Question

I rented an apartment to a couple over 5 years ago. At that time, I collected a security deposit of $650. The lease was for 1 year. We have been operating under the month to month provision of the contract for the last 4 years.

Unfortunately, the couple separated a year ago and the divorce is imminent. The woman has been living at the apartment alone since then, paying the rent herself.

Yesterday, she informed me of their separation, although I had suspected it for a while. She asked if I would remove him from the contract since he no longer lived there or contributed to the rent payment and utilities. My question involves the security deposit. Although the man has made no claim to his share of the deposit, I assume that he still has some claim to half of it. At what point does he lose claim to it, if ever.

How do I handle rent refunds to roommates in general when one decides to leave? What should I put in the contract to handle one of the roommates leaving after the term of the lease has expired and the tenants are then month to month?

Answer

I am not an attorney, but will give you my opinion about the issue based on a lot of experience as a landlord and property manager as well as having some knowledge of various other legal issues.

First, my understanding is that your current lease is with both husband and wife. Absent a Court order, you cannot legally remove the husband from the lease without his written agreement. Doing so would put you in the position of breaking the lease as far as he is concerned, possibly reducing your chances of recovering future rents and damages owed under the lease, even potentially making you financially liable if one if the husband wishes to litigate.

Second, when there are marital problems and the potential for legal separation and/or divorce, a landlord can get into a major hassle by siding with one of the parties against the other.

Third, it is potentially to your disadvantage to remove the husband from liability on the lease unless you are certain that the wife is in fact capable of paying the rent herself. As a general rule the more individuals liable for the lease the better for the landlord. Accordingly, if a co-tenant departs during the term of a lease, there is seldom a reason why the landlord should release that person from responsibility during the remaining original lease term, under some circumstances even when another person replaces him/her as co-tenant.

In a case such as yours, you should consider refusing to allow removal of the husband from the lease during the remainder of the lease term. You should consider that many divorces result in the wife’s financial position becoming significantly
reduced. Although this is not as big an issue now that the lease is month-to-month, for lease terms that still have long times to go it is because it is more likely that she might not be able to pay the rent for the remaining year of the
lease than that both together would be able to pay it.

You should have no legal obligation to release one party from the lease even if there is a divorce. Both parties usually remain legally responsible for all joint liabilities following a divorce even though the Judge might assign liabilities
between the parties when dividing the community assets and liabilities. For example, if the Judge awards a particular jointly held Visa credit card to one of the parties, Visa can still collect from the other party if the first party
fails to pay and failure to maintain credit accounts by one party after a divorce will often damage the credit record of both parties if they were joint account holders. The same principles would usually apply to a lease or any
other contract executed by both.

If, however, you are willing to release the husband from the lease because (1) you are certain that she will have the ability to pay the rent no matter what happens regarding her action or (2) you wish to provide charity, then you could tell the wife that you cannot remove the husband from the lease without his written agreement.

If he consents to removal and you agree to do so, then you will need to think about documentation. Whether you have the wife execute a new lease or adequately amend the existing one is probably not significantly critical, though I would
usually much prefer the former over the latter. However, keep in mind that either way, you should (1) have the wife execute the required document(s) before accepting removal of the husband, (2) consider this an opportunity to make any
other changes to the lease that you might consider desirable, and (3) make sure the documentation makes it clear who is responsible for any damages to the premises as of the date of amendment or new lease – that is, any changes in
condition of the property from the move-in condition at original possession date until the time of modification. Related to those issues, if you haven’t recently done a comprehensive inspection of the unit, I suggest that an inspection prior to document execution be part of the deal and that any damages be paid for by one or both parties prior to execution of any documentation.

The security deposit issue should be dealt with in writing. As a general principle, whether co-tenants are spouses or unrelated parties, security deposits and rents should always be considered a single total amount rather allocated among co-tenants. The landlord should initially only accept one full security deposit (in cash or bank check) and the FULL rent each month (in cash or bank check for the initial first month’s rent) from one person. The residents can fight it out among themselves for the “privilege” of making the payments, but if anybody offers to pay their “his or her share” of the deposit or rent, the landlord should refuse to accept, referring them to the lease agreement which should have so stated.
Accepting multiple separate checks can result in additional problems if one or more, but not all checks bounce. Furthermore, such acceptance may also indicate waiver of the “joint and several” words of the lease mentioned above.

