How to Tell Troublemaking Households You're Not Renewing

As an owner or manager, you do your best to hold on to most households, especially because qualified tax credit households can be hard to find. But there may be times when, in order to comply with the tax credit program, you may have to ask certain tax credit households to leave. For instance, you may discover at your mixed-income site during recertification that a household is now composed entirely of full-time students who don’t fall under any of the qualifying exceptions, or you may be faced with a household who refuses to recertify. In both these cases, you must refuse to renew the lease to keep the units in compliance.

And there may be some qualified households you don’t want to keep, such as ones who chronically pay late or disturb and harass their neighbors. Here, it’s important to keep in mind that in the tax credit program, you have to have “good cause” grounds to evict a household or terminate a lease [IRS Revenue Ruling 2004-82]. IRS guidance doesn’t provide a list of allowable good causes. The general rule is that good cause is a material violation of the lease terms. Examples of good cause may include nonpayment of rent, destruction of or damage to the property, interference with other tenants, tenant fraud, use of the property for an unlawful purpose, or other violations of the terms of the lease agreement.

According to the 8823 Guide, good cause is ultimately based on state and local law and, therefore, the determination of the state court. This means it’s important to check your state and local law, as well as guidance from the applicable state monitoring agency, for any additional rules that will apply to your site. Although simpler than the eviction process, not renewing a lease could pose its own complications. You could create a tense situation and increase the likelihood of a disgruntled household filing a lawsuit against your site. To help you handle this situation, you can send a firm but diplomatic nonrenewal notice taking away a household’s option to renew. We’ll give you a Model Notice: Send Notice When Not Renewing, which you can adapt and use at your site.

Telling Households They Can’t Renew Can Be Tricky

Notifying households that you’re not renewing their lease can lead to disputes and even lawsuits. No matter how much you try to sugarcoat it, the message behind a nonrenewal is clear. Households don’t like to be told that they’re not wanted even if they were planning to leave.

Households whose leases you don’t renew can create trouble. For example, they may refuse to leave and may “hold over” for weeks or even months after the lease expires. If these households are no longer eligible for their tax credit units, or refuse to recertify, their units will no longer be in compliance. The longer they hold over, the greater the threat to the owner’s tax credits. These households also may create trouble by becoming uncooperative and disruptive in their final month and during the move-out, or they may sue you for discriminating against them if they happen to be protected by fair housing laws.

Avoid Trouble with Written Nonrenewal Notice

Once you’ve decided that you have good cause for not renewing a lease, you need to consider how to break the news to the household. You need to avoid miscommunications when breaking the bad news. If you’re too soft, the household may think that they can take advantage and if you’re too heavy-handed, you can provoke a confrontation. Instead of having a staff member tell the household in person, you should send a carefully worded nonrenewal notice.

Send this notice at least two months in advance so that households have plenty of time to find a new place to live. Households who are given a short time frame for vacating their unit may decide that it’s better to hunker down and fight the eviction than to be rushed out the door. Also, giving the household the maximum amount of time allowed under the law to vacate the unit (typically, 60 days) will make you look good to a judge—and it helps to cut down on the instances in which you have to evict, because if you give them enough time to relocate, they’re probably going to find alternative housing.

In addition, after the initial lease period expires, many tax credit leases automatically continue on a month-to-month basis, you should send a notice early on to avoid confusion. If you don’t give notice, the household may assume the renewal is just a formality and think they can stay. By the time they find out otherwise, it may be too late to make arrangements to move out on time. And, as a result, the household will hold over.

How to Write Notice

Here’s how to write an effective nonrenewal notice.

Use formal tone. Send a concise formal notice. You don’t want to antagonize, and you don’t want to sound apologetic.

Say you’ve decided not to renew. Begin the letter by reminding the household of the date the lease is scheduled to end [Notice, par. 1]. Tell them you’ve decided not to renew the lease [Notice, par. 2].

Some states require that the notice state the grounds for termination [Notice, par. 3]. As a practical matter, if your ground for termination includes household conduct issues, you should have a written warning notice pertaining to this matter in your household files prior to issuing a nonrenewal notice. Other good cause justifications also should be documented in the household file, along with copies of all applicable notices and supporting documentation. It’s your responsibility to document and defend the good cause for eviction or nonrenewal if challenged in court or questioned by the state monitoring agency.

Tell household when they must leave. Clearly tell the household that they must leave by the expiration date. Warn them that if they don’t leave by that date, you’ll refer the matter to your attorney for appropriate legal action [Notice, par. 2].

Explain preparations for moving out. Tell the household what to do when preparing to move out. Say you’ll contact them shortly to discuss move-out procedures and to arrange a move-out inspection. Most owners do it within 10 days of serving the nonrenewal notice [Notice, par. 4]. This should keep the household from procrastinating and get them to focus on moving out. Some owners leave it up to the household to contact them. But chances are the household will put it off. So it’s better to take the initiative.

Wish household well. Our letter is businesslike and uses a formal tone. But it should still end on a positive note. Soothing a household’s feelings can minimize the chances that they will create problems for you.

How to Send Notice

You need proof that you sent the nonrenewal notice in case the household denies getting it. To avoid disputes, hand-deliver or send it by certified mail, return receipt requested. If you send the notice by certified mail, you should also deliver a copy of the notice to the household’s unit. Some households don’t pick up certified mail at the post office if they’re not home when it’s delivered.

If an employee serves the notice, have the employee sign the bottom of your copy to certify that he or she mailed or served it. This will give you proof of when the notice was sent or served.