Landlords Worst Nightmare?

Tenant without a lease.In 2015 I had a tenant that wanted to sign a 2 year lease at my asking price of $1300/month. I like stability in my rentals, so I agreed. The first year he was a pretty good tenant. He would pay his rent on time, he would tell me when things needed fixing and he kept the place pretty clean. Overall, I was happy. The second year, everything seemed great as well, however the number of calls I received to fix things went down. “He must be doing a great job taking care of the place!”, I thought.

About 2 weeks prior to the end of his lease, I called him to see if he wanted to sign a new lease and stay longer (I should have done it sooner, but I got lazy and forgot to check when his lease ended. Maybe I should create a spreadsheet which tracks when the lease ends for all my tenants (as well as some other things) so next time I will be more prepared). In the two years he was renting from me, market rent had gone from $1300/month to $1700/month (the Denver market has been crazy the past 5 years). I wanted him to stay, so I offered him a new lease at $1500/month. He told me he wanted to talk with his wife about it and would get back with me the next day.

A couple days went by without hearing from him. I gave him another call and got his voicemail. The next day I called again. Voicemail again. It seemed a little fishy that he wasn’t contacting me, so I’m thinking he probably didn’t want to renew the lease. But I needed to find out definitively because if he wanted to move out, I needed to market the place to find a new renter, ASAP. So my wife and I drove out there that day.

When we pulled up to the house, the door was open and kids were running in and out the door. Oh good, he’s home, I thought. We walk up to the door and ask one of the kids to send an adult to the door. Moments later, a couple of adults (a man and a woman) came to the door whom I didn’t recognize. Guests of my tenant I thought. I asked him if my tenant, Juan (I’m changing the name for this post) was home. It was difficult communicating because he didn’t speak English very well, nor did his wife, and my wife and I don’t speak any Spanish. But after a little effort, he was able to tell me that Juan wasn’t home. I asked a few more questions, and the guy started to get a little defensive. I explained to him that I was the landlord and I was here to see if Juan wanted to sign a new lease. “Oh, Juan moved out a week ago, we live here now”, he said in broken English. WHAT!?!

This is not good! Someone living in your rental without a lease can be a major problem! It could be much harder to get rid of them than getting rid of someone who has a lease. I continued to talk with Jose (again, changing the name for the blog post), but we were having trouble communicating. Eventually, he had his 6-year old son translate for us. I tried to explain to Jose and his wife that Juan wasn’t allowed to bring in other people to live there. It turns out, Juan invited Jose and his family to live with them 2-3 months prior, and together they were sharing the cost of the rent. I told them that they can’t stay there, they would have to move out. After some back-and-forth they asked me if they could pay the $1300 rent for the next month so they could have time to find a new place. I told them I would have to talk with my attorney to get some advice as to what the best path forward would be. I didn’t want to complicate things further by doing the wrong thing. I scheduled a meeting with Jose for late in the afternoon the next day to talk again.

The morning of the next day I spoke with my attorney, and they told me that the best thing to do was to get Jose and his wife on a 1-month lease (Note, I’m not giving legal advice, please speak with your attorney to get advice for your specific situation). That afternoon, I went over to my rental to meet with Jose and his wife. Jose was not there but his wife, Camila (not her real name), was there, and thankfully she brought a friend of hers who was fluent in both English and Spanish.

After some discussion, Camila agreed to sign a 1-month lease. They asked if they needed to pay a deposit, I said, yes of course. Camila agreed. About a half hour after we started our discussion, Camila’s husband, Jose, came home. It turned out, Jose wasn’t on the same page as Camila. He didn’t want to pay a deposit because he was afraid he would never see it again, and he would effectively be paying $2600 for one month’s rent. I understood his concerns. I explained to him that I also needed to protect myself and my property against potential damages. He understood my concerns, but wasn’t willing to put up a deposit for being there only one month. He then asked for a 1-year lease.

At first I wasn’t ready for that, I was just trying to get them to sign a 1-month lease so that we are operating under a legal contract, and then get them out of there after one month so I can do proper tenant screening for my next set of tenants. I explained to them that I was only going to charge them $1300 for the 1-month lease, but after they moved out, I was going to try to get the market rent of $1700/month. They weren’t ready to pay $1700, but they still asked for a one year lease and suggested $1500/month. I suspect my old tenant, Juan, had told them that I was going to raise his rent to $1500/month. The discussion went on for 2-3 hours. Their translator friend was great; she stayed calm and relaxed the whole time. Eventually my wife and I took a 5-minute recess where we went out to our car to discuss what we wanted to do.

We decided that if we didn’t come to an agreement that evening, we would start the eviction process the next day. That’s the scenario we really wanted to avoid – the landlord nightmare scenario complicated by trying to evict someone who is living in your property without ever having a contract. It wasn’t looking like the one month lease scenario was going to happen, so instead of a guaranteed eviction scenario, we decided to take a chance.and draw up a plan that was somewhat of a compromise. Eight month lease, where the first month was $1300, the remaining 7 months were $1500/month, and Jose and Camila would pay a $1500 deposit in 2 installments of $750 over the next two weeks. The worst case scenario with the eight month lease is that they don’t pay and I’ll have to evict, but this time it will be within the legal bounds of a contract.

I made the eight month lease proposal to Jose and Camila, and they agreed. I told them I would have to go home and write up a new contract and come back the next evening to sign it. The next evening my wife and I met up with Jose and Camila to sign the new lease, and to collect the first month’s rent. Camila’s translator friend wasn’t able to make it, but thanks to the Google Translate app, it went fairly well. We signed the lease, collected the rent, and everyone was happy. One week later, I received the first deposit installment of $750. The next week, I received the second deposit installment of $750. Two weeks after that, we received the 2nd month’s rent of $1500. Right now its the middle of the 2nd month, and all seems good.

Some lessons learned from this experience:

  1. Pay closer attention to when your tenant’s lease is going to expire and contact them a minimum of 30 days prior to the end of their contract to determine if they want to sign up for a new lease term. Sounds like a no brainer, but I let it get away from me this time.
  2. Tenants can be too quiet. If you stop hearing from them, you might want to check up on them to make sure they aren’t hiding something, like other tenants sub-leasing from them, which was plainly forbidden under the terms of our contract.
  3. When bad things happen, stay calm and do your best to work things out with your tenants. If you stay calm throughout the whole process, it is much more likely a positive result will occur. I think I did a pretty good job at this, and just wanted to reinforce the idea by including it in my lessons learned.

Is there any reader out there with a similar story? Do you have any other suggestions / lessons learned for such a scenario? I would love to hear your thoughts in the comments section. Thanks for reading!

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