Renting Out House--Tenants Divorcing, want to sublet what to do? (1 Viewer)

[jeaton6]

Moved to China in October and tenants signed 2 year contract to rent out home.  Just got email they are divorcing and have asked if they can sublet the house.  Only out in contract is technically due to them being moved by their company in which case their company will cover remaining contract. 

So, anyone been faced with this and how did you handle? 

My first thought is to tell them it's a possibility but honestly I'd much prefer to find a renter on our own through our realtor (wife will be back in states this summer so she could be part of that process), have them pay the 1 months realtor fee, any shortfall in new rent amount vs present (if any) and then break contract.

Fair or over the top? Other options people have used or could advise?

 

[nirad3]

Depends, are you a sbnomo type of landlord? 

 

[jeaton6]

Explain acronym.

 

[nirad3]

Honestly, if there is no sublet provision in your lease, I would not recommend subletting. 

If you're willing to work with them to find a new tenant, let them break the lease but notify them that they will need to compensate you for the time/resources it takes to find a new tenant, as you suggested.  Much cleaner that way.

Subletting gets messy.

 

[nirad3]

Explain acronym.

Sorry, trying to be funny.... in another landlord/tenant thread here, sbnomo (a landlord) is coming off as fairly hard-### and anti-tenant. 

 

[jeaton6]

Oh gotcha. No they've been good tenants, feel bad, bad situation for all. But also can't afford to just let them walk without getting sorted relatively quickly. 

 

[Bucky86]

Honestly, if there is no sublet provision in your lease, I would not recommend subletting. 

If you're willing to work with them to find a new tenant, let them break the lease but notify them that they will need to compensate you for the time/resources it takes to find a new tenant, as you suggested.  Much cleaner that way.

Subletting gets messy.

I'd do this. Once they're out there's no longer any real recourse against them if the new tenant fails to pay. It's someone else dealing with an eviction and you're forced to sue a bunch of people.

 

[nirad3]

Oh gotcha. No they've been good tenants, feel bad, bad situation for all. But also can't afford to just let them walk without getting sorted relatively quickly. 

Nor should you.  A lease is a legal contract - don't think I need to explain that to you or anyone here - that shouldn't be broken unless there are extenuating circumstances. 

I broke a lease in MN 2ish years ago.  We signed a 2-year lease and halfway through, I got an "offer I could simply not refuse" out of state.  I contacted my LL, told him the situation, and we mutually agreed to have me handle the advertisement of the house for rent, dealt with initial conversations with potential renters, showed the property and ultimately submitted their application, etc. to a credit check site the landlord used.  Everything was sent to him, who ultimately made the decision. 

Fortunately for us, I found a suitable tenant for him rather quickly and there was no gap in cash flow.  Funny thing was, they were a young family moving back to MN from CA... we were a young family moving from MN back to CA.

In your case, it sounds like you'd rather handle the moving parts... which you're certainly entitled to.  If there is no "lease break" provision in your lease, you are entitled to do whatever you see fit.

 

[jeaton6]

Yeah, want to handle the moving parts to a degree so we get a good tenant. That dude is going to be busy with his divorce and all he'll really care about is getting someone/anyone in and getting himself out as inexpensively as possible.

 

[sbonomo]

Moved to China in October and tenants signed 2 year contract to rent out home.  Just got email they are divorcing and have asked if they can sublet the house.  Only out in contract is technically due to them being moved by their company in which case their company will cover remaining contract. 

So, anyone been faced with this and how did you handle? 

My first thought is to tell them it's a possibility but honestly I'd much prefer to find a renter on our own through our realtor (wife will be back in states this summer so she could be part of that process), have them pay the 1 months realtor fee, any shortfall in new rent amount vs present (if any) and then break contract.

Fair or over the top? Other options people have used or could advise?

This is exactly what I have done in the past.  Unless the rental market has completely taken a dump you should easily be able to rent with 30 day of them vacating.   Paying for down time and actual cost (realtor fee) is 100% reasonable.  Apparently some on this board think, along with many people irl, a rental agreement is just a "suggestion" so good luck.

 

[jeaton6]

This is exactly what I have done in the past.  Unless the rental market has completely taken a dump you should easily be able to rent with 30 day of them vacating.   Paying for down time and actual cost (realtor fee) is 100% reasonable.  Apparently some on this board think, along with many people irl, a rental agreement is just a "suggestion" so good luck.

