is wise to think about what rent you might achieve if you did find the property vacant and needed to attract new tenants. You also need to factor in the loss of rent and the renovation and marketing costs and any concessions that you would have to offer. Of course, the tenants will point out the lower rental rate at another rental home and all of the money they will save. But they need to temper those theoretical savings with all of the costs associated with moving from such a large home as well as the extensive loss of productive time and the simple inconvenience of moving. Hopefully, you will be able to reach an agreement on a new lease.
Q: I signed a new 12-month lease recently and just have learned that my company is going out of business. I am losing my job and can’t afford to keep my apartment so I need you to help me come up with a reason to break my lease. The lease agreement doesn’t have any provisions for early termination so I was thinking that I can terminate my lease based on the landlord’s failure to provide the living conditions he promised in his ads for the community.
The landlord owns many communities and promotes them as "college atmosphere housing in a safe, fun and learning environment." However, in the few months I have lived here I am concerned about excessive noise and even my safety. Isn’t that a breach of my lease agreement? I know that there must be police reports of all of the events that have taken place during my residency. I have also complained about items in my rental unit that don’t work and it has taken the landlord up to two weeks to fix them, as he claims he has to order parts. Do you think that I have enough reason to break my lease?
A: I am sorry to hear that you are losing your job, but that does not justify fabricating reasons to break your lease. Unfortunately, with the economy faltering in virtually all areas of the country and some companies going out of business, there are many tenants and landlords that are facing similar circumstances. The advertisements you quote don’t seem to me to be any sort of "guarantee" but more the type of promotional statements typically used to market rental communities, and they are pretty vague.
The delay in responding to maintenance requests apparently is based on the need to perform the repair properly and it is not unusual for some repairs to take additional time because certain parts are not readily available. You should contact a local tenant rights legal adviser and get their opinion, but my experience indicates that you do not have sufficient reasons to break your lease.
I would suggest that rather than trying to point out reasons that the landlord may have fallen short on delivering the living experience you think was implied when you rented your apartment, you should immediately contact the landlord and just be truthful about your situation. He is much more likely to be willing to work with you if you are honest and upfront than if he feels you are making excuses in an attempt to break your lease. While legally you will be obligated for the entire lease term unless the landlord is able to re-rent your apartment, he might surprise you and just let you out of your lease on very reasonable terms.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and co-author of "Real Estate Investing for Dummies."
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