Q: I have four small rental homes that are older and are really starting to show signs of wear and tear. I am constantly receiving calls from my tenants about something that is broken or needs to be replaced. This is getting expensive and is cutting into my cash flow that I need to pay my own living expenses.
So a friend of mine said he read a book on property management that suggested requiring the tenants to handle all repairs as part of their lease. This sounds great so I was thinking that I would send my tenants a written notice advising them that when they renew their lease I am no longer going to be responsible for the upkeep and repair of the air conditioners, gas heaters, or any of the kitchen appliances. They will accept them in "as is" condition, and the tenant will pay for all repairs or replacement if they break. What do you think about my idea?
A: If it sounds too good to be true, it probably is too good to be true. I would strongly advise against such a policy and recommend that you retain control of all repairs for all building systems and appliances. Do not be short-sighted even though it may increase your upfront out-of-pocket costs of maintaining your rental homes. The "savings" you think you will achieve are not real. I would expect that many tenants will not perform any preventive maintenance or pay for any professional contractor to properly maintain the air conditioner, gas heater and appliances. They don’t own this equipment and most likely will do nothing at all until they break and then they will do the minimum to keep them barely functional or they may consider buying "used" equipment as replacements. Even if you had a tenant who was willing to agree to handling the maintenance and repairs he or she would consider it only for a reduction in the rental rate below the going market rental value of the property. So you don’t really save anything.
I firmly believe that while the tenants need to be diligent to alert their landlord or property manager to building systems that need attention, the landlord should be responsible for the inspection and maintenance or replacement of all components of the rental property. I am aware that some property management authors and "experts" make these suggestions to sell books. One that I have seen is something along the lines of including a clause in the lease that says "tenants are responsible for all repairs under $50." This is not what I suggest and there are many liability problems that can occur if the tenant does not properly maintain the premises or gets hurt doing their own repairs.
I suggest you don’t delegate the proper servicing and maintenance of any building systems, and that you consider increasing your rental rates if possible to cover the additional expenses and always retain control of your property.
Q: While on vacation, a tenant arranged for a friend to care for his cat. While in the apartment, his friend left the top door of his refrigerator open, causing the freezer to defrost. The leaking water flooded the apartment and eventually traveled through the subfloor and emerged in the kitchen ceiling of a lower apartment. The damage was so great that the ceiling had to be removed, replaced and repainted. In addition, the cat was allowed to escape from his apartment and defecated on the common-area carpet. There is a standard month-to-month lease in effect, requiring that the tenant be liable for damages caused by a guest or invitee. Who is responsible for the damages?
A: Based on your description of the facts it seems pretty clear that the tenant would be responsible for the damages caused by the negligence of his friend. It sounds like the damage is significant so the tenant should make a claim to his renter’s insurance carrier. You, the landlord, should also file a claim with your insurance carrier so that the repairs can be done right away and then your insurance can subrogate the paid claim with the tenant’s insurance policy or directly pursue reimbursement from the tenant if he is uninsured. Be sure to keep detailed written records of the costs of the repairs and photos of the damage in case the tenant or his insurance carrier disputes the claim.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and co-author of "Real Estate Investing for Dummies."
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