When a tenant leaves your unit in the middle of a lease, as the landlord, what are your options?
This just happened to me. I had a tenant that I inherited when I bought deal 1 that had stayed for two years through $550 of rental increases, rats, mold and a 2 month kitchen rehab/restoration. They weren't the best tenants, paid late on occasion, used a lot of water somehow but could have been worse.
Their lease expired at the end of October 2019 and then transferred to month to month. I had debated asking them to leave but didn't want to deal with a turn over. I was going back and forth. Then out of nowhere I get a call from one of the tenants saying they had broke up and she had already moved out and he was going to later that week.
What could I do at this point? I started to research what my options were and created this step by step guide.
Step 1 - Had they paid rent?
No. My tenant hadn't so if they continued to stay in the unit I would have had to file an eviction.
If they had paid rent but are no longer in the unit I would reach out to them to try and better understand where they went. If they had paid their rent and still moved out they would still have the right to that unit so I wouldn't be able to rent it out yet.
I actually called and spoke to a legal assistant that said since they had left and turned over keys there was no need to evict at this point.
Step 2 - Was the unit abandoned?
No. One of the tenants met me at the unit to return his keys and do a final walk through.
If the tenant had paid rent you'll want to be careful in how you determine whether they abandoned the unit or not. If it is obviously they moved across town you need to secure the unit and fill it as soon as possible. But if they have fallen late and went on vacation or are in the hospital you don't want to think it has been abandoned and begin to start changing the locks or throwing their belongings to the curb.
You don't always have the legal right and that could be dangerous!
I double checked and made sure I had an abandonment clause and you might want to do the same.
The reason this is important is if the tenant abandons your property the law states you, the landlord, have a duty to serve as the custodian of the tenant's property. This process of placing personal property or goods in the temporary custody or control of another is called bailment.
Each state imposes by law a bailment that is set for a fixed term (usually 15 to 20 days). As the landlord, you must hold the tenant’s property for this fixed time in a reasonably secure area. If they don't return and reclaim their property by the end of the time frame you are free to dispose of it as you wish.
Here is a list of the general guidelines a landlord should follow when dealing with an abandoned tenant’s property:
Step 3 - Where are they in the lease?
Month to month. Luckily mine were month to month and surrendered the unit back to me.
If they are in month 6 of a 12 month lease you may be due more money than I was and approach the situation differently.
Step 5 - Determine damages
Once you get into the property you have to be able to determine the damages and see if the deposit will cover damages. Did they trash the place? Are there broken windows and blinds?
When I took over the place they had a deposit of $550 and I never asked for more. I learned my lesson on getting more. When I got there almost all the blinds were broken and there was one broken window. All in all it honestly could have been worse... like way worse. But they also didn't pay rent for the days they were in the unit and gave no notice so I wasn't able to start showing it.
In my situation I paid $390 to have the windows repaired the next day since it was on the front of the house and not in the best area. They also had broken blinds that were about $100 to replace and some light cleaning. They also had keys for exactly half the month so they would owe $650 for rent, $390 for the window, $100 for new blinds, and a deep cleaning fee. Basically they would owe me $590 + cleaning fee after I deducted the deposit.
Step 6 - Send a Disposition of Deposit
The next step is sending a Disposition of Deposit to the tenants to show them the breakdown of what their security deposit is applied towards. This usually needs to be mailed within a certain timeframe, or you could lose your entire right to collect any money AND you may have to actually pay the tenant money depending on the state.
Step 7 - 5 Options to Collect From Former Tenants
If their deposit doesn't cover the damages or what is owed you'll need to choose what to due next and these are your options:
1. Ignore it
If the amount they owe you is very small, you may choose not to pursue anything else after sending the Disposition of Deposit. If they owe you $75, it might not be worth the time or hassle to try and collect. Just send them what they owe and mark it for future references as someday you may get a request for that tenant.
This may feel like losing but you can look at it as a valuable experience to better understand how to put systems in place or the importance of a full deposit.
2. Bill Repeatedly
If you don’t want to ignore it but it isn't enough to take larger action, you can set up a system that mails out a new bill monthly as a constant reminder of what they owe you.
Who knows, maybe someday they'll get a tax return or win the lottery and want to pay it off.
3. Negotiate With Them
Maybe the tenant doesn't have the $500 they owe but are willing to give you $300 now. It may be worth it to take the money now and move on.
4. Send to Collections
Collection agencies are designed to pursue individuals with past-due payments. They can vary in techniques to get this money, including tracking down the tenant and calling them repeatedly until the debt has been paid. For their services, collection agencies typically charge a hefty fee, oftentimes 50% of the debt recovered. If you are fairly certain you won’t get the money from the tenant, you can send the invoice to collections and let them deal with it. Who knows, someday down the road you might get a check in the mail.
Because you'll be losing half what you are owed it may not be worth it to go the collection agency route unless you are owed between $1,000 and $4,000 and don’t think they have the money right now.
5. Take Them to Small Claims Court
If you you are owed up to $10,000 you could pursue a lawsuit in small claims court. This court is designed to help people sue others without the need of lawyers and a lot of money. Usually, for less than a few hundred dollars in fees, you can sue someone, and if you win, you will receive a judgment against them. The judgement could take money from their wages or tax returns. Plus, this judgment can follow the tenant around for years, even showing up on background checks when they apply for a rental property in the future.
Step 8 - Determine What Steps You'll Take
You really have two options, pursue legal action or not. Pursuing legal action would be smart if they damaged your place, skipped out on your lease early, or stole property like a refrigerator. This option may take longer because if they couldn't pay rent while living there it may be hard to collect. It will also serve as a good warning to any potential landlord after you where these tenants may slide on through.
Not pursuing legal action. Sometimes it may just be what is best for you in terms of time, stress, and even safety. You might be avoiding pushing a person who is currently unstable into a more stressful and aggressive situation. If you have partners or investors it may complicate things but moving on may be best.
At the end of the day there is no real right or wrong answer. In my situation I am owed $590 + cleaning fees but I got rid of a tenant I had been debating about not wanting to resign. There were some damages but it could have been left in way worse condition.
Coming up I will send out my Disposition of Deposit hoping to get what I am owed. If not, I will then try and negotiate and at least get half since that is what a collections agency would take anyways. If that doesn't work then we'll see what I want to do next.
In any situation like this I recommend you seek legal council like I did to better understand your states laws. I was able to get all the answers I needed without the $100 fee for a 30 minutes call or a $3,500 retainer the other person wanted!
Let me know if you feel there are any steps I missed or should include!
HELLO AND WELCOME!
I'm Jake, a dude interested in personal finance and travel creating the life I choose.
In 5 years I went from living in a basement with Craigslist roommates to paying off 90k of debt, backpacking 3 continents, getting a house for myself and 5 rental units.
Read my story in the about me section.
All photos on the blog are from my travels
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