So how have you set this up? Do you have the renter sign a contract that this is what will happen or just not release them from the contract until it does? i.e. they can move out whenever they'd like but the payments will still be made until someone else is in the house and they pay the realtors fees? I've got prepaid legal company I could work with to draw something up if necessary. 

 

[sbonomo]

I just amended the existing lease, outlined the offer and collected a check.  The realtor I used gave me an estimate of fees (both side of transaction).  I also added that i could begin marketing day 1.  It actually ended up fine for me.  The place took 2 weeks to rent so it was amicable for everyone.  

 

[Zow]

Generally, you may have a duty to mitigate any losses. I don't think your suggestion is unreasonable. 

Id suggest considering just a flat fee though. Do you think you can rent it back out in thirty days? If so, offer them an additional months rent as a fee for breaking the lease. I've broken a couple leases myself for various reasons and always just agreed on something like this. 

 

[jeaton6]

Generally, you may have a duty to mitigate any losses. I don't think your suggestion is unreasonable. 

Id suggest considering just a flat fee though. Do you think you can rent it back out in thirty days? If so, offer them an additional months rent as a fee for breaking the lease. I've broken a couple leases myself for various reasons and always just agreed on something like this. 

I reached out to the realtor who set up the lease to begin with. Turns out she was a dual agent but still got us what to this point was a great renter and a great price. Asked her if the market is still strong. Will hear back tomorrow AM hopefully. I assume it still is strong market. Guessing these people will wait til school year ends before wanting to move out which should be a good time to get quick turn around. Hard part is not physically being there. Wife will be in 3 weeks but last thing she'll want to deal with is this. 

 

[TheAristocrat]

Sorry, trying to be funny.... in another landlord/tenant thread here, sbnomo (a landlord) is coming off as fairly hard-### and anti-tenant. 

Love that sbonomo liked this and that it was a notebook dropped on a guy without that and a pencil.

 

[sbonomo]

Love that sbonomo liked this and that it was a notebook dropped on a guy without that and a pencil.

- I take no offense to the first comment.   Being a landlord sucks.  Deadbeats are always looking to game the system.  Over the years I have gotten much better at picking people to rent but, it is definitely a process.  I have lost thousands in the process from bad tenants but this is all  part of the business I guess.  

 

[nirad3]

- I take no offense to the first comment.   Being a landlord sucks.  Deadbeats are always looking to game the system.  Over the years I have gotten much better at picking people to rent but, it is definitely a process.  I have lost thousands in the process from bad tenants but this is all  part of the business I guess.  

My parents have been landlords for as long as I can remember.  I've been involved in real estate for more than half of my 43 years.  I get it, seriously. 

I don't think, however, you have had much experience in the "large apartment community" environment, either as an owner or tenant. 

 

[sbonomo]

My parents have been landlords for as long as I can remember.  I've been involved in real estate for more than half of my 43 years.  I get it, seriously. 

I don't think, however, you have had much experience in the "large apartment community" environment, either as an owner or tenant. 

You would be correct, single family homes are what I own and rent out.  My mom did own a property management company with over 500 doors for 40 years so I have some idea about how these things work.

 

[nirad3]

You would be correct, single family homes are what I own and rent out.  My mom did own a property management company with over 500 doors for 40 years so I have some idea about how these things work.

And if one of her tenants complained about a nuisance and you did nothing about it, would you agree that they would have a solid case against her? 

We're talking about something that is specifically called out in every single residential lease that exists. 

Anyways, not going to bring that battle here.  In that case you are missing the point.

 

[jeaton6]

Updated . See correspondence below. Now he's saying he "misused" the term sublease and just meant they wanted to vacate and be out of the contract altogether. I understand I can check public records of people to confirm if they actually have filed for divorce which I plan to do because if they are lying I'm going to be majorly pissed.  But is this something I should seriously consider doing, letting them off the hook (once I find a tenant?) I personally feel like I wouldn't want to let them off the hook even if I found a new tenant. So that if anything did go wrong they still would have to make me whole. Not sure if I can legally do that though. Anyone know?
 
Hi Kevin,
 
I am sorry for the misuse of the term sublet. We were intending to both vacate and allow you to find a whole new tenant to occupy the entire premise. That would be ideal, smooth and then you could have a whole new contract in place. We understand we would need to pay Mary's fee for this process and once the new tenant took custody/damages assessed we would receive the deposit back. Does that clarify our intentions?

