I was working on a lease last week and I received the most bizarre offer that I’d ever seen!
It was full of these ridiculous clauses that I can’t believe an agent or a lessee would include in today’s hot market.
I once dated a girl that had a t-shirt with the “Get Real” “Be Rational” joke on it. She couldn’t wait to explain the meaning behind it!
She was in love with math!
I remember watching Good Will Hunting with her and she was so excited: “Oh My God! Yes! They’re using matrices!” she exclaimed. I was just excited that it had been three minutes and our microwave popcorn was ready…
Last week, I received an offer to lease on a property I had listed in the west end.
The property was listed at $1,750 per month and had only been on the market for a week.
The offer came in at $1,600.
But you know what? This wasn’t the most shocking part! In fact, once I had read through the offer in its entirety, I wasn’t really that concerned with the price.
The cooperating agent, the lessee, or both of them with their heads put together, decided to include some clauses which I believe have no business being in an offer; or at least being in a competitive offer.
On the flip side, who am I to tell a lessee or a buyer what they should include as to the terms of their offer? They can offer whatever they want! If I don’t like it, I don’t have to take it!
And in the end, I didn’t…
Here are the clauses that they included:
Tenant, if not in default hereunder, shall have the option, given to the Landlord at least sixty days before the end of the Lease term, to renew the Lease for a further term and the Landlord, upon acceptance of this extension, agrees to pay commission of one months rent to the Brokerages listed on this Agreement to Lease.
I have several problems with this.
First, I would never allow the lessee to hold the option to renew. Not in this market; not in a million years. What advantage exists to the Landlord in doing so? None, obviously, and that’s what this is all about – the landlord’s advantage. It’s a seller’s market, so the seller can do whatever he wants! Why would he allow the tenant an option to renew? What if he wants to sell in one year’s time? What if he thinks he can get a 25% markup on the property on the open market?
Second, this clause was inserted by the cooperating agent in attempts to weasel out a commission down the road. I believe that as Realtors, we are entitled to a commission when we complete a transaction that we worked on. However, if the tenant and the landlord re-up in twelve months, I don’t think we should have our hand in the pot. Nice try!
Tenant shall have the right to terminate the Lease at any point during the tenancy provided the tenant gives 30 days written notice to the Landlord. The Landlord shall be paid a one-month bonus rent in this event.
Okay, so this is clearly a clause that was hand-written by the cooperating agent.
A “bonus?” Really?
So this clause is basically saying that the tenant can change his/her mind at any point during this ONE-YEAR lease agreement and opt out of the lease, with only 30 days notice instead of 60, but the tenant will pay a one month “bonus” for the landlord’s trouble.
A one-year lease is called a “one year lease” for a reason! It’s for a period of ONE YEAR.
It’s hard enough to turn a profit on a condominium investment property right now with all the rules and regulations that clearly favor tenants over landlords, so why give the tenant an opt-out clause so he can leave the property after two months?
Vacancy rates in Toronto are less than 2% right now, so I think it would be easy to find somebody that will take a one-year lease for a period of one year…
The Tenant shall have the right of first refusal to purchase any time during the term of the Lease or any renewal thereof or at its termination provided if option exercised, such transaction will be handled by XXX Brokerage and the Landlord agrees to pay XXX Brokerage a commission of 2.5% of the sale price on closing, plus applicable taxes.
A right of first refusal?
What planet is this guy living on?
Let me reiterate what I said earlier: we are in a seller’s market. Why would the seller/landlord EVER agree to something like this when he can rent it to somebody tomorrow who isn’t including this clause?
I haven’t seen a right of first refusal in quite a while.
In fact, the only ROFL I’ve seen in the last few years was the one my buddy Spoore invoked on the 2010 Christmas Party after he passed up the chance to host in 2009.
This clause is so loosely worded that in my opinion, it’s not worth the paper it’s printed on. It makes no mention of terms or conditions, price, or any disclosure or representations that need to be made on the seller/landlord’s behalf (ie. if you’re going to list on the open market for $399,000, the ROFL can’t be for $450,000).
But the most incredible, amazing, stupendous thing about this clause is that it says “….such transaction shall be handled by XXX Brokerage,” which in this case refers to the cooperating brokerage!
Once again, this cooperating agent has found a way to weasel himself in there!
How about this transaction shall be handled by Bosley Real Estate, you know, the company who has the client in the first place?
And what if the cooperating agent doesn’t have a buyer’s agreement signed with the buyer? Does this right of first refusal clause somehow establish an agency relationship?
Just like the short-lived late-90’s boy band, OMC, said in their hit song: How Bizarre?
Indeed, how bizarre!
And get real!
So what did I do with this offer?
How did I respond to a $1,600 offer with a boat-load of ridiculous clauses for my listing at $1,750 per month?
I politely told the listing agent, “You’ll need to make your offer more competitive in order for us to consider it. You’ll need to be more competitive on price as well as the clauses you have included.”
Then, I leased the property for $1,775 the next day to another lessee working with a different agent.
He was going to bring an offer of $1,750 but when I told him “we have an offer on the table now,” he immediately told me not to worry and that he’d up his ante by $25 per month.
I was under no obligation to tell him that the other offer was a pathetic joke…
We got the deal done, and my landlord was happy.
As for the other offer, the other agent, and the other would-be tenant, I have no clue where this leaves them.
So I’m not sure if it was the agent that wanted to include all those clauses or if it was the lessee, but I suspect it was a combination of both. It seems that the agent was very concerned with getting paid for any future business, but the lessee was also concerned with getting out of the lease early or being able to buy the property in the even that it goes on sale. I find that ironic, since the one clause shows that the lessee wants out, and the other clause shows that the lessee wants to stay indefinitely!
All in a day’s work, I suppose!
Every time I say “I’ve seen everything in this business,” something like this lease comes along and I’m proved wrong once again…