Put Down The Pipe – And Step Away From That Lease Agreement

by Doug Quance

Associate Broker

Author website

Yesterday’s Unrealistic Sellers Are Today’s Unrealistic Landlords

Just when we thought we had finally convinced all potential sellers that the real estate market was in a crisis – and that realistic pricing was the only way that a sale could be consummated – we now must deal with the unrealistic landlord.

I’m not talking about the professional Leona Helmsley kind of landlord – they’ve always been around. No, I’m talking about the unrealistic sellers who are instructing their agents to continue to market their properties for sale… AFTER they have rented them out to unwary tenants.

Don’t get ahead of me, now. I know that this concept is not new. Home managers have been around for years… and they provide a great service to home sellers by furnishing the home – keeping it in showing condition – paying the utilities – maintaining the yard – all while being prepared to move out with 30 days notice.

Of course, home managers enjoy deeply discounted rents.

And therein lies the rub. The unrealistic seller wants market rent – while marching prospects through the home. A few days ago, I wrote a quick post about our new GAR lease, more specifically about Section 20 which reads:

Upon 24 hours advance notice to Tenant, Landlord shall have the right Monday through Saturday for 9:00AM to 8:00PM to access Premises of Property to inspect, repair, maintain the same and/or to show the Property to prospective buyers. In the case of emergency, Landlord may enter Premises or Property at any time to protect life and prevent damage to Premises and Property. In addition, during the last ___ days of the term of the Lease, and during any period when Premises is being leased from month to month, Landlord may also place a “for rent” or “for sale” sign in the yard or on the exterior of any dwellling on Property, may install a lockbox and may show Premises to prospective tenants or buyers. In the event a lockbox is installed, Tenant shall secure jeweelry and other valuables and agrees to hold Landlord harmless for any loss thereof. For each occasion where the access rights described above are denied, Tenant shall pay Landlord the sum of $_______ as liquidated damages; it being acknowledged that Landlord shall be damaged by the denial of access, that Landlord’s actual damages are hard to estimate, and the above amount represents a reasonable pre-estimate of Landlord’s damages rather than a penalty.

Not only are the unreasonable sellers wanting to install turnstiles on their rental properties to march prospective buyers through – they got those wishes inserted into the pre-printed portion of the new lease. Unfreakingbelievable.

When I was first presented with this new lease a few days ago, I laughed almost hysterically when I read that section… wondering aloud why they would put such language into the pre-printed portion of the lease. Who in their right mind would agree to such terms without a major concession?

I forwarded the lease to my client, informing him that this was a pre-printed portion of the lease… and that it probably was not the landlord’s intention to place such a limitation on quiet enjoyment.

I was wrong. The landlord does wish to continue marketing the home in search of a buyer… and the first lease draft included language that allowed the landlord to terminate the lease with 60 days notice – while only providing one month free rent to my client for the inconvenience.

The funny thing is that if my client desired early termination – they wanted him to pay ALL of the remaining monies that would be due for all remaining months. In other words, they wanted my client to be a home manager who would smile while grabbing his ankles.

We countered this draft stating that unrestricted access was unreasonable – but that we would agree to monthly inspections as well as showings to actual BUYERS who place an offer contingent upon physical inspection… after all, that’s how commercial rental properties are handled with tenants in place. Tenants are entitled to quiet enjoyment, after all.

They came back wanting to secure showings with a one-week notice. “Are you serious?” I asked, “’cause you’re never going to get a tenant to pay market rent with all these inclusions.”

My client said if they would cut the rent 20%, he would agree to it. The unrealistic landlord would only agree to a 4% reduction. Needless to say, we will not be signing a lease with this landlord.

The sad truth is that there are many other potential landlords who are also angling for such an arrangement, as evidenced by my conversations with their agents. Many more than I ever thought were possible.

One agent told me that her client wanted to put a lockbox and a sign on the property 90 days before the end of the lease. Another said that his client wanted to continue marketing the property for sale from day one of the lease. Neither were offering reduced rent. The latter has had an empty rental for five months.

If you are a potential unreasonable landlord – catch a clue. If you want a home manager – get one. Don’t waste everyone’s time trying to get a tenant who will live in your proverbial glass house for full rent. Think about it – do you want the moron who would agree to those terms living in your house?

If you are a potential tenant – get the advice of a broker or attorney before signing your rights away… unless, of course, you ARE a broker or attorney.

If you are an agent who is trying to perpetrate these unreasonable conditions while expecting market rent – you should be ashamed of yourself… especially if you’re offering a ridiculous co-broke.

And if you are an agent representing a tenant client – it is your responsibility to ensure your client understands the ramifications of all of the conditions in the lease… including what could happen if the landlord defaults on the mortgage.

I think I’ll start asking the listing agents to send me a draft of their leases before showing their listings. After all… why should I let them waste my time?