Newbie planning for end of lease period (Ontario)

[holymoly]

I expect my tenants will want to stay after their lease expires in June. Never having renewed a lease, given tenants` deposit interest, or raised the rent, I have a ton of questions. Thanks in advance for your help, it`s really appreciated. (This is Ontario, BTW.)

Re: Increasing the rent...
- I`m happy with these tenants. What else I should be considering when deciding whether to raise the rent? Anticipation of rising mortgage rates? (At the current rent, assuming other expenses stay the same, my variable rate mortgage could go up by 5% or so before the property stopped cashflowing. I can lock in at any time.)
- How do you give notice of a rent increase? The RTA says to give "90 days written notice [...] in a form approved by the Board." -- Will a letter or email suffice, or is there a form to use? Do you get your tenants to sign something confirming that they received the notice?
- Say instead of getting a new deposit each time you raise the rent, you hold onto their original deposit (say, $1000). Do you ask them to top up the deposit cheque so it comes to the new rent amount -- asking them for $10 or whatever? Or, if they don`t keep topping it up with each increase, and by the time they give notice the rent has climbed to $1060, do you then ask for $60 toward last month`s rent? Or do you just forgive and forget the difference between the original $1000 and the new rent amount?

Re: Signing a new lease vs going month-to-month
- I understand that tenants aren`t obligated to sign a new lease, and if they don`t sign one, that they`ll go month to month. In another thread, invst4profit said "In Ontario it is customary to go month to month at the end of a lease" which makes me wonder if I should even bother suggesting a new lease. As a landlord, is it preferable to have a new lease or does it make no difference?

Re: Annual interest on tenant`s last-month`s-rent deposit
- How do you handle this -- write your tenants a cheque each year?

Trying to get a handle on it all...
- I often wish I had a mentor because I learn a lot by seeing people in action. This forum is a great help, since reading about your methods is next best to seeing them. Wish I could see you in communication action. I`m thinking, send an email (more than 90 days before lease end) saying I`d be happy to have them stay on after the lease ends, and ask if they want to stay and sign a new lease at the new rent amount. (Or do I not bother suggesting another lease??) Then I tell them I`ll send them a letter stating the new rent amount -- and ask them to email a confirmation of receipt? Then I guess when the lease is ending, whether or not we sign another, I give them their deposit interest, and whatever makes sense in terms of increasing or not increasing the current deposit. Aside from my many questions, does that sound right?

Thanks... This is very long...

 

[trev]

QUOTE (holymoly @ Jan 13 2010, 03:15 PM) Opinions vary on a few of these questions as I`m sure you`ll see from other replies. But I`ll give my thoughts

I expect my tenants will want to stay after their lease expires in June. Never having renewed a lease, given tenants` deposit interest, or raised the rent, I have a ton of questions. Thanks in advance for your help, it`s really appreciated. (This is Ontario, BTW.)

Re: Increasing the rent...
- I`m happy with these tenants. What else I should be considering when deciding whether to raise the rent?
Anticipation of rising mortgage rates? (At the current rent, assuming other expenses stay the same, my variable rate mortgage could go up by 5% or so before the property stopped cashflowing. I can lock in at any time.)

Certain costs will go up no matter what you do. So in a perfect world you should raise the rent to the maximum of the rent guideline every year. Problem is, not only is this not a perfect world, this is Ontario. I almost never raise rent during a tenancy unless I have reasons for liking to see them go. I find that switching tenants is far more expensive than what you might get if you raise rent. Here are a few reasons.

• Advertising, showings, screening (phone calls, credit check)
• Possible vacancy
• Clean up. Most tenants will leave stuff behind and very few will clean to the level you feel comfortable with asking a new client to accept upon their move-in
• Even if they take all their stuff, make the place sparkle, the kind of tenant you want will a lot of times ask if the carpets will be professional cleaned. Change the locks. I get asked to do this 90% of the timeDamage. I find that most damage occurs on move in + move out. Dents or holes in wall, scratches on floor, etc.And if you think that anyone is going to pay you the last months rent, leaving you the security deposit for you to deduct cleaning and damages, FORGET IT. At least I`ve never seen it

I look at it this way. Let`s say $1300 / month rent x 2%+- increase= $26 / month x 12= $312./ year potentail gain against the possible losses above, not to mention the emotional roller coaster that it sometimes is. No question for me.

