How to inform tenants you are selling...
Hi brownstoners, We are planning on selling our house next year and need to do some work in our rentals before listing. We’ve been overly generous with our tenants, raising their rent once in five years and they are both easily paying $800 – $1000 under market. The one time we did raise the rent, we also switched to month to month leases…they were not happy about the increase and the new lease in spite of the enormous discount they receive. We have an open electrical permit that we have not been able to close out since we have not been allowed to do the work in one of the units for two years. On the other hand, they pay on time every month and are generally good tenants. My question is, how do you notify everyone of your intent to sell and how much notice do you give them? We would have to ask one of the apartments to move out in order to do the work but not necessarily the other. This part concerns me…since they are certainly going to have to cough up a sizable amount more per month than what they are paying now. I don’t want to be the bad guy if we say one has to go but the others can stay. Is it better to ask everyone to leave to do the work and then not have to deal with open houses, etc? Thanks and look forward to hearing your thoughts.
crownheightmrs
in Landlord 9 years and 7 months ago
15
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15 replies
Inquisigal2 | 9 years and 6 months ago
I’ve been on the receiving end of this scenario as a tenant, and I actually got a longer advance notice that our building was being put on the market: our landlord told us about 5 months out. I would say that if you have a good relationship with your tenants in general, you might consider giving them more notice than the 60-90 days suggested here – not every tenant is a vindictive jerk, and frankly, I’d have felt more vindictive if our landlord had given us short notice, versus the more humane approach. I agree with some that telling your tenants why you’re asking them to vacate isn’t necessary, but I don’t think 60-90 days is a long enough time period to prepare for a move if someone has no inclination that she/he will have to undertake the task of saving money to cover moving costs, and suddenly having to find a new place where they can afford to live. When we were told about our building being put on the market, in a neighborhood where prices were getting higher and higher by the month, having advance notice was really important. We were priced out of that neighborhood (if we wanted to maintain our standard of living), but we had the time to consider what neighborhoods would be affordable and suitable for our needs, and more crucially, it gave us time to save money toward the moving costs and fees associated with signing a new lease. Don’t forget – if someone has to use a broker, pay for movers, and sign a new lease, we’re talking about THOUSANDS of dollars here, and I think in today’s over-inflated market, it would be cruel to drop that on someone with only 2 months notice – that’s often why tenants end up digging their heels in when owners ask them to suddenly leave. I now own my own building, so I understand the owner’s side as well, but I just don’t think anyone should assume the worst about what tenants “might” do, especially if they’ve been good tenants. It’s humane and smart to consider how this situation will impact the lives of those who are helping you to pay your mortgage, because a little kindness can go a long way in making this process as smooth as possible for all considered.
crownheightmrs | 9 years and 6 months ago
Thank you for all of the comments. Appreciate it. We are definitely not interested in paying anyone off. Think we’ll contact an attorney to get some advice so we don’t end up having to backtrack.
Petebklyn | 9 years and 6 months ago
I might be going through the same situation in a couple years. Longtime (15 to 25 years) tenants – none young— and paying also $800 to $1000 under market. Would be curious into what you decide and the result. I think I would let them know well in advance that should be on lookout for new situation because this one not going to last forever. 60 to 90 days before wanting to list and if still there —- tell them first going to receive formal notification to vacate before serving papers.
bushwickbill | 9 years and 6 months ago
Just an FYI newpants1 – If you’re primarily concerned with cash flow ( e.g. “income producing brownstone”) you’re doing your analysis wrong – cash flow is not king and you’re going to miss out on some great investment with that kind of tunnel vision. The benefits of owning a multifamily property in NYC go well beyond walking around money.
wtfan | 9 years and 6 months ago
don’t assume that just because you give them 60 days (or 90 days notice) to move that they will actually move. They could decide to just stay and wait for you to take legal action, knowing the in meantime they can keep sending you checks (which your lawyer may tell you not to cash), and it could take a year for all that to work it’s way through the courts.
mikedesabato | 9 years and 6 months ago
You don’t really have a legal obligation to let the tenants know you are selling (although, in terms of courtesy, it would be nice, and if you want to complete the work before you sell, then you do need their consent to enter the apartment as necessary). I am also in the market for an income producing brownstone though, and I would be happy to buy yours as is (without permits being closed out and with all of the tenants still in place). That way you don’t need to bother them, and I can be the bad guy!
