Lease Coming up for Renewal...

[OntarioInvestor]

My tenant`s lease is coming to an end (Ontario). They are good tenants and don`t give us any problems. The property flows cash about $250 a month. The mortgage is variable and I expect it to go up in Q3 and Q4 this year. In Ontario, we`d be entitled to raise the rent by about $25 a month.

Do I:

a) tell them if they sign for another year (which they are not obligated to in Ontario, they can go month to month) I will keep the rent as is with no increase;.. if they don`t sign for a year and go month to month I`m going to increase the rent by $25 or,

b) swing for the fences and tell them I`d like them to sign for another year and that due to HST etc. I need to raise the rent by $25.

I guess my question is, is it worth hanging onto good tenants (assuming they want to stay) for another year at the same rent given that interest rates will almost certainly go up during the course of the year, or is it important to try to max out the rent given that rent increases are limited in Ontario.

Thanks,

 

[invst4profit]

Ask them what there plans are.
There is no material difference between a new lease and month to month for existing tenants, no more or less security for tenant or LL, as the existing lease stays in place.
As far as the rent is concerned in 2010 we are permitted to raise the rent 2.1%. This should be a given and tenants expect it.
I raise my rents annually without exception. It barley covers my increased costs and don`t forget we have the HST on the horizon.

 

[OntarioInvestor]

The difference for me is that if they re-sign for another year I know I`ll have them locked in for an additional year, plus I get to keep the start-end date. If they were to go month to month and they decide to move out Dec 31 I may have a harder time finding a tenant for Jan 1.

HST and increasing interest rates are certainly on my mind. Even if I raise it 2.1% the price is still very good for them and very competitive. I think you`re right though, I`ll ask them their plans and plan on increasing the rent.

Would you increase it the full 2.1% or would you increase it to a round number within the 2.1%. For example the rent is $1350. A 2.1% increase would be $1378, which is an odd number. Would tenants see it as being gready to go for the full 2.1% as opposed to rounding it at $1350?

Sorry for what are probably really stupid questions. This is my first time doing this.

 

[invst4profit]

Personally I do not round anything. I have applied the 2.1% and calculated it to the penny for all tenants.

As far as a lease providing security, even with a one year lease, tenants can break it with 2 months notice same as with month to month. There is no difference other than you can try and take them to the LTB for compensation but that is unlikely to succeed.

The only real reason to have a new lease is if you wish to change the conditions of the lease, such as adding or removing a tenant, adding or removing parking, laundry, utilities etc. But as we all know the tenant must voluntarily agree to any changes.

 

[OntarioInvestor]

Interesting. I didn`t know they could break a 1 year lease simply by giving 2 months notice. I wish residential lease agreements were coverned by standard contract law as opposed to RTA rules.

 

[Alvaro Sanchez]

Your cost is increasing regardless of you been a nice guy or not.... I think you should always raise you rent according to the market. If they stay longer 3-4 years, it would be harder to increase the rent for them (as they are not used to). Further to that the value of the property is indexed to the rent, the higher the rent the higher the value.

QUOTE (OntarioInvestor @ Jan 21 2010, 07:34 PM) My tenant`s lease is coming to an end (Ontario). They are good tenants and don`t give us any problems. The property flows cash about $250 a month. The mortgage is variable and I expect it to go up in Q3 and Q4 this year. In Ontario, we`d be entitled to raise the rent by about $25 a month.

Do I:

a) tell them if they sign for another year (which they are not obligated to in Ontario, they can go month to month) I will keep the rent as is with no increase;.. if they don`t sign for a year and go month to month I`m going to increase the rent by $25 or,

b) swing for the fences and tell them I`d like them to sign for another year and that due to HST etc. I need to raise the rent by $25.

I guess my question is, is it worth hanging onto good tenants (assuming they want to stay) for another year at the same rent given that interest rates will almost certainly go up during the course of the year, or is it important to try to max out the rent given that rent increases are limited in Ontario.

Thanks,