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Default After Renewal

College StudentsThis is a problem in college areas because leases are often signed 9-10 months in advance. Is the renewal lease enforceable if the tenant defaults on his or her current lease?

In other words, what happens if a tenant is a good tenant from August through November of 2018 and then signs a renewal lease for August 2019 through July 2020. Then, in May or June of 2019, the tenant defaults on his first lease.  Can the landlord cancel the renewal lease, assuming it wants to do that?

We don’t know. It seems like the landlord SHOULD be able to cancel the renewal lease. On the other hand, I cannot find anything that authorizes that.  My advice: Talk to your lawyers. If recommended, maybe write a new clause into your forms so if a current lease is terminated for any reason, then the landlord will also have the right to terminate a renewal lease.

By the way, don’t forget about purchase options. I recommend that landlords who give purchase options in their leases have a clause saying it is null and void if the tenant defaults.  Some landlords say any default, even if cured. Some say only uncured defaults. Some don’t even think about this issue. At least think about it!

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Default Notices

Effective June 1, 2018, the law changed regarding default notices. Previously, you had to give tenants notice of default and seven calendar days to cure.  After, you have to give them seven business days to cure.

Judges around the state have been throwing out eviction lawsuits unless the default notice specifically says seven BUSINESS days. They are saying it is not enough to say “seven days” in the notice and then wait seven business days before filing the eviction. The statute does not say how the notice must be worded, but the judges are in control when it comes to evictions.  There is no point in arguing with the judge. Just do things their way, and avoid problems.

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Fair Housing Exemptions

Many landlords incorrectly believe they are exempt from the Fair Housing laws.  It comes up most often when a tenant wants to have an emotional support animal and the landlord says, “No pets allowed, and I’m exempt from the Fair Housing laws.”

I’ve been told that landlords of single family residences are exempt. That is not true.  Believing this urban legend can get you in trouble.

Exemption #1 is for landlords of dwellings with four or fewer units, and the landlord lives in one of them. It has to be their only rental property. It must be owned in the landlord’s personal name, and not a corporation or LLC.

Exemption #2 is for landlords who own three or fewer single family residences as their only rental properties, and all titled in their own personal name.

You can lose your exemption if you use a licensed real estate person to assist with the properties OR if you use someone “in the business of real estate.”  Someone is in the business of real estate if they have more than two transactions in a year.