At DeDe’s Rentals, we frequently take over management of properties for investment buyers. Many times, these residences were purchased with tenants already in place. Frequently, tenants have been living in the home for a while, even a decade or more. There are advantages to having and holding a rental property with stable, existing tenants. However, there can be unintended consequences associated with long-term tenancies, as well.

Over the course of years, the original rental contract may have been misplaced. Alternately, the contract may not have been consistently updated, and is now out of date. In rare instances, we’ve encountered situations where there was never a written contract at all – the tenancy was generated entirely based upon a “gentleman’s agreement!” In situations like these, you want to “tighten up” documentation, but you may likely be apprehensive whether your long-term tenant will readily agree to the terms included in a completely new contract. After all, what recourse do YOU, the property owner have, if the tenant indicates that new terms “simply don’t work for them”?

Having an updated, current contract is important. The contracts we are writing today are substantially improved and more precise than those we were writing a decade ago. It’s not always simple to have a long-term existent tenant readily agree to the terms of a dramatically changed contract. However, it can be done. You can still revise outdated – or non-existent – contracts, even if the tenant is reluctant to accept changes.

Our process at DeDe’s Rentals is fairly consistent and straightforward. Initially, we review the terms of the existing contract, if there is one. We make sure that we have updated information about all adults, guarantors, co-occupants, vehicles, physical property conditions, and other details specific to that tenancy. Based upon that data, we create a completely new contract, because it’s almost certain that changes have occurred over the years. For example, you may have occupants who were 12 when they moved in ten years ago, but are now 22, which means they are considered adults – and therefore, legal tenants. Vehicles may have changed, and perhaps the tenants have pets they didn’t have before, or the pets they had at move-in have passed away. It’s desirable to have an updated and accurate contract, similar to the documentation you’d create if you had brand new tenants. (NOTE: if you are creating such a revision, be sure the “commencement date” of the new contract allows at least 30 days between the time the tenant receives the new document and the time it goes into effect – 60 days if you are raising the rent more than 10%.)

At DeDe’s, after we create the contract itself, we create a formal cover document to accompany that contract. This cover letter explains they are receiving a “30-day Notice of Change to Terms of Tenancy.” Within the cover letter, we notify the tenants that, effective as of the date of the newly created document, their tenancy will thereafter be subject to the terms of the attached rental agreement, which will supersede any previous agreements or contracts. We request that the tenants sign and return a copy of the new contract, but we also clearly stipulate that, in the absence of a tenant-signed copy of the new rental contract, the attached document will still serve as a properly enforceable contract.

As long as you properly serve the documentation, if you follow this procedure, you can initiate a substantially revised contract, even without tenant signatures or explicit acceptance. If the tenants continue their residency beyond the date of the 30-Day Notice, the terms of the new contract are in effect. Proper service is critical, and we will discuss that process in another blog.
Establishing and maintaining consistent procedures is essential in successful property management. If you have additional questions on how to substantially revise a contract for existing tenants, or you need property management help with other topics, please contact us at DeDe’s RentalsLandlord Education Create a New Rental Contract for an Existing Tenant.