Standard lease agreements tend to run for one year. Yet, in practice, one year tends to be more of a threshold than a maximum term.
With vacancy rates so low, landlords should expect to see more tenants wanting to stay put. While long-term tenants may seem like a dream come true, there is no guarantee that these renters won’t wreck the property, disappear suddenly, or fall behind on the rent.
Making long-term tenancies successful requires some forethought. A little planning can make all the difference between success and disaster:
1. Screening tenants is always the most important step of the leasing process, whether a tenant is staying for one month or ten years.
Over the long-term, reliability is the key factor in choosing the right person for your rental property. A reliable tenant will continue to pay rent even as his or her life changes, like a new job or a new baby.
The best way to rate reliability is to check the applicant’s credit. A credit report will gauge the individual’s ability to manage debt. It’s also indicative of on-time payments for revolving accounts — which include rent payments. Because a tenant credit check will take into account a longer period of time, it is a better indicator of reliability than one or two previous landlord references.
2. Evaluate the tenant throughout the first year of the lease. One of the best ways to do this is to provide for routine inspections in the lease agreement. At the very least, inspect the unit before agreeing to renew the lease.
Paying rent on time is not the only responsibility the tenant shoulders. The property must be cared for and kept up to standards of cleanliness.
Continue to monitor the tenant throughout every year of renewal, or you may find the person becomes apathetic. Some landlords are surprised to find their long term tenant is hoarding. Even the most conscientious tenant can turn sour over the course of years. Long-term tenants often cause the most extensive property damage, perhaps because they’ve had the best opportunity to run the property into the ground.
When you see the first signs of trouble, look at your options for terminating the lease agreement. At that point, there is no advantage to keeping the long-term tenant.
3. Incorporate a property maintenance plan. Don’t switch to ‘cruise control’ once you get a long-term tenant. Property damage can occur long-term where otherwise this damage would have been mitigated sooner. If tenants say they want to stay on, discuss what maintenance will need to take place in year two, or three — or ten.
4. Build in leasing strategies for regular communications. In addition to inspections, make sure tenants remember who you are. The longer you are out of the picture, the less likely you’ll be to recover the unit in good shape. It is also important to keep up-to-date contact information for your tenants.
5. Discuss rent increases that may occur throughout a long-term tenancy. Discuss this policy with your attorney if necessary so that you understand limitations on rent increases. If you waffle during rent increase discussions, the tenant may become disgruntled, and that increases the risk of neglect or damage.
6. If possible, renew the lease for additional terms, like one year at a time. It is easier to manage a property that is under a set term than to be unaware of when your next vacancy is likely to occur.
Landlord Tip: Some provinces allow tenants to remain year after year if the lease is not terminated. Landlords run the risk of becoming trapped in a lease with a bad tenant. Make sure you know the law, including deadlines for notices to tenants. Speak with your attorney regarding your leasing policies if you have any doubts or questions concerning your rights or responsibilities. An hour or so of consultation is little sacrifice if you gain a successful tenancy that lasts many years.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.