QLD Tenants signed 12 months lease renewal and week later want to change to 6 months

Hi all,

I've got a bit of a dilemma as to what to do in this situation.

I've got an IP in Brisbane currently being occupied by good tenants for the last 12 months. As their lease was coming to an end in early October the property manager offered me to send them the renewal for another 12 months with a small rental increase which I agreed to and said they can go ahead with it. They sent the renewal to the tenants mid August and got back the signed 12 months lease (valid till Oct 2020) by mid September. I got a copy of the signed lease and was happy with good tenants deciding to stay for another 12 months.

However, by end of September (about a week after I've got a copy of signed renewed lease), I got an email from my property manager saying that the tenants only want 6 months lease and whether I can confirm the change for the agent to be able to update the lease to 6 months. As you can imagine I, as a landlord, is not quite happy about it and would rather prefer 12 months which is already signed.

After further clarification with the property manager they are claiming that when they discussed the renewal with the tenants prior to signing the renewal the tenants mentioned that they wanted a 6 months lease but accidentally signed a 12 month lease without checking the dates. I've never been informed or asked by my PM at that stage that the tenants wanted 6 months and not 12 months renewal. Also, PM checked with the tenants and they want to leave after 6 months.

My issue is that I've got a signed 12 months lease in place (which is about to start in 1 week) and, from my perspective as a landlord, it looks like the tenants changed their mind and now want to update it to 6 months after the fact that they already signed it. Also, I trust my PM and them saying that there was a discussion between them and the tenants of 6 months option prior to signing it. However, I was not informed about that and was never asked by PM whether I'm ok with 6 months (which I personally don't really like and rather go with 12 months). Obviously not happy about that as a landlord.

Now the PM is asking if they can just update it to 6 months. What would you do? Does it make any difference that the renewal hasn't started yet and is only about to start in about 1 week time? Can the tenants ask to change the signed lease duration if it hasn't started yet?

Appreciate your thoughts on this matter.

 

I don't really get the dilemma. You don't have to agree if you don't want to. You don't seem to want to. That's it?

Personally I'd just let them change it, but I don't think I'm as fussed about the 6 month thing as you are.

 

@thatbum Well, the PM usually do their job well. But, on this occasion, I'm quite unhappy they did not even let me know that they discussed 6 months lease renewal instead of authorized by me 12 months option. On the one hand I understand where they are coming from in wanting to update it to 6 months but on the other hand I clearly only authorized them to renew for 12 months and not 6 months.

The dilemma is whether to allow them (usually being a good PM) to just update it to 6 months or stick to the signed 12 months version instead. I prefer 12 months leases to minimize the tenants turnover and re-letting costs.

 

I don't really see why its such a dilemma though. Just pick one? It sounds like you already have chosen - you want to keep it as 12 months. What's the issue if you did that exactly?

 

I would say NO to the tenants.

But make an offer to the agent to agree that yes you will agree as long as the agent agrees to do a free lease renewal in 6 months with the same tenants OR finding new tenants in 6 months for free and waiving the 1 week new lease fee - eg put this back onto the agent to make it right.

BE SURE TO GET THE AGENTS AGREEMENT IN WRITING IN AN EMAIL - so you can remind them in 6 months.

 

Legally you don't have to change it however you need to be pragmatic here. If they really only want 6 and plan to leave after 6 months, forcing them to keep the 12 months lease (at this early time) then breaking it or forcing them to stay an extra 6 months is just not in your best interest as an investor when it comes to overall risk. Keeping a tenant who is unhappy and just doesn't want to be there is never a good idea.

I would look at the big picture and realize its best to let them resign a 6 month lease, you'll most likely keep them as good tenants for 6 months, then just get new tenants.

Imho this is where sound, unemotional decision making by investors is very important.

How you want to handle your PM and the next lease fees etc is a separate issue and at your discretion. But I do believe its in your best interest to let the tenants resign for 6 months. Otherwise your once ignored little maintenance issues/things to rectify etc may suddenly skyrocket with a litigious vengeance. Remember, a large part of investing is really all about risk minimization.


Hell hath no fury like a tenant scorned.

 

I always find Sackie's answers the best imho

This happened to me before and I agreed the lease. Then, I looked for a few other agents in the area as options to compare as things changed, businesses changed and people moved. Your agent can be great this year, but may be not after 5 years time, just time to check on them.

 

Chances are they want to leave after 6 months, so maybe offer them 6 months for a higher rate.

And/or get the pm to pay the difference for making a mistake

#sackie s advice is brilliant

 

Thanks all for your input on this. I've decided to reply to my PM saying that I'd be happy to adjust the lease to 6 month on condition that the re-letting fees are either reimbursed or waived when the time comes to re-let the property in 6 months. Someone's got to pay for the mistake they did.

 

Good idea.

This sounds to me like the PM made a mistake, the tenant always wanted 6 months and they signed them up for 12 months.