Do Estate At Will Rental Agreements Serve A Landlord’s Best Interests?

Estate At Will Infographic

The term “estate at will” refers to a situation in which a landlord gives someone permission to occupy a space under defined terms. 

This arrangement allows a tenant to live at a property without a formal agreement and is also commonly called a “tenancy at will”. 

This landlord-tenant arrangement arises quite often and for as long as both parties are happy with the arrangement, there are certain advantages to an estate at will. 

But when one person or another feels the verbal or open-ended written agreement is no longer working, there can be specific challenges to changing or severing the tenancy at will. 

If you are involved in a tenancy at will situation or are considering this type of rental agreement, these are things to consider.

How Does A Tenancy At Will Work?

It would be unusual for a property owner to rent out an apartment or office space to a relative stranger without a written agreement. It’s safe to say the vast majority of landlords use some form of a formal agreement that outlines the terms and conditions. Traditional rental agreements usually define terms and the life of the lease. Written estate at will contracts can be similar, except they are typically open-ended.

Some of these agreements arise when people have known each other for a long time or feel comfortable. That’s when things often shift away from strictly business practices to an oral tenancy at will deal. These are common examples of estate at will agreements.

  • Month-to-Month Rentals: Some landlords are hesitant to get involved in long-term leases for a wide range of reasons. The owner may be considering listing the property or unsure if they want year-round tenants. In such cases, a landlord can articulate the rental fee and expectations going forward. By asserting the unit is available only on a month-to-month basis, landlords can terminate the relationship by giving reasonable notice.
  • Rooms For Rent: If you check out the local Craigslist ads, you’ll probably come across listings for “rooms for rent.” Some property owners find it advantageous to rent multiple rooms with shared bathrooms, kitchens, and common areas. These types of rentals are prone to charge weekly fees without a written contract or an open-ended contract. Terms generally include pre-paying for each week, no smoking, and noise restrictions, among others. Failure to meet one of the criteria and the agreement ends.
  • Friends & Family Members: Roommates rank among the most common oral tenancy at will scenarios. They involve one person who owns a property and another who rents a room. Like weekly flophouses, the common areas are usually shared. These situations can be tricky when personal differences arise.
  • Holdover Tenants: When landlords allow a lease to expire and don’t require a new one, this can evolve into a tenancy at will situation. This occurs in a number of ways when you have a good tenant. The tenant may not want to sign another one-year lease. A landlord may want to avoid losing rent while going through the process of finding a suitable new tenant. A bird in the hand, as they say, is worth two in the bush. Sometimes landlords are just too busy and procrastinate on renewing a lease. As long as the tenant continues to pay rent and the landlord accepts those payments, a tenancy at will is implied. Otherwise, the person living in the space could be considered a trespasser or squatter.
  • During Lease Renegotiations: When a lease ends and the parties are still engaged in negotiations, the initial agreement’s terms typically remain in place. In such situations, the tenant is not considered a trespasser or squatter. Should the parties fail to agree on a new deal, the tenant usually enjoys estate at will status as long as the landlord accepts payments.

An oral or open-ended agreement can be an effective way to lease space in certain instances. The key points are to be clear about fees and conditions.

How Does An Estate At Will Differ From Other Tenancies?

Tenancies can be grouped into four distinct categories, with each providing benefits to both landlords and tenants. These are the other three types of tenancies and how they may evolve into an estate at will.

  • Periodic Tenancy: This type of agreement is quite similar to a tenancy at will. The renter usually signs a week-to-week or month-to-month agreement that outlines the fees, obligations, restrictions, and details. The key difference is that periodic tenancy arrangements are always open-ended rather than for a set period that expires. With no specific end date, they run until one party or the other decides to end the relationship. In that sense, it is comparable to an estate at will.
  • Estate for Years: This arrangement involves a written lease with a specific end date. The understanding is that the tenant will vacate the premises when the lease times outs. Even though landlords may not be required to provide a notice to vacate, it is generally a good practice. It’s not unusual for an estate for years tenant to stay after the lease expires.
  • Tenancy at Sufferance: Another term that refers to the scenario when tenants remain after a lease expiration is called a “tenancy in sufferance.” When a tenant fails to move out, they are bound by the previous lease.

Understanding how other types of lease agreements can trail into a tenancy at will helps landlords take steps to serve their best interests. It may be the case that a month-to-month arrangement was always in your best interest. You just needed to test the waters and feel comfortable a particular tenant or roommate was trustworthy. But before entering any non-written or ongoing business agreement, it’s essential to weigh all of the perks and potential drawbacks.

Pros & Cons Of An Estate At Will

Now that we’ve clarified what estate at will agreements are, the next question is whether one is right for you. It’s essential to note that the estate at will predates the written lease. So, landlords can anticipate that tenants will enjoy specified rights under your state’s laws. That being said, these rank among the top pros and cons when relying on a tenancy at will.