For a husband and wife, the security deposit must be considered to be jointly owned by the two of them even if both did not sign the lease agreement. Nothing should be refunded until all documentation has been executed by both spouses and the wife provides cash or certified funds to cover what is being refunded to the husband. It would be simpler for the two spouses to settle the security deposit issue between the two rather than receive funds from the wife and make a refund to the husband, with adequate documentation regarding that issue.

Finally, you should consider re-screening the wife as an individual, both as to employment, income, and credit. The fact that she has supposedly been paying the rent herself for a length of time may give you some degree of confidence, but you probably have no proof that she’s really making it on her own. Additionally, this provides you with recent additional information about her, some of which might be materially different from what it was 5 years ago and might be useful if she were to later become a problem.

Question

I own a 10-unit building, with each unit being assigned a carport parking space. A month ago a storm caused collapse of portions of the carport structure, seriously damaging cars in two spaces. The owners are claiming that I am responsible for repairs to their damaged vehicles. Am I?

Answers

There are several issues relevant to the problem. Although I will provide some brief discussion regarding the issues, the statutes and court decisions of states can be significantly different regarding some or all of the issues. Accordingly, if the affected tenants push the matter, you should consult competent counsel. If the tenants engage an attorney or attorneys you should yourself hire one. You should almost certainly not represent yourself in court on such a case when a tenant is represented by an attorney.

In many states, such an event will be considered an “act of God” and the landlord would have no liability for damages suffered by the tenant. As for the loss of or damage to a tenant’s personal property if there is a burglary, fire, or leaking roof in his lease unit, it is up to the tenant to obtain a renter insurance policy that covers his losses.  However, there can be circumstances which will result in landlord liability. For example, if there were defects in construction or maintenance of the carports of which the landlord knew about (e.g., one or more tenants have complained about it) or of which he/she should have known about (i.e., anyone of normal intelligence and experience could see the carport was in danger of collapse).

You should do one or two things. First, you should speak with your insurance agent to determine whether or not your landlord policy provides coverage of tenant vehicles parked in the carport. If, by chance it does, you would likely be ahead by taking advantage of the insurance compared to having disgruntled tenants, resulting in extra vacancies upon expirations of their leases.

If not covered by your insurance and the tenants’ damages are not so extensive that it is obviously going to cost a lot to repair, you should consider voluntarily covering the damages rather than facing the potential costs resulting from disgruntled tenants – e.g., the costs of vacancies.

Second, if the tenants’ damages are not covered by your insurance policy and are so extensive that you do not want to consider voluntary compensation, you should consult a competent attorney who is experienced in such an issue and find out exactly what the statutes of your state say and whether or not he is confident he can successfully defend you or negotiate a reasonable settlement. You also need an estimate of legal costs of defending a possible lawsuit (with the chance of losing) compared to the cost of you (without an attorney) negotiating a settlement with the tenants that might be cheaper than litigation and result in less vacancy.

Question:

I am looking for other sources of income besides rent from my14-unit apartment building and am considering charging for parking space, both covered and uncovered. Is there anything I need to worry about in doing this? Can I force tenants to pay for spaces even though they are willing to park on the street?

Answer

There are a number of issues that must be considered regarding what you wish to do.

First, as you probably almost certainly know, you cannot change the terms of a lease agreement during the lease period without the tenant agreeing to do so. Therefore, you can only amend the lease to provide for paid parking upon renewal or extension of the agreement unless the tenant allows a mid-term change, possibly because you offer some kind of financial incentive.

Second, you should probably require tenants to keep the same parking spaces as they currently use for free in order to avoid additional complications.

Third, you will probably not want to allocate additional spaces to one tenant who is willing to spend more on parking because another tenant wants fewer spaces than he would be allocated, whether because he doesn’t need them or prefers to not pay for them (perhaps parking on the street). Doing so may create problems when the tenant with few or no spaces leaves and you have no spaces available for the replacement tenant, possibly making it difficult, maybe impossible to re-lease the vacant unit in the rental market existing at that future time.

Finally, you obviously cannot charge for the space they use when parking on the street if you don’t you own the street. Similarly, you can’t prohibit street parking; only the city can do so. You can probably legally require tenants who are willing to park elsewhere to pay for spaces that they don’t wish to use. However, you would need to disclose this fact to future applicants and I’m certain this will reduce your pool of qualified tenants, as those who are willing to park on the street will consider they are actually being asked to pay a higher rent. If you want to require all tenants to pay for parking, then you should raise everyone’s rent as the law allows
without calling the increase a parking fee.

Lease Agreements – Part 2

We ended part 1 of this series with a brief discussion of the four commonly used types of tenancy. We continue with discussions of several other basic concepts.

