Just as residential landlords need to know how to correctly begin the relationship with a tenant, they also need to know how to properly terminate the tenancy. This article walks the landlord through that process and discusses potential problems that may arise and how to avoid them.
Download a free notice of nonrenewal word template here
Address Potential Tenancy Problems Up Front
A key to avoiding conflict at the time of the nonrenewal is to start managing the process when the lease agreement begins, according to Zane Grant, who rents out 40 units in Pueblo, Colorado and has been a landlord for 20 years. “The key is what you do up front,” he advises.
“First, careful tenant screening is critical.” He said that it is important to avoid any perceived discriminatory intent in the process of selecting a tenant. Then, review the lease terms with the new tenant when the lease is signed. “Be sure to impress with the new tenant that you will not waver from enforcing the policies and the terms of the lease,” he noted. He also recommends maintaining a statement of landlord policies on the property’s website.
Issues that arise during a tenant’s possession of the premises should be dealt with as they happen. “Don’t wait to deal with any problems with the tenant until you are terminating the lease,” Grant points out. “Address any issues as they arise during the rental term. That will reduce the likelihood of conflict when the lease is terminated,” he stated.
Be Sure the Lease Nonrenewal is Legal
Once a landlord has decided to terminate a residential lease by nonrenewal, the lease needs to be reviewed to ensure the process is compliant. The nonrenewal is usually accomplished by a notice of nonrenewal letter consistent with the terms of the lease. A landlord also needs to be sure that the notice of nonrenewal is compliant with applicable state laws, many of which are likely incorporated into the terms of the lease. Failure of the nonrenewal notice to meet the terms of the lease or applicable state laws could result in the landlord having to start the process over and could effectively extend the length of the tenant’s legal possession of the premises.
To try to avoid problems during the lease nonrenewal process:
- Don’t use any discriminatory reasons for the lease nonrenewal.
- Be aware of issues related to the condition of the property; but don’t raise issues regarding the condition of the property for the first time in the nonrenewal notice if they have been present for an extended period of time during the lease.
- Be aware of the applicable time periods for the nonrenewal notice per the lease and state laws.
- Know the lease terms and state laws related to landlord retaliation and security deposits.
- Manage issues related to utility services for the property.
It is likely that a tenant will ask the landlord for a reason for nonrenewal of the lease. This can be a source of conflict. However, many state laws do not require the landlord to give a reason for the nonrenewal. That is one way to avoid conflict with a tenant regarding nonrenewal of the lease. “Colorado law does not require me to give a tenant a reason for nonrenewal of a lease, so I usually don’t,” stated Grant. “I generally advise the tenant that I don’t need a reason.” However, Grant pointed out that in some instances, it makes practical sense to negotiate certain issues with tenants who are being nonrenewed in light of tenant-friendly laws and difficulties in collecting debts owed by former tenants.
Drafting the Notice of Nonrenewal
Most states and standard lease agreements require that notice of nonrenewal of a lease be provided by the party seeking to end the tenancy at the end of the lease period. While the requirements of such a notice may vary by state, and should always be reviewed by your legal counsel, the notice should generally include the following:
- Landlord’s name and contact information
- Tenant’s name, contact information and address of the rented premises
- Date that the lease ends and the premises must be vacated
- Security deposit amount and information
- Date of the notice, and means of transmittal of the notice (by registered or certified mail, hand delivery or other means)
- Information on how to vacate the premises, including the expected condition of the premises upon leaving
- Information on how to manage utilities for the premises upon vacation
A checklist can be attached to the notice which details how to handle these matters and other aspects of terminating the lease.
As stated previously, your notice must be customized to comply with the laws of your state and to align with the terms of your rental agreement. Always have your notices reviewed and vetted by your legal counsel. The notice of nonrenewal can be accompanied by the tenant move-out checklist and a form for the tenant to complete to leave future contact information.
For additional resources for landlords, go to https://honeycombinsurance.com/insurance-learning-center.
For property and liability insurance for your multi-family property, get a quote.