 






Hi Bill,
 
I think a sublet could work. 
 
A few key things I can think of off the top of my head:
 
- We would need to be part of the tenant vetting process with final say on tenant acceptance and would want you to use Mary (and pay her fee) to market home/ensure quality tenants/set-up sublet agreement, etc. 
- My wife will be back in town in Mid June so could potentially help with this vetting process.
- Since it would be a sublet the terms of our contract would still be in full force and the only key change once sublet is found is whom is living in the home. 
 
As a starting point is this agreeable? 

 

[Random]

Does you lease address vacating early?  Mine states they must pay 1 months rent (which usually means they end up forfeiting their deposit).  In my world, if they want to leave, they will leave.  You are fortunate they are agreeing to pay something.

 

[jeaton6]

Does you lease address vacating early?  Mine states they must pay 1 months rent (which usually means they end up forfeiting their deposit).  In my world, if they want to leave, they will leave.  You are fortunate they are agreeing to pay something.

No early vacating unless their company moves them. 

 

[Bucky86]

This is going to get good. They're expecting a deposit back?

 

[Buttonhook]

Do you have last month's rent and a security deposit in hand?  If so, you should have plenty of leverage and time to find a new renter, without hassling over an updated contract with the existing tenants.

 

[Buttonhook]

This is going to get good. They're expecting a deposit back?

What's wrong with that?  So long as they cover all the misc. expenses caused by them leaving early, and they leave the house is good shape?

 

[Bucky86]

What's wrong with that?  So long as they cover all the misc. expenses caused by them leaving early, and they leave the house is good shape?

Shouldn't our OP be compensated if there's a gap between the current renters moving out, work being done(painting,carpeting, etc.) and the new tenants moving in?

 

[sbonomo]

Have you figured out if rent is still market (you realtor can tell you this)?  Do you think the property will rent quickly?  I would require them to pay for the realtor and any finder fee for a new tenant up front.  Have them continue to pay rent until the property is leased.  Refund them the difference between the partial rent and the remainder of the deposit if there were any expenses (cleaning minor repairs etc.).  Sounds like they have not been there that long so it the place can't be in terrible shape.  

Now what really is going to happen is they are not going to pay rent and will tell you to take it out of the deposit.  At this point you need to play hardball.  Remind them that they are responsible for the entire lease (or whatever the terms are within the lease) and that you will use the court system if needed.  At that point you need to get it marked ASAP to minimize damages.  Hopefully you have a multi month deposit so that you can minimize your loss.  I have never tried to make money on a tenant when they leave (asking for 1-month rent, etc.), i always try to break even.  If they are thinking they are getting a deposit back, i don't think the understand how expensive it is to get a place rented. Good luck.

 

[Chadstroma]

What are the drawbacks on subletting? Wouldn't it, as a landlord, give your extra protection on getting the rental income? Because the person holding the lease is still responsible for making sure you get your payment- right? So, if the new renters don't pay or are late etc, the person holding the original lease is responsible to pay you. Or is that wrong?

As a landlord, what do you want to do in a contract to make sure you are in the best position whether you want to allow it or not?

I plan on renting the house we currently live in in a few years when we move out. So, just curious about this for general knowledge that will be used in the future.

 

[gianmarco]

But is this something I should seriously consider doing, letting them off the hook (once I find a tenant?) I personally feel like I wouldn't want to let them off the hook even if I found a new tenant. So that if anything did go wrong they still would have to make me whole.

I don't really understand this,  As long as they are willing to make you whole until you find someone, then I don't see why you wouldn't allow them to do so.  They have to understand that they are responsible for any realtor fees associated with finding a new tenant, rent owed for the entire time the place is unoccupied until the new tenant moves in, and any costs needed to get it ready to rent.  Beyond that, once you get a new person in place with a new lease, what's the problem? 

What they need to understand is that they can't just leave and not pay for these added costs.  If they don't agree to that in whole, THEN you don't let them out of the lease.  Make sure it's all in writing.  And as long as you don't drag your feet during the process and truly work to get it filled as quickly as possible with a good tenant, then it should work out for all parties involved.