Oral or Written Lease Agreement

In general, contracts of almost any kind can be either “oral” or “written” and each can be equally valid and enforceable no matter what the legal purpose or dollar amount involved. Although often done, it is not really correct to refer to an oral lease as a “verbal” lease because the term “verbal” means words and both oral and written leases involve words.

States have adopted a legal doctrine called the Statute of Frauds (SOF) and put the doctrine into their statutes. These laws are fairly uniform among the states. Among other things, SOF laws require that contracts related to sale of real estate be in writing. As examples, contracts to list real estate for sale or lease with a broker and agreements to sell/purchase real property must be in writing to be enforceable in Court and oral contracts for those purposes are worthless. This is so even though there might be indisputable non-written evidence as to the contracts, for example, unrelated third party witnesses. Many states specify certain items that must be included in such contracts.

Statute of Frauds laws of most states also require that a lease of real estate for a term of more than one year be in writing. An oral lease for a term of one year or less is binding and will be enforceable regarding most terms normally found in a lease. An oral lease can be amended orally.

As a practical matter, all leases of any duration should be in writing because the written document provides a record of the terms of the landlord-tenant relationship so that its terms and conditions can be easily and clearly discernible by the parties, their heirs, or assignees.

As for any type of oral contract, oral leases regularly cause problems for both landlords and tenants because it is often difficult to determine what the terms of the lease are. This can be the result of a number of factors, including the following:

• Misunderstandings by either party at inception of the agreement,
• Misremembering or forgetting terms later by either party,
• Purposeful distortion of terms by one party or the other, and/or
• Limited or no ways of proving the lease terms.

Often a witness to the oral lease can be of value, but that may require that the witness be impartial or at least not a beneficiary of the lease in any way. Furthermore, the witness usually must be able to appear at a trial, something not always possible perhaps years after being witness to an oral contract.

When an oral lease ends up in Court, the judge can sometimes make a reasonable decision based on circumstantial evidence. For example, if the disagreement between landlord and tenant related to the amount of rent, cancelled checks or receipts would prove what the rent was for those past months. However, it would usually not support or deny any rent increase.

Sometimes a judge makes the decision based on which party can provide the best circumstantial evidence whether or not that evidence is directly relevant to the disputed issue. However, when there is no clear evidence of who might be telling the truth he may end up making a decision based on who was the best liar. If both parties are equally believable or equally unbelievable, the decision is probably most likely to be in favor of the tenant.

Judges sometimes will not enforce certain terms of an oral lease. Non-typical lease terms will likely not be enforced. Even certain typical terms may not be enforced. For example, it is not uncommon that a judge will refuse to enforce a late penalty provision that is not in writing.

A month-to-month oral lease can continue for many years so long as it remains a month-to-month lease or a lease for a term of no longer than one year at a time, with oral renewals.

The bottom line is that oral leases are only as good as the paper they are written on.

Fixed-Term vs. Month-to-Month Lease

Most landlords will want to choose either a periodic tenancy  (month-to-month) or a tenancy for years (fixed term).

To help decide between these two types of leaseholds, the landlord should consider a number of factors, including: (1) advantages or disadvantage under the law of that state, (2) the current condition of the local rental market including vacancy rates, (3) the type of applicants expected for the particular location and property type, (4) whether rental rates in the area are increasing or declining, and (5) the anticipated future local rental market as affected by general economic trends, population growth predictions, and new rental construction coming on line.

A month-to-month tenancy allows the landlord to raise rents or otherwise renegotiate the lease more often and provides more opportunities to terminate tenancy of a less-than-satisfactory tenant. This is advantageous when the rental market is strong. A fixed-term tenancy prevents frequent rental increases, but is more favorable to a property owner in a declining or over-built rental market. Fixed term leases can be either an asset or a liability in the event of a sale or refinance, depending on a buyer’s plans and where rents are relative to market rents.

Residential leases can be written for any term length. Although we assume month-to-month or multi-month fixed-term leases in this lesson, keep in mind that residential leases can be weekly, bi-weekly, semi-monthly or any other rent period or length of tenancy desired, and like commercial leases, can have options for renewal, although not usual.

There are reasons to utilize multi-month fixed-term leases and there are reasons to utilize to month-to-month leases.

