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Monday, October 15, 2007

Damaged Doors At Rental #1

I received my September statement from my property management company today and was unpleasantly surprised to see a bill for $150 for some door repairs to my property. The bill states one bathroom door was repaired and two other doors were shaved to fit properly.

My lease states:

Lessee will, at lessee’s sole expense, keep and maintain the leased premises and appurtenances in good and sanitary conditions and repair during the term of this lease…Major maintenance and repair of the leased premises (reserving and excepting costs of ordinary repairs) not due to lessee’s misuse, waste, or neglect… shall be the responsibility of the lessor.
It seems quite clear to me that any damage is either due to the tenant's abuse of the property, or required as part of ordinary maintenance. In either case, it is the tenant's responsibility to pay for the repairs.

I have faxed my property manager and asked her to call me and explain what exactly was repaired and how shoe came to the conclusion that the tenant was not responsible for the cost of the repairs. I have not heard back yet.

I am quite glad these tenants will be moving out at the end of the month. I get the feeling that they thought they were living in a hotel instead of a house and that whenever they wanted anything, they just called the property manager, who was more than happy to do whatever they asked and pass the cost on to me.

15 comments:

all things good staff said...

A shaved door seems that it would fit under "ordinary repairs." Walls shift over time and door frames become no longer true. That would be no fault of the renter. Don't know about the repair to the bathroom door--will have to wait to see what your property manager says.

I am not familiar with renting, but I hypothesize that your property manager is not accustomed to having to justify every $150 expense. This is why, in a thread much earlier, I asked why you budgeted so little for housing repairs and upkeep. My house can eat $150 worth of repairs in a space of a nanosecond. That will hardly buy anything in terms of materials or labor.

Shaun said...

Read the excerpt from my lease again. It says tenants ARE responsible for "ordinary repairs."

I will not rehash the repair budget discussion.

all things good staff said...

You are right--I misread the lease, and I apologize for that. Still, whatever type of repair you call it, you can't expect your tenant to pay for sticking doors, can you? That's exactly the sort of thing one calls upon a landlord to repair. It could just be that the wood in question has swollen with the humidity--no one's fault.

One of the very major advantages of renting over owning is that the tenant don't have to do these sorts of repairs. Any decent place that I've ever lived in, the landlord would have sent over someone to fix something like this in a jiffy.

I'm pointing this out because this might be a larger issue--maybe you are undercapitalized for what you are attempting to do?

Shaun said...

I agree it could be caused by humidity. That has happened at my home. However, even at my home , I didn't call someone out to shave the door. I simply waited a day or two for the humidity to go down and the door stopped sticking.

Yes, I can expect the tenant to repair this himself. This is what I am talking about when I say it feels like the tenants think they are living in a hotel. To me, the point of having tenants be responsible for normal maintenance items is to prevent precisely this sort of needless service call. If this were an apartment, I would expect the tenant to call management to fix it, but not in a house.

I am definitely not undercapitalized. Plus, even with the $150 bill, I still have positive cashflow this month on this property, as I have every month I've owned it.

Shaun said...

Also note that just because it isn't directly the tenant's fault, doesn't mean the tenant shouldn't repair it. That's why the lease stipulates the tenant must keep the property in good repair. Everyday living results in things wearing out. It isn't the tenant's fault. It isn't my fault. But the tenant is using the property and, by singing the lease, has accepted the obligation to keep the property in good repair.

Anonymous said...

Shaun, I understand your point.
I also see the other posters point.

Most tenants,regardless of what they sign, don't get that they are responsible for anything,(and don't have the finances to handle anything unexpected), even if the lease clearly states otherwise. In NC where i am from, the lease can put off minor repairs onto the tenant(my lease does just that), however state law superseeds the lease and makes the landlord responsible for anything other than tenant damage.

Pay the $150 and don't major in the minors!

Anonymous said...

"Normal maintenance" is usually things like mowing the lawn, etc. The doors are part of the house and if they are failing through no fault of the tenant, I believe it is the landlord's duty to fix them. Wouldn't this be considered "part of the cost of doing business"? Landlords can deduct the amount of repairs from their taxes. Tenants can't do this.

Like someone above said, tenants rent because they don't want to be responsible for things like this.

Shaun said...

Very well. I will concede that perhaps it is appropriate for the landlord to pay for having the doors shaved to close better. However, I don't believe I should have to pay for repairing the damage done to the door. My PM has yet to respond to me, so I don't know all the details yet.

Doug O said...

Shaun, if you want to be a landlord for years to come, let me give you some advice here (and this is coming from years of experience):

You'll need a certain type of temperment to deal with these kinds of issues... After a tenant leaves, it is to be expected that there will be some amount of maintenance that you need to perform (be it painting, minor door repairs, etc..)... Unless the damage is due to negligence on the part of the former tenant, 99% of the time you are better off taking care of the repairs and moving on to the next tenant... You'll spend more money and time (my time is worth money, how about yours?) chasing after people to simply collect $100-200 for repairs that are practically routine anyways...
Chalk this up to experience...

