Landlords: Do You Collect Last Month's Rent Upfront? Be Careful
Many states have rules that LMR is the same as "buying" the last month of occupancy for THAT amount of rent and that unless the LMR on file was included in rental increases, that it was not automatically increased
I see rentals advertised all over town. Move in with first, last, and security deposit. Hmmm. That's a lot of money. How many people can afford to do this? But, does the landlord understand what they're really asking for? Not always.
As a landlord for nearly 17 years I have always required first month's rent and a security deposit from tenant's moving in. The security deposit is typically about $150 to $200 more than the rent amount. So, for $800 rent, the deposit is usually $1000.
Many landlords require first month's rent, last month's rent and a security deposit for move in. Let's think about this for a minute. On an $900 rental, that's $900 first, $900 last and $1100 security. If they have a pet that can be another $250 nonrefundable FEE. So, a perspective tenant could be looking at $3150.00 to move in. And, that's a lot of money that many people just don't have!
I find additional problems with doing this:
As a landlord you may be potentially ruling out over 3/4 of tenants in the market.
As a landlord you are responsible for keeping track of the last month's rent. Often times we hear of landlords spending the last month's rent, and it's gone by the end of the lease term.
If the tenant remains in the home for multiple years, and the rent continues to be raised over multiple years, the last month's rent will no longer be enough to cover that rent.
As simple as this sounds, the last month's rent is to be used for the last month of the lease term only and NOTHING else.
Now look at this... this has not happened to me personally, but in the past, I have seen this happen to other landlords.
A tenant doesn't pay their rent, The landlord evicts for non payment of rent. There is also some damage to the rental unit. The lease usually provides the landlord with the right to retain the tenant's security deposit to cover the lost rent and/or damages (with proper notification to the tenant). But, maybe there is not enough money to cover the unpaid rent and/or damages. So, the landlord assumes that he has a right to the tenant's last month's rent. Makes sense, right? Well maybe NOT!
BE VERY CAREFUL!
This may not be the case at all. In the past, in 2 instances, I have seen landlords in a court of law, fighting for the tenant's last month's rent. EVEN THOUGH THE TENANT OWED THE LANDLORD MONEY FOR UNPAID RENT AND/OR DAMAGES I HAVE SEEN JUDGES AWARD THE LAST MONTH RENT BACK TO THE TENANT! (WHAT???) I have heard them say the money is to be used for the last month of the lease term, ONLY. If the tenant is not staying the last month (but being evicted), I have seen it go back to the tenant (with money still owed to the landlord!) *see note below -and check the current laws in your area. I am certain that a judge must review every aspect of each case to make a final determination.
UNBELIEVABLE, RIGHT?
So as a landlord, you may consider collecting first, last and security from a tenant moving in, collect first and security. If you are feeling a bit uncomfortable, then increase the security deposit. Be careful if you decide to collect last month's rent (and read my note below*- be sure to check with a real estate attorney in your area and follow their recommended guidelines).
*NOTE: I am not an attorney and I do not profess to practice law. I do not know the laws in your state nor do I profess to preach the law here in Florida. So, please check with a real estate attorney. Find out what they advise in your area. Be sure the you know and understand the laws here in Florida, as well as in your state.
Sandy Shores, Melbourne FL Broker-Associate
M & M Real Estate, Inc.
Residential, Investment, New Construction and Relocations
We have a team of professionals to facilitate your Short Sale.
Melbourne Real Estate / Palm Bay Real Estate
321-253-4545 or 321-733-6080
Email me at SandyShoresMelbourne@hotmail.com
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