Many landlords require a fixed term lease of six months or one year, for the following reasons:

• Turnover is expensive and there is usually less of it with longer lease terms compared to month-to-month. However, long-term leases do not always mean long-term tenancy. In addition to tenants breaking their lease, federal
  law allows military personnel to terminate leases under certain conditions, and some states have laws allowing unilateral termination for other reasons. For example, some states allow termination for a tenant who is moving to a care facility or where domestic violence is involved.
• Tenants tend to be more respectful of the landlord’s property and the rights of other tenants because they expect to be and want to be a tenant for a longer fixed period.

Other landlords favor month-to-month leases for the following reasons:

• Rent can be raised with the proper notice, usually 30 days in most states although a few states require a longer notice period, some only in certain circumstances. This is particularly desirable in tight urban rental markets where rents can regularly be raised and vacancies easily filled.
• Allows the landlord to modify other lease terms to deal with new problems that have surfaced.
• Troublesome tenants can be terminated with the proper notice, usually 30 days in most states, even though they have not violated a significant lease clause, although an eviction may still be necessary.

There is no reason why a landlord must fill every vacancy or renew every lease for the same period of time. Landlords are free to change periods because of market conditions or for other business reasons. However, as with every other landlord issue, landlords must take care that the reasons do not hint at discrimination – that is, a different period is used for particular protected classes and not for others.

Types of Leases

The subject of Leases must be divided into the categories of Residential and Commercial because the two types are significantly different in many respects. Commercial can be further divided into several sub-categories including office, retail, industrial, and warehouse, with significant differences among each of them. Some of these sub-categories are often further subdivided, for example, general office and medical office.

Size of the Document

Lease agreements vary widely in size, from a single page to dozens of pages in small print. The number of pages will depend on the type of property involved as well as whether printed on legal or letter size paper and the font size used. Many feel that residential lease agreements should be short because tenants don’t want to have to read a long lease agreement prior to signing. However, we feel that the more detail in the agreement, the less the landlord-tenant relationship is subject to misunderstandings.

Section 8 Basics – Part 1

The Housing Choice Voucher Program (HCVP) or as more commonly known, Section 8, is funded by the U.S. Department of Housing and Urban Development (HUD) and serves as the federal government’s largest low-income housing assistance program. Section 8 refers to the section of the U.S. Housing Act that authorized rental housing assistance.

Section 8 is a tenant based rental assistance program for low income families, the elderly, and the disabled to choose and lease safe, sanitary, decent, affordable housing in the private rental market. Section 8 housing vouchers issued to “approved families” help pay the cost of rental housing on the open market.

The housing voucher program seeks to (1) provide better living conditions at affordable rent payments for low-income families, (2) provide freedom of choice in selecting rental units from the open market, and (3) provide incentives to landlords and property owners to rent to voucher approved families.

The HCVP program is administered at the federal level by HUD. At the local level, the program is administered by numerous state, regional, and local housing agencies, known collectively as Public Housing Agencies (PHAs). While many of these public housing agencies are independent public authorities, other agencies are under the direction of elected city, county or state governmental officials.

Landlords and low income families must choose to participate in the Section 8 program and follow program guidelines and requirements. Rental units must meet HUD quality standards of health and safety. If the selected rental unit is approved, the housing subsidy is paid directly to the landlord by the local PHA who administers Section 8 funding on behalf of the participating family. The family is responsible to pay any difference between the actual rent charged by the landlord and the amount subsidized by the Section 8 program. HCVP families normally pay no more than 30% of their monthly-adjusted income towards the rent and utilities.

Once family eligibility has been established, the family is placed on a waiting list of approved families and will be notified if a voucher becomes available. Once a housing voucher has been issued, the family usually has sixty days to use the
voucher to locate and select a qualified rental unit.

Applications to the housing program may be denied by the local agency for various reasons. Families receive written notification of denial and have an opportunity to present their objections to the eligibility decision. A formal review process determines the final eligibility status.

Eligibility and approval do not guarantee funding assistance. There is no automatic entitlement benefit. Program funding limitations govern the number of available housing vouchers. Waiting lists for housing assistance are usually long with no certain date for issuance. In some areas, because of the size of the waiting list, the list has been closed to new applicants. The number of eligible families that eventually receive housing vouchers varies by region but in general, one out of four families may be served by housing assistance.

There are several key checkpoints in the voucher process. Approved families must

1. Receive the voucher,
2. Conduct a housing search,
3. Have the selected rental unit pass HUD quality standards,
4. Have the rental amount meet the rent reasonableness determination,
5. Have the participating landlord sign a contract with the local housing agency,
6. Sign a lease agreement with the participating landlord, and
7. Comply with all PHA requirements to allow the housing assistance payments to begin.

