Q: Tenant and I agreed to rental terms prior to Application Approval verbally. Tenant claims we have a binding agreement.
A Father came to look at our rental for his newly graduated college son. I gave the Father a Rental Application as well as an Oregon Rental Application Addendum & Fee Disclosure. The Father dropped of both signed agreements (by his son) two days later with a $50 non-refundable processing fee. During the approval process the son called me and asked if I would make some term adjustments on the Fee Disclosure. I agreed to a pro-rate of 1st months rent and a reduced early lease termination fee. In my mind this oral agreement was only "upon approval." The son however (young) felt that our agreement on terms translated to his approval and said as much to his parents. The parents are now livid and telling me I have an oral binding contract with there son! At no time did I ever tell the son he was approved and I still actually have his $50 un-cashed check. Now we so scared we want to take the unit off the market. A friend suggested mailing check back with no comment?
A:
IF there is to be an early termination fee, then it MUST be a fixed term lease and not a month to month. Fixed term leases MUST be in writing, signed by the parties. Only month to month tenancies can be by verbal agreement alone. Now you may still have problems with unhappy tenant(s) and it is a bad way to start things off, so in the end you may well want to simply refund the background check money (and you must if you have not actually spent it for a background check) and go your separate ways but legally, you have not entered into a binding fixed term lease agreement without having gotten a written, signed agreement.
I am not sure what adjustments you orally agreed to but clearly there could have been no agreement made prior to that discussion, verbal or oral. Rent must be pro-rated daily no matter what, so I am not sure what "change" you agreed to make though some landlord's do charge a full month's rent up front and then do a pro-rate for the second month to balance it out. I am not sure why you would agree to reduce an early termination fee - it doesn't matter in the slightest UNLESS the tenant breaches their agreement and if they go in intending to do that, then better you know it up front. Early termination fees cannot be for more than 1 1/2 months rent but if a tenant, before ever moving in, wants to negotiate about their breaking the deal they are about to make, it would waive warning flags in my mind. Regardless, next time be clearer but if you never expressly agreed that he was approved and you would rent to him, the burden of proof will be on him to prove that you did if it ever went to court. That, coupled with it apparently being a fixed term lease and needing to be in writing, makes the odds of his prevailing in court extremely small.
Good luck.
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