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- How do you give notice of a rent increase? The RTA says to give "90 days written notice [...] in a form approved by the Board." -- Will a letter or email suffice, or is there a form to use? Do you get your tenants to sign something confirming that they received the notice?

Always the proper form.

- Say instead of getting a new deposit each time you raise the rent, you hold onto their original deposit (say, $1000). Do you ask them to top up the deposit cheque so it comes to the new rent amount -- asking them for $10 or whatever? Or, if they don`t keep topping it up with each increase, and by the time they give notice the rent has climbed to $1060, do you then ask for $60 toward last month`s rent? Or do you just forgive and forget the difference between the original $1000 and the new rent amount?

In theory they top up last months rent. Perfect world, remember

Re: Signing a new lease vs going month-to-month
- I understand that tenants aren`t obligated to sign a new lease, and if they don`t sign one, that they`ll go month to month. In another thread, invst4profit said "In Ontario it is customary to go month to month at the end of a lease" which makes me wonder if I should even bother suggesting a new lease. As a landlord, is it preferable to have a new lease or does it make no difference?

I agree that it is customary, but I always try to get a new lease, because:

• Ties them up for another year.
• Avoids trying to rent at a bad time. I have one right now that a month to month tenant moved out Dec 31. Good luck finding someone to move in then.An updated lease looks better to banks on your next buy.
  
  Re: Annual interest on tenant`s last-month`s-rent deposit
  - How do you handle this -- write your tenants a cheque each year?

A lot are going to disagree with me on this one.
DON`T PAY IT.... unless they ask.
I hardly ever have people ask for it. They either don`t know or don`t care. I find that following the REIN system, giving them a well maintained home, responding to calls quickly, fixing it quickly and properly, welcome basket, xmas gift, birthday card, gift when they renew the lease each year, they don`t ask for anything when they leave.

Some will ask...pay them. But why pay a bill if your not asked to?

Trying to get a handle on it all...
- I often wish I had a mentor because I learn a lot by seeing people in action. This forum is a great help, since reading about your methods is next best to seeing them. Wish I could see you in communication action. I`m thinking, send an email (more than 90 days before lease end) saying I`d be happy to have them stay on after the lease ends, and ask if they want to stay and sign a new lease at the new rent amount. (Or do I not bother suggesting another lease??) Then I tell them I`ll send them a letter stating the new rent amount -- and ask them to email a confirmation of receipt? Then I guess when the lease is ending, whether or not we sign another, I give them their deposit interest, and whatever makes sense in terms of increasing or not increasing the current deposit. Aside from my many questions, does that sound right?

Use the power of legitimacy. "When could I come over to renew the lease with you?" not "do you want to renew"
I`ve also offered to waive the standard increase if they are willing to extend their lease.


Good luck with your decision.

Thanks... This is very long...

 

[invst4profit]

Rent increases, I have never not raised my rents annually. The allowable amount is very small in Ontario and never covers the increased costs year over year.
If you decide to sell the value of your property is directly related to the rental income.

I send a letter annually indicating the rent increase and date effective. Don`t use email, send a proper letter and keep copies of all correspondence. Confirmation from tenant has never been necessary, the rent check of the proper amount is confirmation enough.

Just hold the deposit till they decide to move. Apply the interest to the deposit, don`t bother paying directly to tenant. In the end regardless of the original deposit amount apply it to the last month rent and tell the tenant the interest was added to the deposit to cover the annual rent increase.

As far as a lease is concerned the rights of both tenants and LLs are the same regardless of month to month or lease. A tenant may break a lease by giving notice the same as month to month. The LL must attempt to find a replacement and only if not successful tenant must continue to pay rent to the end of the lease but this rarely happens and usually the LL must take the tenant to small claims court to recoup the loses.

 

[holymoly]

This is all great info and very helpful. Interesting that there are conflicting opinions on rent increases, yet both sides make a lot of sense. Thank you very much for your insights and advice.

 

[invst4profit]

Keep in mind my opinion is based on squeezing maximum return out of my business.I have a large enough tenant base that a across the board increase is significant enough for me to count on it year over year.
I also do not mix emotions with money, the board says I can raise the rent therefore I raise the rent, no questions asked.
Besides it`s so small 99% of tenants simply accept it as part of life. Everything goes up in cost.
Make a habit of doing it annually and it becomes second nature. Plus if stuck with a long term tenant, which I personally dislike in Ontario, you do not fall behind as much which would further devaluing your investment.

My feeling is if your not in business to make money why are you in business.