Q: The water heater at the rental we own broke and we had a hard time getting it replaced (we do all of the repairs ourselves). After a week, the problem was solved, but our tenants are demanding that we compensate them for expenses they incurred as a result of our tardy work. They’re asking to be reimbursed for their stay at a motel, several days’ worth of meals, and the added costs of transportation that resulted from living further away from work and school. It’s quite a bill! We admit to being less than on the ball with the repair, but do we have to pay these expenses? –Martha and John
A: Lack of hot water in a residential rental is a serious problem, and in every state but Arkansas, it’s a violation of the warranty of habitability. Depending on the state, tenants have various remedies if they alert landlords of the problem but the landlord fails to act reasonably promptly. Remedies include repairing the problem and deducting the cost from the rent, withholding rent, and living with the problem but suing later for a retroactive rent reduction, called rent abatement.
Another remedy includes procuring substitute housing during the time that the deficiency persists. Several states allow for this option, including Alaska, Connecticut and Tennessee. In these states, however, the approach isn’t uniform — should the tenant be compensated for substitute housing and be excused from paying rent? If so, this presents the tenant with a chance for a windfall — if the pro-rated rent is lower than the daily substitute housing, the tenant is "making money" on the deal, though few tenants would willingly choose the disruption to their lives caused by such a move.
You’ll need to find out how your state handles the issue of substitute housing. As for the other bills you’ve been presented with, these expenses are a bit more attenuated, but they follow from having to move away. Unless the motel had a kitchen, your tenants were obligated to get take-out or go to restaurants. And, unless they chose a location needlessly far away from school and work, their added commute costs were also an unavoidable result of having to move out temporarily.
Landlords in your position have been asked to foot the bill for items such as increased utility bills, the cost of replacement heaters, child care expenses (required because children could not stay comfortably or safely at home) and so on.
This has been an expensive lesson. In the future, it may be cheaper to hire a plumber than wait for the weekend to do it yourselves.
Q: The lease we are about to sign has a clause that says the winner of any lawsuit gets to recover attorney fees and court costs from the loser. Is this a good idea? –James and Ella
A: This "two way" attorney fee clause is common in contracts and leases. The idea is to make it clear to both sides, before a dispute has even broken out, that bringing a worthless lawsuit is likely to be an expensive affair. If the person who brings the bogus lawsuit loses, he pays not only his own costs and fees, but the other side’s, too. The clause also encourages both sides to work out legitimate differences between them, without involving a court. No one, even someone who is sure he’s in the right, can guarantee that a judge or jury will agree; far better to compromise than risk losing and having to pay your own and the other side’s costs, too.
In residential lease situations, the analysis takes a slightly different turn. Precisely because the clause will discourage litigation, tenants may hesitate to bring lawsuits to enforce their rights, fearful that if they lose, they’ll have to pay big time. In a similar vein, landlords may find the right to collect from the losing tenant an academic right — few tenants have the resources to write a check for attorney fees and court costs. These landlords would prefer a world in which each side pays its own costs and fees, which is the rule most of the time.