Landlords Showing an Occupied Unit
Showing an Occupied Unit
Time is of the essence when re-renting a property. Without adequate planning and preparation for the move-out of the current tenant and the welcoming of a new tenant, a landlord may have the potential of lost rents and unhappy tenants, old or new. Timing of events is a controlling factor in the filling vacancies process.
A key decision will be whether to market the occupied property or wait until the current tenant has vacated and possession of the property has been returned to the landlord. While there are advantages and disadvantages to either marketing approach, deciding factors may include the condition of the local rental market, the amount of business risk that the landlord is willing and able to take, the condition of the property in general, and the housekeeping habits of the current tenant in particular.
Transitioning tenants requires communication, coordination, and compliance with applicable landlord-tenant statutes. Move-in and move-out events are separate but equal processes that demand time and effort. If you decide to market an occupied property, you need to make sure you have the ability and resources to successfully multi-task a simultaneous transition. If you decide to process one event at a time, you need to allow for the expected down time between tenants. Either approach can be subject to outside influences that could cause unexpected delays or issues. Either approach can benefit from having a prepared plan, even if the plan may be subject to change.
A vacant unit is an expense with no offsetting rent revenues. Many landlords can absorb some loss of rents for a short time, but a long term vacancy may have a serious effect on the business bottom line. To minimize costs of vacancy many landlords attempt a zero vacancy turnover policy. As the old tenant is moving out, the new tenant is moving in. The almost simultaneous move-out and move-in strategy can substantially reduce vacancy down time. However, such strategy is not without risk and may create more stress than could be offset by the transfer of renters.
The advantages of showing an occupied unit include the potential of uninterrupted cash flow, provided of course that each tenant fulfills his obligation to pay rent in a timely manner. Many utility companies can schedule same day turn off – turn on of essential services which could be of benefit in back-to-back scheduling of tenants, saving time for landlord or tenants.
However there are disadvantages to showing a unit that is still occupied. In addition to showing of occupied units may discourage some potential applicants due to poor housekeeping, adding additional stress to an already stressful situation has the potential to create conflicts between landlord and tenant, both old and new. Conflicts can lead to disputes regarding privacy, proper notices of entry, and even tenant claims of theft.
By statute the tenant has the right of the covenant of quiet enjoyment for the term of his lease period. This covenant ensures that during his tenancy, the tenant’s use and enjoyment of the dwelling unit will not be disturbed by others including the landlord.
In most states, notice of entry can be an issue if the departing tenant wishes to hold the landlord to the letter of the law. Many states require the landlord to provide the tenant 48 hours’ notice prior to each non-emergency entry. Furthermore, entry must be during reasonable hours. Not only is 48 hours, even 24 hours, a long time when potential applicants are looking for housing, but the tenant may not consider it reasonable to show the unit during the dinner hours or at certain other specific times on certain days. The landlord cannot gain entry against the tenant’s wishes. The landlord’s only recourse against failure of the tenant to cooperate is to file a lawsuit. Use of force or even excessive pressure could result in not only a lawsuit against the landlord, but even criminal charges.
Security issues are of particular concern when the property is being shown when the tenant is not at home. The tenant is more likely to make claims of theft or damage against unknown persons viewing the unit than against the landlord or manager who is doing the showing. The landlord should remember that he is providing entry to persons on whom little information is known and any type of applicant screening has yet to be done.
To protect himself and his family a tenant will need to secure or remove personal items and items of value during times of showings. If multiple showings are requested, this could be a burden upon the departing tenant, adding to the tenant’s stress regarding the move.
The matter of privacy and advance notice is best dealt with by discussing the issues in advance of marketing the still-occupied unit. Making sure the tenant understands what is expected will help minimize conflicts. Often, agreeing on a specific time of the day when showings might occur is helpful. It may even be necessary to financially reward the tenant in order to gain good cooperation.
Since the unit is occupied, it is usually better to avoid placing For Rent signs on the property until the tenant has actually vacated. This will help protect the tenant’s privacy by not openly advertising the coming vacancy to drive-by vandals or criminal elements, not to mention the potential for those looking for rental housing appearing at the tenant’s door. Of course the landlord will want to advertise the vacancy, but should choose the media and marketing tools accordingly.
