13 Replies Latest reply: Jan 24, 2012 2:23 PM by flaskier RSS

    Advance Rents/Cancellations

    New Member

      I'm new to this and I need some advice.

       

      I lease my condo seasonally, January through April. And my condo requires a minimum three month seasonal lease.

       

      It seems difficult to lease the unit for the full term after mid to late October. Most inquiries after this date are for shorter periods.

       

      I have prospective tenants who wish to lease in 2012 and they want to reserve now. Is it unreasonable to require them to pay non-refundable rents in order for the property to be secured? I'm concerned if I have the traditional cancellation policy (even 60-90 days) that it won't provide me enough time in the event of a cancellation to lease the property over the season.

       

      I was thinking about a $1,000 lease deposit with half of the lease due within 180 days and the balance within 90. In the event of a cancellation the fee would be 50% of the amounts paid.

       

      Too aggressive? 

       

      Thanks.

        • Re: Advance Rents/Cancellations
          New Member

          it seems too agressive to me.

          • Advance Rents/Cancellations
            amyg Active Contributor

            Flaskier, what about requiring trip insurance?  That way if there's a cancellation by the guests, you won't lose anything.  We use Travel Guard and guests can purchase trip insurance up until the time that the rental is paid for in full.  It costs 7% of the rental total and it provides peace of mind for your guests as well as you.  I am always thrilled when I have guests who opt for the trip insurance.  If something happens, I don't have to deal with guests asking me for refunds because they had a family illness, emergency, or bad weather.  

              • Re: Advance Rents/Cancellations
                lce0606 Contributor

                How do you require that guests purchase travel insurance? I suggest it as part of my contract. I am now in the position of trying to decide what to do about a deposit. My contract specifies "non-refundable" (with no exceptions) but I have have able to rebook the original dates. I am thinking I should change my policy, but am not sure what to do. Any thoughts?

                  • Re: Advance Rents/Cancellations
                    New Member

                    I try to be fair to my prospective tenants. My agreement (I only rent seasonally) calls a deposit of $ 1,000 to secure the unit and full payment by Labor Day. If they cancel before Labor Day I refund all but $250. After Labor Day the deposit is forfeited unless I can lease it again for the same rate. If I can lease the unit for the same rate I return all of the deposit.

                     

                    I’m not trying to upset anyone and sometimes things happen so if you’re not financially hurt by the cancellation then you shouldn’t necessarily profit from someone else’s misfortune.

                     

                     

                     

                    Just my two cents.

                     

                     

                     

                    Hope it helps.

                     

                     

                     

                    William A. Head, CPA

                     

                    William Head, PA

                     

                    Certified Public Accountant

                     

                    621 South Federal Highway

                     

                    Suite 9

                     

                    Fort Lauderdale, FL 33301

                     

                     

                     

                    Office: 954.525.7822

                     

                    Facsimile: 954.449.0382

                     

                     

                     

                    IRS Circular 230 DISCLAIMER:

                     

                    In compliance with IRS Circular 230, any written tax advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Additional issues may exist that could affect the tax treatment of the matter that is the subject of this advice and this advice, therefore, does not provide a conclusion with respect to such issues. That said, please do not hesitate to call me if you have any further questions regarding this matter.

                      • Re: Advance Rents/Cancellations
                        lce0606 Contributor

                        Thanks for your response. Part of my loss is that I had to turn down 3 repeat renters that I expect I will no longer have for future rentals. And the credit card charge incurred service, including international, fees. The thing that is making it hard for me now is that it was clearly listed on my contract that the deposit is non-refundable. If I were going to follow your example, I could refund all but $250.00. However, and this gets potentially into legal issues, if I do not follow my written (and agreed to) non-refundable provision, couldn't there be argument that if I wasn't following the contract, and refunded part, then they could request it all?

                      • Re: Advance Rents/Cancellations
                        msdebj Senior Contributor

                        I doubt you can REQUIRE them to purchase travel insurance. I always encourage my guests to do so - especially during hurricane season, though I tell them to Google various sites (since I don't have a dog in that fight) and don't rely on VRBO for all my advertising. 

                         

                        In the end, it's up to them to protect their money. If you have a good contract that spells out your cancellation policy they have to make their own decision.

                         

                        The only time we offer a refund, once full payment is made (it is due 30 days prior to their date of arrival) is if a MANDATORY evacuation is ordered for our area. Then we offer to prorate. See below that portion.

