After 45 years as a property manager, I’ve collected quite a few stories about what can happen when you rent your property to others—and some wisdom about what to expect. If you own a rental property, or are thinking about it, here are some things to consider.
Raising the Rent
Let’s say you find out you’ve been charging less-than-market rates for rent and you want to bring those rates up half-way through your year-long lease. Unless your lease agreement says you can raise rates before the end of the lease term, you can’t. If you and your tenant sign a lease agreement that specifies a monthly rate for a year, that’s it. No take backs.
Can you increase the rent when the lease agreement ends? Do you have to rent the property to the same tenants if they have consistently been late with the rent (but have included the late fee in their payment)? As the law currently stands, you can increase the rent before signing a new lease agreement or you can decline to renew with the existing tenant. However, proposed laws may change this.
Rent Control
In non-rent-controlled areas, you do not have to renew a lease if you don’t feel like it. However, if your property is in a rent-controlled area or is subsidized for low-income tenants, you may have to renew the lease whether you want to or not. There are several rent-control regulations pending in California. In the Ukiah Valley, we don’t have rent control. We should all hope it never comes.
With rent control, the current waiting list for rentals will get even longer. When vacancies appear, the people rent control is intended to help will be the first to suffer. Why would a landlord accept a prospective tenant with a monthly income of $3,000 when they have another applicant for that same unit who makes $7,000 per month?
On the supply side, if rent is capped at $1,000/month but the cost of construction is $200,000/unit, no one is going to build. That’s the primary problem with any kind of price control. Rents go up because demand is up. If you eliminate the profit motive for building new units, you’ll eliminate the supply of new units. It’s basic economics.
Evicting with the Help of Law Enforcement
If you decide not to renew a lease agreement (or evict your tenant before the lease agreement ends) and your tenant declines to vacate the property, you may need to get law enforcement involved. Let’s say your tenant doesn’t pay rent and then ignores your three-day notice. After that, you are not legally obligated to accept payment and you can begin eviction proceedings. Once a judge rules in your favor and you serve your tenant with your “judgment for possession,” they need to move out. If you think this is going to be a problem, it’s best to schedule an appointment with local law enforcement to accompany you to the premises.
I can only recall one instance when the tenant told a law enforcement officer, “I’m not moving.” The policeman’s attitude quickly changed from friendly to extremely serious. He explained to the tenant in short, clipped sentences that the tenant could walk out voluntarily or be escorted out in handcuffs. The tenant left on his own, which was wise.
Little Known Fact about Renting to a Minor
Generally, you cannot enter into a legal agreement with a minor unless it’s an emancipated minor; however, a minor can sign a legally binding lease agreement because housing is considered a necessity. Most legal agreements with a minor require a co-signer, but if the landlord trusts the minor, then he or she can rent to the minor without a co-signer.
If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.