This is why I'm an advocate of only owning absentee if you have enough units to warrant the attention of a competent manager (ie, more than 10 units), who will take care of the mundane issues like this without involving you... If you own single units locally, you can take care of the make-ready maintenance yourself and not have to worry about paying for it...

In most cases, you'll be fighting a losing battle by trying to get tenants to pay for stuff like this... Not to mention, when tenants are responsible for repairs and such, they tend to not report things that can cause major headaches for you as the owner later on... ie, a small leak under a sink - the tenant might not think it's worthy of repair since the landlord doesn't offer repair on 'routine maintenance' .. Next thing you know, you've got mold and other problems resulting from this... Just something to think about... I used to have something similar in my leases, but I've since removed it and asked all tenants to call about any maintenance issues, no matter how minor..

all things good staff said...

If the tenants have damaged the door-especially through negligence or malign intent--yes, they should pay. You can take it out of their security deposit, right?

I give you a hard time now and then but I do appreciate your blog; thanks.

Shaun said...

Those are good points. I know when tenants move out, there will be repairs that need to be made. These tenants have not moved out yet, however and any repair costs on move out should be deducted from the tenant's security deposit.

Anyway, my concern isn't so much that the tenant pay for these repairs. My main concern is that the management company does not blindly do whatever the tenant asks, without stopping to think who should pay for the repairs. In my fax to the management company, I did not ask them to go back and charge the tenant. I asked for them to explain their reasoning behind charging me for the repairs instead of the tenant. They may very well have valid reasons. As I said, I don't know all the details. But a valid reason is not "Well, the tenants are moving out next month, so it's just easier to pass the cost on to the owner than try to get the tenant to pay."

Terry Sprouse (planetabooks.com) said...

I agree that the cost should be passed on to the tenant.

However, in the long run I agree with Doug that it's much cheaper to make the repairs yourself.

What I do for my houses is when a tenant moves out, my wife and I go in and do all the fix-up work. We can usually knock it out in a day or two, over a weekend.

I would never replace a broken door unless it were in small pieces. I always wood putty the holes, sand it, paint it, and its good for another tenant. (It sounds the case of your door was a little different).

For repairs that the tenant requests while he is living there, I have a handyman who goes over and does it whenever I need him, and its a lot cheaper than what management companies charge.

Kenric said...

Shaun, you should talk to your PM about this. Not about the repair itself, but about how they handle this stuff. I wonder if your PM is the type that will agree with the tenant and just repair it to avoid an argument.

I was quite pleased with my PM when we were in front of the tenant and he said to me and her that the carpets were clean. I was going give a nice PC answer. But she just said "No, these are dirty, the place was new when you moved in, they need to be cleaned or you won't get your deposit back." He said "Ok, I'll get them cleaned."

Anonymous said...

Hey Shaun,

First of all I want you to know that I'm an avid reader (from the Netherlands) of your blog. I have two basic questions and you're the closest 'acquaintance' that I have that deals with real estate.

1) What annual return do you look for in a property? Is 5% a year something worth looking into?

2) In Holland you can get a mortgage up to 5-6 times your annual income. If I choose to do this (as I'm now 21 and almost finished at university) I will tie up all my income in 1 property. How will I be able to get a second mortgage to buy the second property ?

3) Could you give me a quick idea of what earns you actual money each month in real estate (e.g. tax benefits, rental income, equity ?)

If you would be so kind to help me out that would be great!

Thanks for your time
Andrew

Shaun said...

Hi Andrew. Thanks for the kind words. Nice to see I have a reader in the Netherlands, considering my daughter's name is Holland :-)

I look for 11%-12% ROI. 5% doesn't excite me. I can get that from a bank with a long term CD. But I don't know what the financial landscape is like in Holland, so whether or not 5% is good for you is something only you can decide.

When you buy a rental property, you should do your research and make sure you can rent it out for more than what your mortgage payment will be. Be sure to add in costs for maintenance, taxes, etc. If you can show a bank that you have a tenant in place with a signed lease for more than the monthly mortgage payment, the bank should be ok with lending you more money.

You income each month is what is left over from the rent you collected after you pay for the expenses. Rent - mortgage - maintenance - insurance, etc. You do get some equity buildup (provided your mortgage is not an interest-only mortgage), but I don't really consider that income, since you can't use it until you sell the property or refinance it. I can't speak to the tax benefits simply because I don't know the tax system of the Netherlands. Look at my posts labeled "Rental #1." One of them has a breakdown of my expenses and income and you can see how I make money each month from it.

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