Leases are Binding Documents

From a conversation regarding leasing situation:

A while ago we had a tenant come to us and say they can’t afford to continue on in the residence and they’re renting one of the more expensive suites in one of the more prestigious buildings in town. The rent’s about $7000 a month. So – a difficult situation. They told us they probably won’t be able to pay the rent next month. We can’t do anything, we can’t re-lease the suite or do anything until we actually get a written notice from the tenant.

Now once the tenant breaks the lease they are liable for any losses or damages that the owner might incur as a result of their lease breaking, so if they’re 3 months into the lease and they’ve got 9 months to go and it takes us 7 months to get the suite rented we would have the right to go to arbitration for 7 months rent.

Plus they’re also responsible for the re-leasing fee which is half a month’s rent. So something that need to be thought of quite carefully especially if you’re a tenant, when you are signing a lease you are responsible for the full term of it.

Generally speaking we’re able to re-rent suites fairly quickly. In fact, in this instance we have a fellow actually say that he wanted to take it for the first of the month – because we had put an ad up to try and mitigate any damages for the owner, and the tenant. But at the moment, the tenant is travelling and we haven’t got the signed notice so there’s nothing we can do. We can’t enter into another lease agreement until we have that notice.

At Downtown Suites we’re trying to mitigate costs for everybody. We don’t want to be the bad guy, at the same time you have to protect everybody’s rights, and that includes the landlord, obviously. We’re also very conscious of trying to be helpful to the tenant. Situations in life do change- people get transferred This chap’s financial situation has changed even though he had a very stable credit background for a long time, something’s happened and that changes.

We do try to mitigate and we do try to rearrange as quickly as possible. But it’s something to remember, that there are when you’re a tenant.

From the landlord perspective there’s an obligation too. Once you’ve signed the lease you are not able to do anything with the property, you can’t move into it. The lease takes precedence, the lease runs with the lands. So even if you sell your apartment or property, you can’t evict the tenants, the tenants are there for the term of the lease. You can ask the tenants if you can show the suite – they more or less have to oblige for that with 24 hour notice. But even if you do sell it, the new owners have to take on those tenants. You can’t raise the rent, and actually you can’t make any other changes whatsoever. The lease is firm for the full term.

We like to take a one year lease at Downtown Suites because one of the other concerns we have is that we have some sort of longevity with a tenant. We don’t want somebody using it just as a crash pad and then walking away. So we like to have people in for one year and after that we go month to month. We don’t renegotiate actual leases because it gives the landlord more flexibility should they want to sell or should they want to move in. Then it’s a 60 day notice situation and they can either move in or the new owner can move in.

It is something to be concerned about: leases are binding legal documents.