                        NO REFUNDS due to weather UNLESS:

                        1. The National Weather Service and the City of Galveston orders a MANDATORY Hurricane Evacuation Order for the Galveston, Texas Gulf Coast area.
                        2. The day/date such an order is given we will process the following refund:

                        A. Any unused  (prorated by day, minus cleaning fee) portion of rent for The Primary renter currently in residence.

                        B. Any unused (prorated by day) portion of rent paid by the Primary renter scheduled to arrive, who wish to shorten their stay and come for the remainder of their confirmed dates  after the Order has been lifted, and our home has been inspected by Owner/Agent and is deemed habitable.

                         

                        Owner reserves the right to cancel the reservation if all monies and completed paperwork are not received by the date due, or should property become unavailable due to uninhabitable conditions. All monies will be returned if cancellation is due to uninhabitable issues as determined by Owner.

                         

                          • Re: Advance Rents/Cancellations
                            lce0606 Contributor

                            Thank you very much for your response. I am currently thinking that, to be fair, I should revise my cancellation policy. However, my current contract - requiring signatures of acceptance - state, in 3 separate places, that the deposit is non-refundable. At this point, I have a group that cancelled 30 days before final payment was due, but I was able to rent for all except 3 of their days. Their reason for cancelling was stated to be medical and I am now feeling guilty for keeping their deposit. The only justification for at least keeping part of it is that I lost 3 repeat guests and I incurred credit card service fees. (Yes, I do make a refund exception for the house becoming uninhabitable.)

                              • Re: Advance Rents/Cancellations
                                New Member

                                I just try to be fair. Be fair to your tenants and to yourself.

                                 

                                 

                                 

                                In 2010 I returned the entire deposit due to a tenants medical condition but I was in my rights to keep all of it. But since we had discussed the potential issues before they signed and I was aware of their condition I felt it was better to side with karma and return it versus tempting it.

                                 

                                 

                                 

                                Wouldn’t have done for every tenant but my gut told me it was the right thing to do.

                                 

                                 

                                 

                                William A. Head, CPA

                                 

                                William Head, PA

                                 

                                Certified Public Accountant

                                 

                                621 South Federal Highway

                                 

                                Suite 9

                                 

                                Fort Lauderdale, FL 33301

                                 

                                 

                                 

                                Office: 954.525.7822

                                 

                                Facsimile: 954.449.0382

                                 

                                 

                                 

                                IRS Circular 230 DISCLAIMER:

                                 

                                In compliance with IRS Circular 230, any written tax advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Additional issues may exist that could affect the tax treatment of the matter that is the subject of this advice and this advice, therefore, does not provide a conclusion with respect to such issues. That said, please do not hesitate to call me if you have any further questions regarding this matter.

                        • Advance Rents/Cancellations
                          Contributor

                          I get the full rent 90 days out, then it's nonrefundable and my agreement encourages people to get trip insurance (gives two websites). One rental is summer only, weekly and for very large groups, like families, and it seems like they have to plan in advance so far that I didn't have any cancellations in the first year I rented it, but I had only started taking reservations in February. This year the property is almost totally booked before February, so I'm more worried that it's too far out and people might end up cancelling; would sure like to get at least half the rent sooner. Will do that next year if too many end up cancelling this year.

                           

                          The other rental is all year, monthly and a small place, been renting for two years. I've had cancellations at 91 days out which were very hard to fill unless I discounted, which worked, but I'd sure like to move the prepay period out to 120 or 180 days so as not to have that situation. Based on others in the area, it doesn't seem like I can do that. Right now I'm in a situation where I moved someone's non-refundable reservation deposit ($600) to a month in 2012, but have just had a good inquiry for three months that includes that month being held. I'll probably get in touch with the people I'm holding for and offer them the deposit back if they can tell me now if they want to release it. I don't think I'll move deposits forward like that as it seems like once cancelled, more likely to cancel again. Seems like the best thing would be to get more rent farther out, but not sure how that would go over, so am thinking about it.

                          • Advance Rents/Cancellations
                            spoonbill Contributor

                            My property rents weekly during the peak season and 2 night minimum during the off season.  I experimented with a variety of booking policies with one thing always constant.  All moneys were due 30 days before check-in and non-refundable.  I also offer Travel Guard Trip Insurance, both regular 7% and the newer cancel for any reason 11.2% and encourage guests to purchase the policy since we are in a tropical storm area (Galveston, TX).  Now that I have started using an online booking system I changed my policy to full payment in advance and I allow them to cancel up to 30 days prior to check-in and will refund all but a fee, any travel insurance costs, and the credit card charges.  In my area there is a small risk that I won't be able to re-rent the property in 30 days but it is minimal.  I haven't found much resistance since payment is by credit card.

                            • Advance Rents/Cancellations
                              Contributor

                              I tihnk in your case you need to be aggressive and def suggest they get travel insurance. It's a lot of risk if they cancel and you haev a very hard time renting.