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Author Topic: Variable rate leases with SECT 8 ?  (Read 2621 times)

Offline h2h

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Variable rate leases with SECT 8 ?
« on: February 16, 2005, 08:25:34 am »
I'm in the process of changing our current lease agreements to include much of the suggested terminology learned thru recent REI seminars and subsequently purchased forms.  We're in CT and deal regulary with SECT 8.  We have a pretty good handle on market rates and the SECT 8 limits for our local area, and price accordingly. SECT 8 typically requires new leases to be a term of ONE year initially, with automatic month to month holdovers.  
We might state in our agreements, for example,  the term of a lease to be ONE year, for consideration of $12,000, with monthly installments of $1,000.  
To my way of thinking-if it's worth $12,000 over 12 months, then its worth $6300 over 6 months($1,050/mo), and $1100 on a month to month basis.  While SECT 8 does allow 6 month renewals, this poses no problem as I simply write a new lease for 6 months for $6300.  We've had good SECT 8 tenants in the past who we'd like to stay but had no incentive to get them to resign.  They were savvy enough to stay on month to month holdover to keep their options open.  
I'd like to word my lease initially such that the rate is $1100 per month, discounted to $1,000 per month for 12 months, with any month to month holdover automatically reverting to $1,100 per month thereafter.  At that point, a rent increase to $1025 per month for a new one year lease would also look good in comparison.  Does anyone out there use this strategy in their leases?  If so, is there any suggested wording beyond what I propose above?

Offline ginoray

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Re:Variable rate leases with SECT 8 ?
« Reply #1 on: February 16, 2005, 03:33:12 pm »
 I leased an apartment Section 8. I negotiated a deal with the lessee. Section 8 reviewed the $1000 rent agreement and determined the amount they would pay towards the rent. Renter paid $272 Section 8 paid $728.
 Secon 8 requirerd their lease be used. So I had no control over the lease terms. However, their terms were tolerable.
 I lost about 6 weeks rent while all of the approval and inspection procedures took place.
 I will Section 8 in the future only as last resort.
 However Section 8 renters do follow the lease rules more often, due to fear of using their subsidties.
 I believe the program exists due to large amounts of rent not being declaired by some owners. With Section 8 you get a 1099 at year end.
Gino Ray

Offline h2h

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Re:Variable rate leases with SECT 8 ?
« Reply #2 on: February 17, 2005, 06:41:46 am »
Thanks GINO RAY,
I'm getting the sense that our local SECT 8 office isn't so bad in comparison to many other areas.  We negotiate terms with the tenant on the  lease WE draw up.  Also we haven't experienced the long wait for the initial payments that others have cited in these postings.
 
My only concern is that I want my leases to force the tenants to pay a higher rent payment should they stay in the building on a month to month basis after initial period of their one year lease. Otherwise I'm submitting a rate hike for months 13,14,15 etc which SECT 8 reviews, disputes, and complains about.  If I build these terms into the lease at month 1 there is no reveiw and approval at month 13 because it was approved back at the original lease signing and now everyone, Me, SECT 8, and the Tenant all benefit from a 1 year lease renewal.  

I remember when gas stations got into trouble a few years back for "illegally" charging their customers more when they used credit cards  to pay for gas (to compensate for the processing fees the station incurred) because it was found to be a discriminatory practice.  How did they solve the problem?  They raised the price of both credit and cash prices and then "legally" discounted gas to their cash customers.  The price differences were exactly the same both ways- one method was leagl, one illegal.  Similarly,  I want  to discount the monthly payment for a 12 month commitment, charge more for a 1 month commitment, and not have it bite me in the backside.

Offline ginoray

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Re:Variable rate leases with SECT 8 ?
« Reply #3 on: February 17, 2005, 10:19:03 am »
Hi,
 I did not know that Section 8 could have different basic rules from one area to another due to Federal funding. We live and learn.
 Here in San Diego the Section 8 Agency sent out a letter requesting landlords to limit rent increases to 2 1/2 %
per year. The Section 8 contract is for six months min. and then reverts to month to month.
I assume that any increase greater than that will be shouldered by the tenant. A duplex 2 BR, 1 bath, and garage unit in Sand Diego rent for $950 to $1800 a month. Raising rents forces renters to either buy or move in with friends. I take my tenants situation into account before raising rents. I also weigh the effect of the refurbishing and lost rent costs if they move out.
Good luck,
Gino Ray

Offline h2h

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Re:Variable rate leases with SECT 8 ?
« Reply #4 on: February 20, 2005, 12:09:07 pm »
Hi Gino,
Interesting on the differences in policy practies-Thanks again.  I ended up using the following language after the conventional terms-installment-period section of my lease:
"If the TENANT desires to stay beyond the above stated ending date of the term, and has not negotiated and signed a subsequent lease with the LANDLORD, and LANLORD has not leased this same premises to another party, TENANT, upon receiving written permission of the LANDLORD, does remain in the above described premises on a month-to-month basis for a consideration of  ($ XX) , per month, due in advance on the first day of each month, and payable at the above stated office of the LANDLORD.  Further, if a month-to-month tenancy exists, the monthly rent may be increased at the option of the LANDLORD/AGENT with written notice served on TENANT as specified by law."  Hopefully I've covered that backside of mine!

 




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