Pre-Leasing
Pre-Leasing
Some landlords like to minimize downtime of units by “pre-leasing.” Although at first thought this might seem like a good idea because it can theoretically reduce the period for which no rent is being paid, it sometimes creates enough trouble to more than make up for the times when it was advantageous.
By the term “pre-leasing” we mean renting a property that is still occupied by an existing tenant, more specifically signing a lease with the prospective new tenant before the existing tenant gives up possession.
While the landlord has the right in most states to show the unit while current tenants are still in occupancy, it is not always a good idea to do so.
The procedure has the potential for creating conflicts between the landlord and the departing tenant. Because the departing tenant is already stressed out about the pending move, probably already packing and organizing for it, there is a greater potential for such conflicts. Conflicts can relate to disputes regarding invasion of privacy and proper notices of entry, even claims of theft.
While privacy is somewhat subjective, in most states notice of entry can be a practical problem 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. 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.
While in theory the landlord could push the issue of entry at any reasonable time after the minimum notice period, in practice this should not be done. The landlord should not enter a rental unit against the tenant’s wishes except for reasons of safety or preservation of property. 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 a lawsuit against the landlord, even
criminal charges.
Security of the departing tenant’s unit is of particular concern if the property is being shown when the tenant is not present. The tenant is more likely to make theft claims against unknown persons viewing the unit than against the landlord or manager who is doing the showing. The landlord should
remember that he/she is providing entry to persons on whom no screening has yet been done. There have been cases where the showing has served as a chance for a burglar to case the unit prior to breaking in.
If the current tenants are uncooperative or outright hostile, it is best to wait until the unit is vacant.
The matter of privacy and advance notice is best dealt with by discussing the issues in advance of marketing the still-occupied unit. Often, agreeing on a specific time of the day when showings might occur is helpful.
The issue can be minimized by following certain procedures, including the following:
- Discuss the property showing issue with the outgoing tenant, including whether he wishes to allow it in evenings or on weekends;
- Give the tenant as much notice as possible before entering;
- Try to limit the number of showings each week; and
- Offer to reduce the rent slightly if the outgoing tenant considers showing to be an imposition.
Another issue is related to both privacy and security. A sign in the yard or advertising in any other format that provides the address of the unit can cause problems for the departing tenant. The least problem is when it results in interested persons knocking on the departing tenant’s door or the door of another tenant in another unit of the same property. The worst problem is if it results in a home invasion because someone broke in expecting the unit to be vacant. If a sign is put up, be sure to include the words “Shown by Appointment Only, Call (phone number), Do Not Disturb Occupants.”
The prospective applicants for the coming vacancy may be turned off by the housekeeping of the departing tenant and/or the current condition of the unit. At the very least, the unit may not appear to be worth the rent being asked. Even worse, it may be considered not even habitable to discriminating potential applicants. 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.
It is difficult for a prospective new tenant to properly evaluate a unit that is overly filled with furniture and other belongings, including a lot of already packed boxes, some of which hide defects that would be objectionable to the prospect. As examples, there can be carpet stains or tears and/or dirty or damaged walls, under and behind furniture, respectively. When such defects are found after the unit is vacant, the landlord must correct them or hope that the tenants will be happy living with them after being surprised at move-in, with the latter almost certainly being wishful thinking.
When the prospect sees the condition of the unit before it has been rehabilitated, he/she may consider the quoted rent to be too high for what can be seen and may be concerned about depending on the landlord’s promises regarding work to be done. Offering to put promises in writing can help, but many people can only see what exists and cannot visualize promised work or their expectations may be more than what is done. The matter becomes even more problematical if the landlord discovers once he has possession of the empty unit that significantly more work than expected will be required.
Potentially most troublesome, is what can result from the landlord committing to a replacement tenant before the departing tenant has actually vacated the unit. When the unit for which applications are being taken is still occupied, one must be concerned that the departing 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 for the new landlord-tenant relationship, and, at worst, there may be a lawsuit, even further delaying re-leasing of the unit.
For landlords who wish to pre-lease in spite of the disadvantages, there are ways to minimize the potentially greatest risk of being unable to give possession to the new tenant on the date promised. The risk of problems can also be reduced by having lease clauses that clearly define adequate move-out procedures and by providing notice to the departing tenant as previously discussed.
The best protection for the landlord is to put some of the risk on the incoming tenant by lease clauses 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 of applicants 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 pre-lease. 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, pre-leasing does not provide much advantage over not showing the property until possession has been returned to the landlord. A
landlord must decide whether that small advantage is worth the risk of extra trouble associated with interfacing with the departing tenant, the other issues
related to an occupied unit, and the potential for serious problems.