THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, October 15, 1994 TAG: 9410200624
SECTION: REAL ESTATE WEEKLY PAGE: 28 EDITION: FINAL
COLUMN: Landlords & Tenants
SOURCE: William Mazel and Albert Teich Jr.
LENGTH: Medium: 59 lines
I own a single-family home and I'm in the military. I will be transferred and away from the area for at least three years.
I have a prospective tenant interested in renting the property for the entire three years.
I'm afraid taxes might go up, my insurance might go up and that other assessments may be levied against the property during the three years. In addition, inflation may increase and I want some protection.
I have told the prospective tenant that I will rent the property to him for a set sum.
While I'm agreeable to renting the property to him for three years, I want to include some sort of escalator clause in the event that my expenses on the house increase.
I do not want to be stuck for three years and have to pay a lot of money out of my own pocket to meet added taxes, etc.
My tenant says he does not want an escalator clause. He said he would be agreeable to mutually negotiate the rent at the end of the first and second years.
What do you think of that proposal?
Quite frankly, the proposal of a mutual agreement to negotiate at the end of the first and second years does not, legally, enthrall us.
The difficulty with such an agreement is that your tenant may be willing to negotiate and you may be willing to negotiate, but if you do not reach an agreement, where do you find yourself?
The Supreme Court of Virginia has held that when parties mutually agree to agree at a later date as to how much rent shall be paid, the agreement is too indefinite and there is no way the courts in Virginia can enforce it.
We further find that since you are going to be out of the area, you would have a difficult time negotiating with your tenant.
We suggest that instead of agreeing to mutually agree at the end of the first and second years, that you include a clause in your lease that would provide either an increase in rent according to the increase in the cost of living each year or that you have a provision that if the real estate taxes, insurance and other costs increase, the rent will be increased accordingly.
For your protection on a long-term lease (three years is not long but it might be long as far as you're concerned, being so far away), an escalator clause setting forth an increase in accordance with the cost of living would probably be the easiest item to be enforced.
Be very careful when you negotiate this new lease with your tenant so that both of you are protected and will know exactly where you stand.
An absentee landlord often finds it very difficult to protect his or her interest in real estate. MEMO: Albert Teich Jr. and William Mazel are real estate lawyers based in
Norfolk. Send comments and questions to them at Real Estate Weekly, 150
W. Brambleton Ave., Norfolk, Va. 23510. by CNB