bushwickbill | 9 years and 6 months ago
As others said, absolutely do not inform your tenants their leases will not be renewed due to your desire to sell the property. They will most definitely be expecting a buyout. You need another excuse. Also, if you’re going to be selling a multifamily in Crown Hrights (I’m assuming from the S/N), let me know. My partners and I would very much be interested in acquiring the property from you if you are looking to sell, we do pay market value, and who wouldn’t love to save on a broker’s fee!
rh | 9 years and 6 months ago
Thank you for being who you are and trying to make people happy. Don’t change that. I’ve always worked with my tenants and they appreciate it and do the right thing in return. I give them notice as soon as I make a decision. In more than one instance, they were thinking of moving on anyway, so I was guilt free.
resident2 | 9 years and 6 months ago
DO NOT TELL YOUR TENANTS YOU WANT THEM OUT BECAUSE YOU ARE SELLING! They will just put their heals in and they will expect to be bought out! It is also really none of their business. You want them out because the building needs some work done, or you have family that need to move in…. Put them both out, get on with your life and worry about what you need to do, not them. They will move on and just remind yourself and them that change is good. If you need income in the meantime, AirBnB is good for these situations.
livingthedreamingreenpoint | 9 years and 6 months ago
One thought – you don’t have to tell your tenants why you are terminating their leases. Many tenants when they hear the owner is selling get dollar signs in their eyes. They know that if they refuse to leave it is a deal killer and they want their payout. This happened to the sellers of our current building – tenants were long time and well below market. And they ended up paying just to get the deal done. You might consider telling them you have decided to take over the apartments for your own personal use. Or if you don’t want to do that, don’t say anything at all.
crownheightmrs | 9 years and 7 months ago
Thanks, guys. Yes, I agree with you that I’m trying too hard to keep people happy…it’s just who I am and why I don’t want to be a landlord anymore. You are also right that we should have made small increases every year versus a one-time, $100 increase…not that I thought that was an extraordinary amount given how nice the apartments are but what’s done is done. So, if I want them out at the end of April, I tell them in January and send them formal, written notice 90 days out even though we have a signed month to month lease? I want to make sure we do this the right way. I’m not expecting this to end up in court but we’ve been far too lax all along. Appreciate the good advice.
boredatwork | 9 years and 7 months ago
@goatcrapp Thanks for those comments. I echo them completely. You can give both of them 30 days (or 60 or 90) notice and be done with it, or agonize over what your tenants will feel and think about you. You need to do work to sell. If you need to stage the place to make it more sellable, a broker can do that for you.
Goatcrapp | 9 years and 7 months ago
This may seem heartless – but you’re trying too hard to make everyone happy. They are, according to you, paying significantly below market rate. No matter when you tell them, they’re going to be unhappy. It really matters not who gets to leave and who gets to stay. That said – I’m not saying you should be heartless about it – if you’ve maintained a good relationship with them then give them the time they need to find something – but be clear about *everything* discussed, and put it in writing. When you’re nearing the agreed upon date – be sure to follow up on all the rules of notification, including 30 days notice. Also be prepared for resentment. It can’t be helped, given how far under market rate you’ve let them slip (your fault, not theirs. Smaller annual increases, if warranted, would have let you keep pace with the market). At the end of the day – don’t put too much energy into trying to balance other people’s happiness with you – it never works out. Do what you reasonably need to, and help set their expectations accordingly.
sunbury | 9 years and 7 months ago
The question is when next year? I would try to coincide their departure before/after Spring/Summer, since it may be easier for them to find an apartment during that time. I agree that it is best to vacate both apartments.
sqhaexgkh | 9 years and 7 months ago
There are a lot of considerations brought up in your question that seem to be personal decisions you need to make. One thing I will point out, your home will be much more marketable with no tenants, it will be easier to show (you do not have to schedule viewings around the tenants schedule – which they never make easy) and prospective buyers will see a clean cleared out space (not a messy rental). Buyers worry about getting tenants out and just because you say they will be out and there is no lease, doesn’t mean that will happen efficiently and the housing court eviction process is very lengthy. Since you have a year before you want to sell, it seems that you have time. You could choose to give your tenants 6 months, for example. Just stop collecting rent when that time period is up, because every time you take a check you are extending their lease by that month.