The participating family is responsible for their share of the rent per the lease agreement and for the security deposit as required by the landlord.

Once the rental unit has been selected by the participating family and the owner/landlord has agreed to rent the unit in accordance to Section 8 rules and regulation, a document, known as the “Request For Tenancy Approval” (RFTA) must
be completed by the landlord and submitted by the participant family to the local public housing agency for processing. The RFTA information will help determine the eligibility of the family for the selected unit.

Upon receipt of the RFTA, a Housing Quality Standards (HQS) inspection is conducted on the rental unit by the local PHA to ensure the unit meets HUD quality standards of decent, safe, and sanitary housing and whether the monthly rent
amount is reasonable and consistent with market rents for similar units in the area.

The landlord and the participant family receive move-in approval once the rental unit has successfully passed inspection. Should the selected rental unit fail to meet HQS, the landlord is notified in writing, is given a timeframe for completion of needed repairs, and is allowed an opportunity to correct the deficiencies and have the rental unit re-inspected The unit is re-inspected and approval given if the unit passes inspection. If the unit fails inspection for the second time, the family will be asked to locate a different rental unit.

If the unit meets these housing quality conditions, the local housing agency enters into a one year contract with the participating landlord for direct payment of the monthly housing subsidy. The participating family and the participating landlord enter into a written lease agreement for one year for the family’s rental of the selected unit.

HUD Housing Quality Standard inspection items include:

• There cannot be any chipping or peeling paint anywhere on the inside of the unit.
• There cannot be any chipping or peeling paint located five feet and under on the exterior of the unit.
• Cooking stove must be clean and in working order. (Either the tenant or the owner must provide).
• Refrigerator must be clean and in working condition. (Either the tenant or the owner must provide).
• There must be an installed heating system that works.
• There must be hot and cold running water in the bathroom.
• There must be hot and cold running water in the kitchen.
• There must be a shower or bathtub that works.
• There must be a flush toilet that works and does not leak.
• Bathrooms must have either a window to the outside OR an exhaust fan.
• There must not be any plumbing leaks.
• There must not be any plugged drains. (Check for slow drains).
• All ground floor windows must have attached locks and exterior doors must have locks including working deadbolts.
• All electrical outlets must have cover plates and be in good condition.
• There must not be any missing, broken, or cracked windows.
• The roof must not leak. (Check the ceiling for stains).
• The hot water heater tank MUST have a temperature pressure relief valve with a downward discharge pipe made of galvanized steel or copper tubing that is 3 feet long (NO PVC).
• An earthquake strap is required for all hot water heaters.
• There must be GFI outlets around all sinks.
• The floor covering cannot be torn or have holes that can cause someone to trip.
• If there are stairs and railings, they must be secure.
• Working smoke detectors are required in every unit and on every level.
• The contract rent must be reasonable, based on the rent of comparable units in the neighborhood.

The lease/rental agreement and HAP contract are effective the day the unit passes inspection and the family takes possession of the rental unit.

Additional discussion will be provided in “Section 8 Basics – Part 2.”

Question:

I have a tenant that signed a lead disclosure statement, but did not tell me she was pregnant prior to moving in. Do I have to have to have the apartment inspected and if there is lead do I have to remove the lead? I feel this is only one bedroom and they are not going to stay long.

Answer:

Since you are concerned about the issue, I assume that the rental unit of interest was constructed prior to 1978.  The federal “Residential Lead-Based Paint Hazard Reduction Act” was enacted in 1992 to reduce the danger from lead paint. Commonly referred to as “Title X”, compliance for all landlords became mandatory as of 12/6/1996.

For compliance with Title X, landlords of housing built before 1978 must inform tenants before they sign a lease of any information the landlord has about lead hazards on the rental property. If a landlord has had the property tested by a state certified lead inspector, a copy of the inspection report or its written summary must be disclosed to the tenants. Most states and some cities have lead hazard reduction laws similar to the federal law, with some of them being significantly more stringent than federal law.

Every lease agreement must include a lead hazard disclosure, either within the agreement itself or as a separate document, even if the property has not been tested. Most landlords will use the disclosure form provided by the EPA “Disclosure of Information on Lead-Based Paint and/or Lead Based Paint Hazards.” Disclosure also requires that tenants be given the EPA lead hazard information booklet, “Protect Your Family From Lead in Your Home.”

I assume that you have no certain knowledge regarding existence of lead. However, lack of certain knowledge would not be an excuse in some jurisdictions. For example, while federal law requires disclosure of what the landlord knows, DC law requires not only disclosing “what is known by the landlord,” but also “what is reasonable for the landlord to know.” Some jurisdictions may require remediation when lead-based paint is known to be an issue.