Getting Rid of Bad Tenants Made Easier

There is no way to sidestep state law when evicting rude, loud, and annoying tenants. Landlords are tasked with serving notice and following the procedural steps. That being said, tenants with long-term leases use those legally-binding documents to form the bedrock of their rights.

One of the worst-case scenarios involves renting to a real jerk in a property you also inhabit. Say, for example, you own a duplex and rent the adjacent space to someone you grow to dislike. Now consider that you have to interact act with on a daily basis. If that person signed a 12-month lease, it can be extremely difficult to evict them unless the terms are violated. And there’s no law against being obnoxious. In this situation, a landlord could be far better off with a tenancy at will that allows you to quit the deal relatively quickly. The peaceful enjoyment of your property is priceless.

Recovering Rent in an Estate at Will

When tenants fall behind on their financial obligation, lawyers talk about “cure rights.” This is the amount of time a delinquent renter has to rectify the situation. In many tenancy at will agreements, a landlord may be able to promptly serve the tenant with a 14 day notice, depending on the state. Tenants typically retain the right to pay their balance within the set time period and remain in the space. Once the payment has been cured, everything goes back to the way it was under the tenancy at will.

Let’s say that delinquent rent becomes a persistent problem. A landlord can serve a notice to terminate the agreement. This is where it can get tricky in some states. If a landlord accepts the payment, the tenancy could be considered cured. On the other hand, some states only allow one cure within 12 months. That gives landlords significant leverage in removing late-payers and retaining good tenants.

One of the key differences between a tenancy at will agreement and a 12-month lease is that it may be easier to evict undesirable tenants through the cure rights process. In a traditional lease, late fees are often assessed rather than prompt exit clauses. In a 12-month lease, you could be stuck with a late-payer for a year.

Open-Ended Leases Tend to Charge Higher Rates

Home and property owners who offer week-to-week rentals often charge higher rates than 12-month leases. The conventional wisdom is that a tenancy at will attracts short-term renters, and they pay a little extra for the flexibility. Traveling professionals find that they can actually save money by renting a room or studio apartment for a few weeks rather than staying at a hotel. In areas where major construction projects bring in labor forces for months at a time, landlords have access to gainfully employed tenants. Although the turnover frequently creates vacancies, higher short-term revenue may prove more profitable in the long run.

Estate at Will Deals Don’t Guarantee Rental Income

Landlords would be wise to consider their need for steady and reliable rental incomes when embarking on open-ended agreements. Although landlords may be able to replace late-payers and undesirables expediently, tenants also enjoy great flexibility.

In a 12-month lease, the tenant is typically responsible for payment of the entire contract. That means landlords can plan on the rental income unless unforeseen circumstances arise. Tenants do not generally have the right to send the landlord notice they are moving out without paying off the lease. But in a tenancy at will situation, that 7- to 30-day notice could come at any time. And the renter won’t be on the hook for a single day more. The drawback of an estate at will is that landlords may face unexpected vacancies.

Challenges of Terminating an Estate at Sufferance

Let’s say — hypothetically — that you have enjoyed working with a tenant for a year, and the lease has expired. You continue taking rent under the month-to-month tenancy at will scenario, aka tenancy at sufferance. At some juncture, either you cannot come to terms on a new lease, or your tenant stops paying the rent. Many landlords operate under the misconception that they can just order the tenant to vacate. But that’s not necessarily true.

In this situation, landlords would likely have to conduct formal eviction proceedings based on the terms of the original lease and state law. The point is that landlords rarely, if ever, find it easier to remove a delinquent tenant under tenancy of sufferance.

Consider a situation in which a landlord rented a space based on an oral agreement. Whether this is a weekly room rental or roommate you had a falling out with makes little difference. In the absence of a written agreement, property owners and landlords are required to give some form of an eviction notice. Some states may allow a tenant 30 days to find a new space and move out. If you had a week-to-week written agreement, those terms could be asserted.

Those hypotheticals point out that an oral tenancy at will generally defaults to the practices of state laws, which often enhance tenant rights. A written agreement must adhere to state law but may have the ability to shorten the eviction process.

Consider Your Tenancy at Will Term Wisely

Everyday people experience a learning curve when they become landlords. It’s not unusual to enjoy wonderful tenants, as well as a few bad apples along the way. Tenancy at will situations can be an excellent way to dip your toe into the rental game waters before diving into long-term lease agreements. The ability to end an estate at will quickly allows you to learn from a mistake and resolve it rather than suffer a bad tenant for months on end. If you are considering renting out a space, it may be in your best interest to speak with an attorney with estate at will experience and craft a contract that clearly articulates your rights, expectations, and an exit clause.

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