Q: About 90 days ago we signed a month-to-month rental agreement for a rental home that we now live in and had planned to rent for at least a year. Two weeks ago we were shocked to hear that our rental home had been listed for sale within a month of our move-in. Even more incredible is that the home has been sold and is in escrow and the new owner wants to occupy the home — and the owner’s management company just gave us a 30-day notice to vacate.
Having heard similar horror stories from others, I had asked the property manager about any plans to sell before we signed the agreement and explained that we were looking for at least a year’s stable housing to get our son through his last year of high school. We were verbally reassured that there were no plans to sell.
We are blown away by our landlord’s actions and have many questions. Do landlords have a responsibility to disclose their intentions to potential renters? Can we sue them in small claims court for our damages of having to move sooner than we expected?
A: Neither owners nor tenants are required to make any advance disclosures about their long-term plans when entering into a month-to-month rental agreement. The concept of "caveat emptor" applies to both landlords and tenants, as a rental agreement is essentially a contract that requires trust between both parties.
The landlord is turning over a very expensive rental property to a tenant while the tenant is paying his or her hard-earned rent money expecting to establish a home.
While I clearly do not condone any misrepresentation made to you by your landlord, I have seen hundreds of situations in which tenants have also misled landlords, and that isn’t right, either. It is my experience that 2 percent of landlords and 2 percent of tenants create 90 percent of the problems!
The bottom line is that with a month-to-month rental agreement the owner retains the right to change his mind about continuing to rent to you for any reason or no reason. He may not have had any intention of selling the property when you signed the month-to-month rental agreement, but a job loss or family emergency may have come up suddenly.
Now certainly if that is the case, then a call with an explanation would have been the right way to handle it. It doesn’t change the dramatic impact it has on you, but it at least would make it more palatable.
But let’s look at it with a cynical view and discuss your chances of taking legal action. What if the landlord did lie to you? Can you prove in a court of law that he knew he was going to sell when he told you he wasn’t? That may be a very difficult allegation to prove and one that the landlord would certainly deny.
The property was listed a few weeks after your rental agreement was signed. Does it look suspicious? Yes, but the owner could say that he changed his mind or circumstances developed that changed his plans.
Remember that legally you have a contract for 30 days and only 30 days. Either party can decide to terminate the rental agreement upon proper written notice with or without a reason.
Even with a month-to-month rental agreement, the parties are not on equal footing, as the landlord is further obligated to not terminate the rental agreement for an illegal reason — retaliation or discrimination. The tenant does not have these limitations.
In many ways, a residential lease is totally one-sided in favor of the tenant. The landlord can potentially be stuck with a bad tenant who doesn’t take care of the property very well, but the issue isn’t severe enough to make it a lease violation. The landlord also cannot raise the rent or change any other term during the lease.
Although the tenant is responsible for the rent throughout the balance of the lease, if he or she chooses to vacate the rental before the lease is up, the law requires the landlord to mitigate or minimize the tenant’s damages and attempt to re-rent the property immediately.
Also, the reality is that beyond the security deposit, which is typically less than one-half month’s rent in many parts of the country, the landlord will find it very difficult to actually collect the unpaid rent owed by the tenant plus the damages caused during the tenancy.
You mentioned that you had asked the property manager about the owner’s intentions. In the future, note that all agreements concerning real estate are generally enforceable only if they are in writing. Therefore, the verbal assurances are meaningless and you do not have much (if any) of a small claims court case.
A month-to-month rental agreement is just that — an agreement to rent a rental unit for one month, and it can be canceled by either party upon proper notice at any time.
The main lesson to be learned here is that you must insist on a lease or you are open to a notice to terminate your tenancy at any time with or without cause. If you had a lease, the owner could still sell the property, but the new owner must honor the lease or make you a deal to vacate early.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies." Email your questions to Rental Q&A at firstname.lastname@example.org. Questions should be brief and cannot be answered individually.
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