Finally, what you should do might depend on when the tenant knew of her pregnancy. If knowledge was prior to signing the disclosure you might be safe, as she knowingly acknowledged agreed to rent the unit after knowing of her pregnancy. If knowledge came after signing the disclosure, you may want to consider giving the tenant a chance to terminate the lease, without penalty. Otherwise, she could claim she forgot about the lead issue after finding that she was pregnant and injury resulted.  If she decides to remain, you should utilize a signed written document showing that she agreed to remain in spite of gaining knowledge after learning of her pregnancy.

Although it appears that you followed the law regarding disclosure, you are confronting an unusual situation that might expose you to some legal risk. I am not an attorney and so cannot provide legal advice. Accordingly, whatever the timeline, I recommend that you consult a competent attorney who is knowledgeable about lead law issues at federal, state, and local levels where your rental property is located.

Question:

Are there laws about charging a pet fee, what that fee can be used for, and limits on such fees?

Answer:

The answer to each of your questions is “it depends on the laws of your state and possibly those of the city or other jurisdiction.” The bottom line is that you will need to research the landlord-tenant laws for whatever state and local jurisdiction the rental property is located in. However, I will mention a few issues that might be of concern.

Some states have no statutes regarding pet deposits or extra rent for pets. In these states, the amounts of deposits or extra rent are only limited by the amount prospective tenants would be able and willing to pay. From the landlord’s perspective this translates into how much the landlord is willing to reduce the pool of prospective qualified applicants.  In the extreme case, extremely high deposits and/or extra rent would result in no applicants.

Since by legal definition a deposit is refundable when there are no defaults of lease terms that are applicable to the deposit (e.g., no damages by the pet), high deposits will result in higher probability of tenant lawsuits when the landlord unjustifiably fails to return a deposit or a significant part thereof. If allowed, higher rent would be less of a problem.

The security deposit laws of some states include both security deposit and pet deposit (and any other deposits) within the maximum security that can legally be collected by the landlord. For example, if the maximum security deposit allowed is equal to one month’s rent and the rent is $500, the security and pet deposit can be $400 and $100 or $250 and $250 or $500 and zero, respectively, or any other combination totaling $500, but the total cannot exceed $500.

Furthermore, some jurisdictions may forbid using the pet deposit against unpaid rent or other defaults not related to the pet. For example, the pet deposit could not be applied against damage by a human. A judge may impose such restrictions even if not imposed by statute.  Another possible issue is whether the maximum deposit allowed can include both regular rent and extra rent for the pet(s). This issue may not be explicitly defined by law and might be open to a judge’s opinion of what is fair and equitable.

Some local jurisdictions (i.e., county or municipality) may have more restrictive rules. As for any other financial losses that exceed the security deposit and/or pet deposit, a landlord can file a lawsuit for any damages caused by a pet. Of course, adequate lease agreement clauses can be important to being successful in such litigation.

Question:

I have a family that just moved into one of my rental houses. It’s in the lease that they pay utilities and have the utility service put in their name. This tenant has an old $170 water bill and the city won’t let them put the water in their name until this old bill is paid. I want to leave the water bill in my name and them to pay me for their bill each month. Also I want to give them 6 months to pay the old water bill from their previous address and then to put the water bill in their name. How do I word this in an addendum to their lease?
Answer:

I will first advise you that in many states, water districts have the legal right by statute to hold the owner liable for the tenant’s unpaid water bills even when the water account is in the name of the tenant. Thus, a landlord can end up with months of unpaid bills for which the water district may, again, depending on the state and the water district, be able to file a lien against the property if the bills are not paid. Accordingly, a landlord may end up paying the unpaid water bills even if the tenant never pays the landlord and the landlord will have to evict the tenant. You should determine if this is an issue for the location of your rental property.

If the tenant fails to pay you and it becomes necessary to evict the tenant in order to terminate his use of your water, a court may be less inclined to grant an eviction when the eviction is for an unpaid utility bill compared to if it is for unpaid rent. Failure to pay rent as agreed is usually an easy eviction because the statutes of most sates explicitly make payment of rent a basic duty of tenants.

