Provisions for a month to month agreement-what makes a solid contract?

So I’ve been reviewing my lease agreements and after reading through the terms (they’re pretty much fill in the blank general leases) decided to switch to a month-to-month agreement come renewal time for my tenants. I spoke with a couple investors at last months local RE Club meeting and heard some good ideas for clauses and some really bad ones.

After talking with a couple people I decided to give it a go and try to write my agreement Clause by Clause myself before taking it to my attorney for approval. I figured it would be helpfull to compare notes with some of the other professionals on here to see what they include in their agreements and if possible provide some I intend to use to help them. Would be interested to hear everyone’s feedback on what helps cover their a$$ OR what could come back to bite you. Here’s a couple of my ideas (not put in legal jargon):

  1. Change in Rent payment due date- Currently tenancy starts on the 1st of each month until the last day of the month. I’m thinking of switching to the 21st of each month (tenacy from the 21st to the 21st of the next month). Reason being, my mortgages are due the 1st week of the month. I have had to chase for payments on occassion (not often) but this gives me a bit more leadway instead of readying MY checkbook to make a payment. Late rent will still get a late fee attached.

  2. $200 addition to security deposit: Currently I charge 1st/last and security to move in. I received the suggestion to increase the SD by $200 above rent. In the event I need to fix things/evict/pay the tenant to leave, $700 is a much better motivator for them to keep things in order and/or move out then $500.

  3. Requirement for tenant to maintain the grounds (snow, grass, etc): This I’m a little “iffy” about as far as the legality. One investor stated she use’s this to state if a tenant does not maintain the lawn in a “respectable” manner and does not shovel the snow on the property to avoid fee’s from the city in the winter the client will be deemed in violation of the monthly agreement and is possibly subject to eviction. Fairly sure this isn’t legal but checking to see if it is if agreed to by the tenant.

Again, these are pretty tentative ideas but I’m interested to see what people think and see others suggestions to add. As always, thanks ahead of time for everyone’s insight.

Happy Investing!!

There’s a clause in our lease that states the lease automatically converts to a m2m lease at the end of the term. We also state our company reserves the right to renegotiate rent at any time during the m2m tenancy.
We’ve tried to do some different things with payment due dates. All it really accomplished was to confuse my wife on when to expect rent from our different units. If you’re running that close to empty with your checking account, a couple unexpected expenses will cause major problems for you.
Are you going to evict a tenant who pays their rent on time if they don’t put down an extra $200 deposit after they’ve lived there for several months? Most of the time - if you don’t get the whole deposit up front before move in, you’re not going to see the rest of it. I can see people putting you off for this extra deposit.
There’s nothing illegal about expecting your tenant to mow their yard. Do you mow the yard for them now? I would absolutely put that in the lease. Failure to keep the yard properly trimmed would be considered a material breach of the lease.
We also have in our lease that the tenants are expected to change HVAC filters, smoke detector batteries, etc. as applicable. It’s also their responsibility to notify us immediately of any unsafe or hazardous conditions. If there is additional damage caused due to a problem and the tenant didn’t take reasonable steps to mitigate that additional damage, the additional damage is their responsibility. We also list any sewer backups caused by tenant use are their responsibility.
You need to set guidelines for visitors or other people living there. A clause about the tenant not being able to lease, sublet, or otherwise allow someone else access to the property without the LL’s express written consent works well. We had a couple different issues the past few months where tenants tried to move in family, daughter’s bf, etc. We screen our tenants. If we didn’t screen someone, they’re not living there.

Thanks Justin, definetly appreciate the insight. The clause concerning screened tenants is something I’ll definetly take into consideration. I think my big concern is being able to evict a problem tenant quickly and for a good reason should the issue arise.

I screen all of my tenants pretty rigorously (criminal, credit, employment, prior landlords. Bankruptcy, judgments-all at their cost) and haven’t been put in a bad situation-knock on wood-as of yet. NYS isn’t really too landlord friendly (or business friendly for that matter) so I want to be fully prepared with documentation and reasoning should it go the legal route.

OUtside of the confusion with the due dates, did you experience any other problems with switching the payment due dates? Issue’s with tenants?

Thanks again for the comments!!

