Would You Offer a 3-Year Lease Renewal?

[Honeybadger]

My friend has had a tenant for the past year, who is excellent and takes great care of the house.  The tenant recently asked to sign a three-year lease renewal.  The current rent is a bit over market, and my friend would prefer to avoid turnover.  Would you consider offering a three-year lease to a superb tenant?

[an]

Yes. I did a 5 years lease once and then follow up to that 5 years with a 4 years lease to the same family.

[gzz]

Yes to a good existing tenant.

[Coronita]

I’m going through this right now. Personally I think anything longer than 2 years is a long time with inflation, with the latest tenant laws, puts landlords at a disadvantage, unfortunately for good tenants thanks to AB-1482.

Unless your property is “exempt” from AB-1482, you are limited to rent increases of up to 10% per year. So if you’re a landlord that in the past never raised rates, you might be in a interesting situation in which you are really far behind from current market rents, and with inflation, you won’t ever catch up even if you were able to raise rates 10% each year for several years. Furthermore, if your property isn’t “exempt”, there’s only a small limited number of “no-fault” reasons you can evict/get rid of the existing tenant, and in the case of a “no-fault” termination/eviction, I think you owe at least 30 days rental credit to the person.

Because of this, I stopped my old policy of never raising rent, and raise it every 2 years a bit just so I won’t fall that far behind.

Now technically, most SFH and attached properties that individuals rent out are exempt from AB-1482. But that’s only the case if you notified your existing tenant that your property was exempt from AB-1482 before the 2020 deadline.. Many people who had old leases that preceded that didn’t properly notify the tenant that the property is exempt, and therefore technically, unless you signed a new lease with the old tenant clearly stating that the property in question is exempt from AB-1482, it technically ISNT exempt from AB-1482…

So regardless of what sort of length terms you plan on renewing with your tenant, you want to make sure your lease contract clearly states it’s exempt from AB-1482, and if it’s up for renewal it’s probably a good idea to have a new lease contract with those new papers that clearly states the property is exempt.

Times like these I also recommend getting a professional property manager that can walk you through this and make sure your lease contracts are correct. Otherwise you might get screwed.

• This reply was modified 1 year, 9 months ago by Coronita.

[Honeybadger]

Thanks to all of you for these very helpful responses!

[Author]

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