Furthermore, absent a court order to the contrary, a landlord cannot have the water (or any other utility necessary to provide a habitable dwelling – e.g., gas or electricity) turned off while a tenant is still in possession of the rental property no matter how many months the tenant is behind in reimbursing the landlord for the water or for any other lease default including failure to pay rent. If the tenant is knowledgeable regarding the court system or has an attorney and significantly
delays the judgment for eviction, unpaid rent and, in states where the owner is responsible, unpaid water bills can rapidly add up to serious losses.

For these and other reasons, it is usually better to charge a higher rent that is sufficient to cover worst case usage rather than to charge for the water bill as a separate item.  Furthermore, a higher rent allows for a higher maximum security deposit, potentially providing yet additional safety.

The applicant family should never have been allowed to take possession of the unit prior to executing a lease or an addendum thereto which contains adequate clauses regarding the water bills. If the tenant now refuses to sign whatever agreement is subsequently provided him, no matter how good the agreement might be, there will probably be nothing you can do about it other than to proceed to terminate his tenancy. Absent a believable witness on your behalf, the exact terms of any oral agreement regarding the water account issue you may have made with the tenants could be difficult to prove in court, particularly if you are outnumbered by the number potential witnesses within the group of occupants,
whether legally tenants or not who know of the agreement.

In order to avoid such last minute problems, I always recommend that an information sheet be attached to the application form provided to all applicants. There are a large number of other issues that should be addressed in such an information sheet. Most relevant to your current issue, it should identify each utility provider and warn applicants to verify with all utility providers that they will qualify for accounts and that the applicants have the financial ability to cover all
deposits that will be necessary based on their previous payment history with each utility. Those who have bad utility payment histories can be subject to extremely high deposits.

I would be seriously worried about an applicant who cannot come up with $170 to pay the outstanding bill, as such an amount would not usually be considered significant compared to the rent, security deposit, utility deposits, and various other costs of moving from one rental to another rental.

The subject of an information sheet is discussed in some detail in Lesson 11 of our eCourse titled “Managing Income Property” which can accessed via a member’s homepage on LandlordOnline.com.

Although I have several decades of management experience and have created documents for my own use, I am not an attorney and cannot create such documents for others. For such specialized documentation needs the landlord is usually best qualified to generate the necessary clauses. Simply put into concise language the terms you and the tenant orally agreed to.

Lease Agreements – Part 1

Landlords and property managers utilize a large number of different documents. Some are used regularly, others only occasionally, and many landlords may never have need for certain documents that other landlords use regularly.

Unfortunately, most landlords do not utilize as many documents as they should. Use of adequate documentation is important for minimizing misunderstandings and the conflicts that often result from misunderstandings as well as for providing paper trails that provide proof of what really happened in case a tenant wishes to dispute a matter.

More specifically, a large percentage of landlords fail to use adequate lease agreements, resulting in unnecessary disputes and other problems. This should probably not be surprising, as the subject of lease agreements is a large and complex one.

We won’t attempt to cover all aspects of all types of leases here, as the subject of leases can be a book in itself. However, in a series of articles we will attempt to cover a wide range of topics in enough depth to provide a good understanding of lease agreements.

Lease Basics

A real property lease agreement is a legal contract whereby the owner (or his property manager agent) gives a person (or persons) the right to occupy and use a property for a specific period (the “term”). The contract sets out the terms and conditions of the tenancy, is legally binding and enforceable against all parties.

The lease governs the landlord-tenant relationship. It transfers possession, use, and enjoyment of the property from the landlord to the tenant for a specific period of time and for a stated amount of rent. To be enforceable, the lease agreement should cover a number of basic issues which help to protect both the landlord and the tenant from fraud or misunderstanding in the event of disagreements or disputes.

The owner is called the “Lessor” (or “Landlord”) and the person who occupies the property is called the “Lessee” (or “Tenant”). A lease agreement defines the rights of lessor and lessee that are not already defined by law. The lease agreement must conform to statutes and case law and the terms and conditions stated in the agreement must be acceptable to both parties.

Importance of Lease Agreements

The lease agreement is important not only for current operation of the rental property but also for maximizing the value of the property as an asset. This is true because the value of an income property is highly dependent on the lease agreement(s) for the property. While not as important for a single-family residence, value becomes increasingly more dependent on lease agreements as the number of units increases. In fact, lease agreements are a primary factor in the value of larger properties. A primary method for valuing a larger income property is the Income Approach wherein the net operating income is capitalized to calculate value. Accordingly, the value of a property can be significantly affected by both current and future rents as specified in the lease agreements for the property as well as by many other lease issues.

The terms of lease agreements are particularly important for non-residential properties for which leases tend to be long-term and often include cost-of-living adjustments, renewal options, and other terms that can significantly affect future value, sometimes for a decade or more.

