We are often asked, “how long a lease should I have with my tenant?”. Some owners want a month-to-month because they can have possession of their property with a only a 30-day (if they have been there less than 12 months) or 60-day (more than 1 year) notice. Others think a 2 or 3 year contract is best because they don’t have to worry about a renewal or finding another tenant in a year. Here is our policy (even though everything is negotiable): we prefer contracts that are 9 to 15 months in length that expire February through September.
For example, if we are hired to manage a unit in October 2017 that is month-to-month, we will encourage the owner and tenant to agree to a new lease that expires no earlier than February of 2018. What is our rationale?
- If you have 3 units that are month to month, and they all decide to give you 30-day notice October 1, you (or we) now have to fill three vacancies at the worst time of the year. There are tenants looking for rentals this time of year, but generally speaking, they are not the best quality and not many of them.
- If you give a tenant a 3-year lease, and after 3 months you realize they are difficult because they pay late every month, complain about everything, or worse, they violate the terms of the contract (such as having additional roommates or pets) but not in such a blatant way that allows for a quick eviction (e.g., non-payment); you just inherited a three year headache.
- We find that a one-year contract expiring between late February and late August is best. It gives enough time to see if the relationship is worth extending. If the tenant enjoys the property and wishes to stay, we always recommend allowing that tenant to stay an additional year with perhaps a small rent increase if the market justifies it.