 

[sbonomo]

I don't really understand this,  As long as they are willing to make you whole until you find someone, then I don't see why you wouldn't allow them to do so.  They have to understand that they are responsible for any realtor fees associated with finding a new tenant, rent owed for the entire time the place is unoccupied until the new tenant moves in, and any costs needed to get it ready to rent.  Beyond that, once you get a new person in place with a new lease, what's the problem? 

What they need to understand is that they can't just leave and not pay for these added costs.  If they don't agree to that in whole, THEN you don't let them out of the lease.  Make sure it's all in writing.  And as long as you don't drag your feet during the process and truly work to get it filled as quickly as possible with a good tenant, then it should work out for all parties involved.




 




 





 

I completely agree with this.  I think the OP is vastly over estimating his ability to collect on a contract termination as a land lord.  You can win all day in court.  Good luck collecting anything.  

ETA: i have won my case everytime i went to court.  I have never collected a dime because of it.  It was worth the time and effort so that i could file a lien against the responsible party but, in reality it was a waste of my time.  Any rentor that is willing to let it go to court does not care about their credit.  People going through a divorce will most likely not give a chit.  I have been doing this long enough to understand it is cheaper to let them walk away with zero owed than trying to go through the process of evicting and trying to collect.  Cut your losses now.  

 

[Chadstroma]

I completely agree with this.  I think the OP is vastly over estimating his ability to collect on a contract termination as a land lord.  You can win all day in court.  Good luck collecting anything.  

ETA: i have won my case everytime i went to court.  I have never collected a dime because of it.  It was worth the time and effort so that i could file a lien against the responsible party but, in reality it was a waste of my time.  Any rentor that is willing to let it go to court does not about their credit.  People going through a divorce will most likely not give a chit.  I have been doing this long enough to understand it is cheaper to let them walk away with zero owed than trying to go through the process of evicting and trying to collect.  Cut your losses now.  

Do you run credit before renting? If not, why not? If so, what is your acceptable score?

 

[sbonomo]

Do you run credit before renting? If not, why not? If so, what is your acceptable score?

It is not so much the score but the credit history.  If someone has a charge off because they lost their home it is not as big of a deal as the person that has 10's of thousands in CC debt that they are constantly late on.  An isolated incident is much different than someone that robs peter to pay paul.  Also, if there is a lien against a prospect from a former land lord, even with perfect credit, it is an instant no.  I will also adjust the deposit accordingly if there was a one-off problem.  I have learned through the years better to wait for the right tenant, which means i eat the mortgage payment, than to rush into a situation with a bad tenant.    

 

[Chadstroma]

It is not so much the score but the credit history.  If someone has a charge off because they lost their home it is not as big of a deal as the person that has 10's of thousands in CC debt that they are constantly late on.  An isolated incident is much different than someone that robs peter to pay paul.  Also, if there is a lien against a prospect from a former land lord, even with perfect credit, it is an instant no.  I will also adjust the deposit accordingly if there was a one-off problem.  I have learned through the years better to wait for the right tenant, which means i eat the mortgage payment, than to rush into a situation with a bad tenant.    

So, you don't get a score- you just pull the credit and then review it on a case by case basis. Correct? Does that work for you?

 

[Buttonhook]

So, you don't get a score- you just pull the credit and then review it on a case by case basis. Correct? Does that work for you?

I think what sbonomo is saying is you get their credit score, but the score is only part of your review.

After the many years we've rented our places I'm still amazed at how many well-dressed people with nice cars have huge CC debt (but sometimes OK credit scores).  And while they may be living the American Dream, they are some of the worst renters.

 

[Chadstroma]

I think what sbonomo is saying is you get their credit score, but the score is only part of your review.

After the many years we've rented our places I'm still amazed at how many well-dressed people with nice cars have huge CC debt (but sometimes OK credit scores).  And while they may be living the American Dream, they are some of the worst renters.

No, makes perfect sense. I am very adept at ready a credit report more so than most everyone who is not an actual underwriter. I am just learning here as again I expect to be a landlord in the future. I think that last post could have sounded like a challenge but was not meant to be- just honestly asking how well it has worked for him.

 

[Dan Lambskin]

Tell the wife you'll agree to it as long as she sends you some tasteful nudes

 

[sbonomo]

So, you don't get a score- you just pull the credit and then review it on a case by case basis. Correct? Does that work for you?

