Situation: I'm an 'accidental' landlord of the result of the CHCH earthquakes. I owned the property with my partner, and after the earthquake he left the country to go back to live in the USA. Subsequently I have bought out his share of the house, so I now own it outright in my own name.
I am looking to sell the house, and have been ever since the quakes, but have been waiting for EQC to repaint it, at which point I will get everything repainted inside and out, garden fixed up, new curtains, new carpet etc and put it on the market. The ball is finally rolling on that front and the work should hopefully be happening in the next few months.
The problem I have however is timing. The current fixed-term lease is to 5 students, and expires on 23rd of November. Due to the amount of painting required, I doubt it could all be completed before Christmas, and even if it was and I put the house on the market, with most people on holiday late-Dec to early-Jan, there wouldn't be as much interest in the house so it'd effectively be "empty" during this period. Due to the (ludicrous) way the contents insurance is handled, if the house is empty while EQC repairs are done, the insurance company won't actually pay me for loss of rent unless there is an actual tenancy agreement in place, but because the current tenants weren't the occupants when the quake happened, they aren't entitled to any rental payments (so if the tenants moved out, I would still be paid the rent, but the tenants would have to arrange and pay for short-term rental somewhere else - effectively a non-starter).
So what I'm considering is offering the tenants a short-term flexible lease option. The tenancy is currently through a PM company, but I haven't been super-happy with their work and the tenants aren't either, and this lot of tenants are easy to deal with (unlike the previous ones I've had). Of the 5 current tenants, I believe only 2 or 3 of them were wanting to stay on next year and the others were going to go off to do their own thing. The current rent is $650 a week, which is $590.20 after PM fees. What I was thinking is making a new short-term lease out until say January 19th 2014, with a rent of $500/week based on 5 occupants, however if 1 of them moved out I'd drop it to $400/week, and so on. So this way if 2 of the tenants want to move out on 23rd of Nov because they already had other accommodation lined up, I'd still be getting $300/week from the remainders out until the 19th of Jan. The idea here is basically to make the short-term extension attractive to the tenants so they say yes, to try and minimise the period for when the house is vacant - of course I could make this offer and then have all of the tenants move out in December anyway, and be in a worse position if the work was not scheduled to start until 20th Jan.
The other alternative would be to end the lease on the 23rd as already planned, not extend the lease any farther at all and potentially have 2-3 weeks where no rent was paid and no repair work was being carried out / sat on the market with little interest.
So, opinions? Good idea? Bad idea? Questions? Any pitfalls or problems with my proposed idea?
One problem I forsee is that the current bond is pooled between the 5 tenants, but with the flexible rental I'm proposing, if 2 tenants left early they would surely want their share of the bond returned early. It can also get tricky if there is damage done to the property (having visited it fairly frequently, I haven't seen any issues so far) by tenants that have left early, leaving the remaining tenants to pick up the can. Having never dealt with the DBH, is it possible to request portions of the bond back to be paid to individuals over time, or is it a 1-time-only deal?
I haven't spoken to the tenants about this yet, I want to get a gauge for whether this is a good idea before I go further. The PM company has no idea about any of this.
I am looking to sell the house, and have been ever since the quakes, but have been waiting for EQC to repaint it, at which point I will get everything repainted inside and out, garden fixed up, new curtains, new carpet etc and put it on the market. The ball is finally rolling on that front and the work should hopefully be happening in the next few months.
The problem I have however is timing. The current fixed-term lease is to 5 students, and expires on 23rd of November. Due to the amount of painting required, I doubt it could all be completed before Christmas, and even if it was and I put the house on the market, with most people on holiday late-Dec to early-Jan, there wouldn't be as much interest in the house so it'd effectively be "empty" during this period. Due to the (ludicrous) way the contents insurance is handled, if the house is empty while EQC repairs are done, the insurance company won't actually pay me for loss of rent unless there is an actual tenancy agreement in place, but because the current tenants weren't the occupants when the quake happened, they aren't entitled to any rental payments (so if the tenants moved out, I would still be paid the rent, but the tenants would have to arrange and pay for short-term rental somewhere else - effectively a non-starter).
So what I'm considering is offering the tenants a short-term flexible lease option. The tenancy is currently through a PM company, but I haven't been super-happy with their work and the tenants aren't either, and this lot of tenants are easy to deal with (unlike the previous ones I've had). Of the 5 current tenants, I believe only 2 or 3 of them were wanting to stay on next year and the others were going to go off to do their own thing. The current rent is $650 a week, which is $590.20 after PM fees. What I was thinking is making a new short-term lease out until say January 19th 2014, with a rent of $500/week based on 5 occupants, however if 1 of them moved out I'd drop it to $400/week, and so on. So this way if 2 of the tenants want to move out on 23rd of Nov because they already had other accommodation lined up, I'd still be getting $300/week from the remainders out until the 19th of Jan. The idea here is basically to make the short-term extension attractive to the tenants so they say yes, to try and minimise the period for when the house is vacant - of course I could make this offer and then have all of the tenants move out in December anyway, and be in a worse position if the work was not scheduled to start until 20th Jan.
The other alternative would be to end the lease on the 23rd as already planned, not extend the lease any farther at all and potentially have 2-3 weeks where no rent was paid and no repair work was being carried out / sat on the market with little interest.
So, opinions? Good idea? Bad idea? Questions? Any pitfalls or problems with my proposed idea?
One problem I forsee is that the current bond is pooled between the 5 tenants, but with the flexible rental I'm proposing, if 2 tenants left early they would surely want their share of the bond returned early. It can also get tricky if there is damage done to the property (having visited it fairly frequently, I haven't seen any issues so far) by tenants that have left early, leaving the remaining tenants to pick up the can. Having never dealt with the DBH, is it possible to request portions of the bond back to be paid to individuals over time, or is it a 1-time-only deal?
I haven't spoken to the tenants about this yet, I want to get a gauge for whether this is a good idea before I go further. The PM company has no idea about any of this.
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