We currently have one unit where the tenants pay every other Friday (payday). They’re always on time and it works out well. They’re tenants we screened and put in place.
For an inherited tenant, we wrote the lease so the rent was due on the 10th because she told us she had problems paying by the first of the month. I wanted to set her up for success by making the payment due when she would be able to pay on time. It didn’t matter and she’s been a little late every month, but then again she’s paying a little more than her normal rent too.
For another inherited tenant (couple), we started out with the standard due on the 1st lease. At one point, the guy asked me to make the payments due twice a month to make it easier on them. We changed to twice a month…still late. Finally they ended up moving out (a good thing) and left me lots of nice gifts (free fridge/stove/push mower/subwoofers). Don’t know why they didn’t take that stuff, but it’s all mine now.

I’ve been using a month to month agreement for years and I love it. It gives you the option of getting rid of tenants who need to go, and my lease
has no “legal schmegal” wording in it. It’s very easy to read. It’s one page long. I ran it by my att’y, who said it’s airtight. I have my tenants take care of grass cutting and snow shoveling. No problem! Good luck!

1- Seriously, you need to arrange your own financing so that the rent you receive this month goes into a savings account to pay the mortgage 3-4 months hence.

I throw the rent from 2 of my rentals into a savings account and the mortgage money is taken out automatically. I don’t have to worry that my mortgage payment will ever be late. (That’s all the mortgage I have; those two rentals cover it, plus enough to pay property taxes.)

I have rents due at different dates all through the month. It’s set up to be the very most convenient for the tenant to pay. I don’t have any trouble keeping track of when I have money coming, but if you want it all the same day, you are the boss. I do suggest, however, that you don’t make it too far from the tenant’s payday. Some tenants are not good about saving, even for a couple of weeks.

2- I can’t even do first and last, let alone a bigger deposit. Nobody around here has that much cash. I must have all deposits and first paid before the tenant moves in, but if I wanted another month’s rent at that time, my units would just sit empty.

3- If you’ve got multi’s I think that the LL does grounds and snow. If you have singles, you can certainly have tenants do grounds, snow removal, and (at least in my state) pest control.

I specifically have snow removal mentioned twice in my agreement, so that if the tenant slips and falls, I am not going to be liable. Same with pest control; the tenant can’t complain about bugs to the eviction judge if his rental agreement says the tenant is responsible.

That liability thing is going to vary by your state or local judges. Judges don’t always follow the law, or use common sense.

I make sure the deposit is not an equal to the rent because the tenant will invariable see that as a months rent and try not to pay your last months rent and say the deposit covers it. If the deposit is $100 to $200 more than the rent there is no doubt that this is something else.

Due dates in Harris County Texas should always be the 1st. Judges know that rent is due on the first late on the second and after 3 day notices the earliest time the a person should have a court date for eviction is the 11th. That is when they schedule all evictions. If you are a day or 2 late, you are into the next month. A person can be into you for 2 months instead of 1 if you miss the deadlines by having rent due on different dates.

To these ideas:

  1. Absolutely NOT. Evictions and other things aside, this 21st to 21st can make it difficult for a tenant to move INTO your property. Furthermore, it exposes a weakness in your operation. You should have a minimum of 3 months cash “in the bank” to cover expenses, maybe even as much as 6 months cash.

  2. Screen your tenants, and make the security deposit depend on that screening. Bad Credit/references = higher deposit. Good Credit/references = lower (even zero) deposit required. If working with “high risk tenants” - I would get as much as TWO months rent as security deposit, as it can be VERY hard to go after a problem tenant that rips you off. From the same angle, you don’t want to scare off tenants with good credit either.

If it is a serious issue, adjust the deposit up or down one dollar… so they don’t get into thinking it is one months rent.

  1. On SFR’s you can DEFINITELY make the tenant maintain the grounds. On multi-family units… the LL usually has to do it, but it isn’t impossible for you to have the tenants do this in the likes of a duplex-triplex-4plex. I know one landlord who gives a tenant a $75 a month break on the duplex rental to handle maintenance of both sides of the unit - considering that the tenant in the adjacent unit is handicapped. I also know a local landlord who will gladly make a “problem” tenant pay their bill by working it off cutting grass/making repairs ect in season as appropriate - in lieu of rent.

Evictions are ALWAYS expensive in the end, and are a last resort. Part of getting tenants to pay up is in that they know you WILL do whavever you can do to help, but you WILL collect. My Mentor told Me this… One month late… happens, and take the fee Two Months late?.. they don’t make it to the end of Month three under any circumstances, plain and simple.