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Rent it Right
by Janet Portman, Inman News
Q: I own a small apartment complex in another town and would like to rent one unit to a tenant who will also be my on-site manager.
Getting bootI want to tie the tenancy to the employment, so that if the manager does a poor job I can terminate both the tenancy and the job.
How can I do this? –Jason S.A: It’s a good thing that you’re thinking about this now, before offering the job or creating the tenancy.

When landlords haven’t set up either the job or the tenancy correctly they can find themselves stuck with a tenant whom they’ve fired from the manager’s job but who still has the right to live on the property (sometimes even in the manager’s unit).You’d be well advised to check with a local lawyer on just how to draft your employment agreement, but in the meantime, here are some pointers:

1. Unless you offer your manager an employment contract, you will be free to fire him at any time, with or without cause. This ability, known as “employment at will,” describes the situation for most employees. The only caveat is that employers may not fire them for discriminatory or otherwise illegal reasons.

But if employers have simply decided to hire somebody else, they can let the employee go without needing to justify the decision and without having to give advance notice.

2. Tenants are not so easy to get rid of, as you no doubt know. Lease-holding tenants are entitled to remain until the end of the lease term unless they have broken an important lease clause, committed illegal acts on the property, or severely damaged it. Month-to-month tenants can be terminated for the same reasons, and can be let go for no reason (unless the reason is illegal) on proper notice.

When dealing with a tenant-employee, you can see the possible collision: An at-will employee with a lease may be able to remain on the property if he loses his manager’s job but does nothing to justify losing his lease.

3. The way to avoid this unhappy event is to make it clear that you do not intend to create an independent landlord-tenant relationship. In the employment agreement, state that living on the premises is essential to the job. Make it clear that both you and the manager may end the employment relationship for any reason (that way, you’ll preserve the “at will” status of the employment), and that if the employment ends, so too ends the tenancy.

Making the ex-manager leave immediately may be too harsh; consider giving a fired manager a period of days to find a new place and move out (you’ll need that time to find and hire the next one). You can add the normal leasing provisions to your employment agreement (such as requiring a security deposit and describing your rights to enter the rental property), and as long as you’ve clearly made residence contingent on employment, you should be on solid ground.Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of “Every Landlord’s Legal Guide” and “Every Tenant’s Legal Guide.” She can be reached at [email protected]. Copyright 2009 Janet Portman

See Janet Portman’s feature, How to Negotiate a Lease Buyout.

American Apartment Owners Association offers discounts on products and services for landlords related to your real estate investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at joinaaoa.

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