Lease Extension Or Month To Month
The one year lease is almost up on my first rental property and I have some big decisions to make.
The tenant is awsome, pays enough each month to cover the interest on my mortgage and is easy on the property. He knows I might sell at lease end and we openly communicate about the investment he is living in.
He used to say he would buy from me when the time was right but here in Southern California my property has already increase in value $135,000 from when I purchased it 10 months ago. He is not prepared to spend that much and frankly, I don't think he was prepared for our market out here.
Now he is asking if I will go month to month with him. I said I would consider it if we agreed to a 90 day notice period and access to show the property for rent or sale if he moved. I prefer to just sign a six month lease but he's hoping to get out if he finds a "great deal" before money becomes too expensive to borrow.
Should I try to get him go go the lease route or let him do month to month and hope he sticks around? I'd hate to see the place vacant (the Southern California rental market is in flucuation right now).
What is your experience?
I'd get him to sign another lease of at least one year. You can address his specific need by adding a clause that says that if he breaks the lease because he has entered into a written purchase contract your only remedy is to keep the security deposit and not pursue other legal or collection activity.
I would do it this way because if you don't have a written lease, then the landlord-tenant relationship defaults to California Landlord-Tenant law. While I'm not familiar with California law, given what I know about California, I'm almost sure is more favorable to and protects the interests of the tenant more than the landlord. Keep in mind there's alot more to a lease agreement than term and money. Liability and ease of eviction are huge issues you want in your favor. Generally having a written lease agreement is the only way to insure that they are.
I think your best option is to ask him to sign a long term lease with a clause that states he would be allowed to break the lease upon giving you 90 days notice. You'd need to speak with your lawyer to get the lease language just right, but this way both you and the tenant will get what you want. He gets out if he finds the right deal, and you get 3 months notice, which is what you want.
You can of course try to do something similar with a MTM lease. But the very idea of a MTM lease is that usually, only 30 days notice is given when the tenant wants out or if you want to make any changes.
Either way, make sure you're in compliance with law.
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