Typically i will have any prospective renter run thier own credit report with score (i typically require the tri but will make an exception if i get a good vibe from the renter) that is no more than 2 months old.  They get to keep the copy if they are looking anywhere else.  I don't have to bother with collecting the $$ to run it.  If they balk at this they are out.  I am also upfront that a BK or foreclosure is not an instant no.  That typically helps.  Also, i will let them know that we should not waste our time if there are multiple items on there.  I have had rare occations where someone went through a nasty divorce or medical in the past where we came to terms but that typically requires spotless references and a much larger deposit.  

 

[sbonomo]

No, makes perfect sense. I am very adept at ready a credit report more so than most everyone who is not an actual underwriter. I am just learning here as again I expect to be a landlord in the future. I think that last post could have sounded like a challenge but was not meant to be- just honestly asking how well it has worked for him.




 

Happy to answer any questions you have about a credit report as well...i have been in banking for over 15 years and have seen literally 1000's over the years. 

 

[BassNBrew]

Tell them it will be a one month's fee and they are responsible until it re-leases.  I just pm'd you a form that may help you.  If you place good tenants on the front end, they will usually honor this arrangement.  Market is smoking hot and it's peak season so the gap should be minimal.

 

[Chadstroma]

Happy to answer any questions you have about a credit report as well...i have been in banking for over 15 years and have seen literally 1000's over the years. 

Been in banking about 20 years- I could underwrite loans if I really wanted to though I think I would be bored quickly doing that.  Just digging in on your approach, thinking and experience on it all. Essentially trying to ask if there is any difference from the lending world to the renting world. If I had remembered (I think I knew that you were in banking at one point) then I would have just asked that. Knowing you have the experience to 'read' a credit report makes me understand your approach much better.

 

[jeaton6]

I completely agree with this.  I think the OP is vastly over estimating his ability to collect on a contract termination as a land lord.  You can win all day in court.  Good luck collecting anything.  

ETA: i have won my case everytime i went to court.  I have never collected a dime because of it.  It was worth the time and effort so that i could file a lien against the responsible party but, in reality it was a waste of my time.  Any rentor that is willing to let it go to court does not care about their credit.  People going through a divorce will most likely not give a chit.  I have been doing this long enough to understand it is cheaper to let them walk away with zero owed than trying to go through the process of evicting and trying to collect.  Cut your losses now.  

It was more about the "sublet" vs just finding someone new and letting them out of the contract. Wasn't really about me thinking I could easily control collection necessarily but more about whether having a sublet would enable an extra layer of protection that would make it worthwhile pushing for this.

 

[sbonomo]

It was more about the "sublet" vs just finding someone new and letting them out of the contract. Wasn't really about me thinking I could easily control collection necessarily but more about whether having a sublet would enable an extra layer of protection that would make it worthwhile pushing for this.

Dont bother with the sublease - it has next to zero value.  Negotiate whatever will get them out of the home the most quickly.

 

[BassNBrew]

Been in banking about 20 years- I could underwrite loans if I really wanted to though I think I would be bored quickly doing that.  Just digging in on your approach, thinking and experience on it all. Essentially trying to ask if there is any difference from the lending world to the renting world. If I had remembered (I think I knew that you were in banking at one point) then I would have just asked that. Knowing you have the experience to 'read' a credit report makes me understand your approach much better.

I ignore credit score also.  All accounts graded on a score of 1-10.  One pays as agreed, no lates.  Two, thirty days late.  Repo's are eight's.  Collections and bankruptcy are tens.  The bankruptcy is only counted once so any account included in it is dropped.  Sum them up and divide by the total number of accounts.  

Basically people in with a pile of debt but make the payments fly through.  Almost every bankruptcy gets through unless they are headed down that path again.  This system has been a great predictor of good tenants even though we rent to a lot of poor credit score people.  My eviction rate is under 2%.  If I throw out those who marginally qualified or the low rent properties it probably drops to less than 0.5%.

 

[jeaton6]

Dont bother with the sublease - it has next to zero value.  Negotiate whatever will get them out of the home the most quickly.

Your thinking being at this point they've told me their intentions and if I try to play hardball (if this is truly a divorce) that things could go south quickly and just easier to get them out now and get a new/good tenant and move on?

 

[RandyDB]

Just read the title of this thread and found myself wondering....

who would rent your outhouse. Time for another scotch.