Of major concern to the landlord is the uncertainty of the tenant’s housekeeping standards and the general condition of the rental property at the time of showing. While most visitors will understand and empathize accordingly, boxes and packing materials may contribute to generalized clutter and it may be difficult for a visitor to appreciate some of the property’s features, or visualize how they would live there. It is difficult for a prospective new tenant to properly evaluate a unit that is overly filled with furniture and personal belongings, including already packed moving boxes, some of which may hide rental unit defects that would be objectionable to the prospect. It may be that some areas are considered “off limits” because of family living arrangements, containment of household pets, or use as a staging area for the upcoming move.
If the prospective applicant cannot see beyond the current condition of the unit, he may decide the unit is not worth the rent being asked. Obviously, the degree to which this is an issue will depend primarily on the housekeeping habits of the departing tenant, but will also depend on the condition of the unit compared to the condition it will be at move-in of a new tenant.
The prospect may be concerned about depending on the landlord’s promises regarding work to be done. Offering to put promises into writing can help, but many people can only see what exists and cannot visualize promised work or their expectations may be more than what the landlord plans to provide.
There is potential for trouble when the landlord commits to a new tenant before the old tenant has actually vacated the unit. When the unit for which applications are being taken is still occupied, one must be concerned that the old tenant may not vacate in a timely manner. A landlord who has signed a lease with a replacement tenant and then finds that the existing tenant fails to vacate as scheduled can end up between a rock and a hard place. At best, there is an unhappy beginning, and, at worst, there may be a need to compensate the new tenant for inconvenience and/or the need for him/her to obtain temporary housing and/or storage space. It can even result in a lawsuit, further delaying re-leasing of the unit in addition to the cost of defending against the lawsuit.
The new tenant may have given notice at his rental across town or be staying in a motel and paying daily on the moving van after moving across country. It is possible that the old tenant will not leave voluntarily, period, and require eviction. It is easily possible that an anticipated one-week turn-around becomes a month or more. Even if the new tenant is willing to continue living in a motel or with friends, it might be expected that the landlord will pick up the tab for all of the new tenant’s increased expenses.
There are ways to minimize the potential risk of being unable to give possession to the new tenant on the date promised. Risk is greatly reduced by having previously put a good tenant in the unit and utilizing a lease agreement that clearly defines move-out procedures.
Holding over upon expiration of a lease term can be made less attractive to the departing tenant by specifying in the lease that the rent is automatically raised a significant amount at the end of the lease period unless a new lease or renewal of the lease is negotiated at least a minimum period in advance of expiration.
However, if the old tenant is himself facing an unexpected last minute problem, for example, his new residence not being ready as promised for his occupancy, the very best of tenants might not leave as planned. In such circumstances a large rent increase or even the threat of an eviction may not help. Even a few hundred dollars of increased rent for holding over will be more attractive to the departing tenant than the alternative of finding other temporary housing and storage of his furniture and other belongings at the last minute.
Even a holdover of only a few days can become a significant problem if the landlord had committed to the new tenant being able to move in 5 days after expiration of the old tenant’s lease because the landlord figured that the necessary preparation would take that amount of time and the landlord discovers, upon gaining possession of the empty unit, that significantly more work than expected will be required.
The best protection for the landlord is to put some of the risk on the incoming tenant by a lease clause or separate document in which the incoming tenant understands that possession is contingent on the old tenant vacating by a specific date, meaning that possession will be given within the time required for preparing the unit after the vacating. This may, of course, eliminate some potential candidates from the pool and even seriously deflate the pool in a bad market.
The bottom line is that landlords should consider the overall picture when deciding whether to market an occupied property. The vacancy period between the tenants is usually most dependent on the time that will be required to clean, paint, and perform other work required between the tenants. Under normal market conditions, trying to get a head start on signing a new tenant does not provide much advantage over waiting to show the property when possession has been returned to the landlord. A landlord must decide whether that small advantage is worth the extra trouble, the other issues related to an occupied unit, and the potential for serious problems.