How Renting Your Vacant Apartment "As Is" Could lead to Housing Court
Is this the Condition of the Vacant Apartment You Rented?
How the tenant added value to your investment
You Must Provide an Apartment that is Habitable
Your rental applicant was a bachelor recently relocated into the area. He needed some place to live in a good location. The applicant looked at several apartments, and even though your rent was a little high, he decided to lease it. You rented your apartment to him “as is”, without making any minor repairs or painting before you leased it out. You never spend the money to fix up your vacant apartments. Why should you, when vacant apartments in your city are hard to find?
Over a period of months or a year, the tenant ultimately gets the apartment where it looks beautiful. He made all the necessary repairs, installed mini-blinds to the windows. He installed carpet in the living room and bedroom, and re-tiled the kitchen floor. He did a wonderful job painting the apartment. You never volunteered to pay for the paint or any of the materials.
What is your goal in setting an “as is” policy? Why would you want to spend as little as possible on your own investment? Is it because you don’t have the money to do the work yourself? What benefit is served? What does this even have to do with a possible future eviction?
When you make your tenant fix up his own apartment, never believe he is happy with that situation. He may feel a little better if you give him a month’s free rent in exchange for the repairs. Still, the tenant may infer you have made him a reluctant investor to your building. This may not be what you are trying to do, but in the tenant’s mind, it is what you did. You had the tenant renovate your real estate investment as a condition of occupancy. Even if he recognized that he was in a bind and you were kind enough to rent to him, in his gut, he will still feel you took advantage of him.
Upon a lease renewal several years down, you give the tenant a rent increase of $100 per month. You figure the apartment is in much better shape than it was a year ago, so it is worth more rent. What?! The tenant knows the reason why the apartment has increased in value is because he did all the work. He made the initial investment, and now you, the landlord, want to reap the benefits. He decides not to pay the rent increase.
You can see why the tenant may have a negative attitude about your raising the rent. You are trying to take the benefit of his investment in the property to increase your profit margin at his expense. This tenant may stay not so much because he has nowhere else to go, but because of his investment in the apartment. There are others who may leave due to the increase. For the tenant it may be a case of your adding insult to injury. He may decide to plead his case in court.
If there comes a time when you have to evict the tenant for non-payment of rent, your ‘as is’ policy could come into question. Don’t think the tenant won’t mention you made him fix up and paint the apartment. The tenant will present to the judge a picture of the apartment when he first moved in and one after he fixed it up. This could be one of the tenant’s responses to your non-payment claim. The extra expenses to paint and repair the apartment always comes into question when a tenant is being evicted. The tenant will argue that you should have compensated him for the repairs and paint jobs. Instead, you gave him a rent increase.
Another scenario to consider: When the tenant moves out at the end of his lease, he takes his investments with him. He removes the carpet from the floor, the ceiling fans from the ceilings. In his eyes, he is not doing anything wrong. He is giving your apartment back to you in better condition than when you leased it to you. Because he is angry about the situation, he decides to stay in the apartment without paying the rent for the last month. He doesn’t care about getting the security deposit back. You can send the Notice to Quit, but he will be gone before you get to court. This is why landlords now lean to charging first and last month’s rent, plus a security deposit.
The point is, when you rent an apartment, you are legally obligated to maintain an “implied warranty of habitability” with your property. Things like making the tenant fix the kitchen sink, or re-tile the floor is a landlord responsibility. Should you make the tenant fix up your apartment, the warranty of habitability obligation could come back to haunt you, either in court or in a move-out.
For these reasons I believe it is better to do the work before renting out the apartment. You can control the cost and have it done to your satisfaction. It is a legitimate income tax deduction. Include the cost in the rent calculated over the months of the lease. Or, allow the tenant to do the work with a month of free rent or reduced rent for a period of time. You must compensate the tenant in some way if you make him or her do maintenance work on the apartment. It is the law in every state except Arkansas. And, at the end of the day, your tenant will be grateful for the consideration.
This is an updated excerpt from the hub author’s book, “Secrets to a Successful Eviction for Landlords and Rental Property Managers: The Complete Guide to Evicting Tenants Legally and Quickly.”
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