Lease agreements must include tools for enforcing timely payment of rents, proper care of the property by the tenants, and other issues important to efficient and profitable operation of the property. For example, if default provisions aren’t adequately defined, the landlord may be unable to evict a tenant who defaults on lease obligations that are important to the landlord. There must, of course, be compromises when deciding the content of a lease. If it is totally iron-clad in favor of the landlord, no thinking applicant will sign it, whereas, if it’s a one page document purchased from the local stationery store, the landlord might be left at risk in many ways.

It is not enough to have a good lease agreement. A landlord must thoroughly understand his/her lease agreement and apply the terms uniformly and firmly to all tenants who have signed that lease.

Lease Agreement vs. Rental Agreement

It is our opinion that there is no legal difference between a “Lease Agreement” and a “Rental Agreement.” Some property management writers and document publishers use the term “Lease Agreement” for tenancies originally written for a term of more than one month and the term “Rental Agreement” for month-to-month tenancies. However, typical state statutes do not differentiate between the lengths of tenancy in choosing which term to use. Historically, legal references have more often used the term “lease agreement” no matter the length of tenancy specified in the document.

It is the content of a lease agreement that matters, not the title. In this article and in future articles of the series we will use the term “Lease Agreement” or simply the term “Lease” to mean a contract for tenancy of either residential or commercial income properties for any period of time.

Types of Tenancy

The landlord may offer one of four different types of ”tenancies” or “leaseholds.” The type of tenancy can affect the parties’ rights to terminate or alter the landlord-tenant relationship.

The four types of tenancies are:

Fixed Term Tenancy – The fixed term tenancy is the most common type of leasehold and is usually an annual (12 month) lease. This type of tenancy has a fixed duration and terminates automatically at the end of the period. A fixed term tenancy can run for any period of time, as long as the lease terminates automatically at the end of the period. In some jurisdictions, it is important that the total rent for the entire lease period be stated in the lease agreement.

Periodic Tenancy – This type of leasehold runs for a fixed period of time (e.g., weekly, monthly, six months, one year, five years) and renews automatically at the end of the lease term. A month-to-month rental is the periodic tenancy most often used. A periodic tenancy does not terminate until the landlord or tenant gives notice of termination. Notice must usually be equal to the rental period term. If the agreement is weekly, a seven day notice would suffice; if it is monthly, the party who wishes to terminate the agreement must give at least one month’s notice. However, some states provide for longer notice periods by only the landlord or for both parties, sometimes depending on certain circumstances.

Tenancy at Will – A tenancy at will has no fixed duration and can be terminated by the tenant or the landlord at any time. In some jurisdictions, a tenancy at will is restricted, usually for benefit of the tenant, and in some jurisdictions this form of tenancy is not permitted.

Tenancy at Sufferance – A tenancy at sufferance occurs when the tenant wrongfully remains on the premises, or “holds over,” after the lease has expired. Unlike the other types of tenancy, the tenancy at sufferance is not the result of an agreement between the landlord and tenant. Therefore, the tenant should have no legal right to remain on the property and the landlord should be able to evict. However, some jurisdictions now address a hold-over tenancy by statute and conclude that by accepting rental payments the landlord is deemed to have entered into a new lease contract with the tenant. The laws of some states specifically say that if the tenant makes rental payments during the hold-over period, and the landlord accepts those payments, a new tenancy is created. Some states even make the renewal lease period equal to the previous lease. In other states a landlord retains his right to evict and, in fact, may be entitled to damages as well.

Question:

The tenant in one of my units is complaining that there is currently mold around a bath tub where the tile meets the tub. She wants me to clean it up. Who is responsible for cleaning up the mold?

Answer:

That might depend on what type of mold it is, the source of the moisture that results in mold, and/or whether there was evidence of the mold at the time the tenant moved in.

The type of mold that almost always appears around a tub at its interface with tile or other material is not usually of the type that the landlord must clean, at least not if mold was not there when the tenant moved in. In most, perhaps all states the tenant is legally responsible for keeping the premises in clean and safe conditions. This includes keeping the plumbing fixtures clean (and free of mold). Of course, if the problem is caused by a leak in the wall or from a unit above, the landlord should take care of the problem. Taking care of the problem includes repair of the leak source, not only because the mold is more the fault of the landlord rather the tenant, but more importantly because continuation of the leak will ultimately result in the landlord having to pay for very expensive repairs or rebuilding of walls, ceilings, and/or floor.