Question

A tenant in one of my 4-plex units left the place a mess. In addition to not even attempting to do any cleaning, he seriously stained the carpet during his stay and otherwise damaged it in several spots. Also, certain walls and many of the window blinds were damaged. I have a non-refundable cleaning deposit in addition to a security deposit. What can I charge the ex-tenant against his deposits?

Answer

First, be aware that any “deposit” is by definition potentially fully refundable if the tenant meets the terms of the lease agreement. Some states do not allow a separate cleaning amount whether called a “deposit” or a “fee” and some states prohibit making it non-refundable. In states where a non-refundable amount is allowed related to cleaning, the lease agreement should call it a “cleaning fee” rather than a “cleaning deposit.”

Finally, some states that allow deposit or fees other than a “security deposit” still limit the maximum total of all amounts collected to be the maximum amount stated for the maximum security deposit in the state’s statutes. For example, in some states a “cleaning fee” of $200 plus a “security deposit” equal to a month’s rent would exceed the legal limit if state law limits a security deposit to one month’s rent. I mention these potential issues because a knowledgeable tenant could use collection of excess deposits against the landlord when disputing the deductions taken from his deposits and the financial penalty for security deposit violations by a landlord can be significant.

I will assume that a cleaning deposit/fee is allowed in your state and that it can be non-refundable. I will also assume that his rent was paid to the date of vacating, as you made no mention of rent being owed. If both rent and damages are owed it can sometimes be important regarding the order in which deductions are taken from amounts held by the landlord.

In your case and under my assumptions you should apply all cleaning costs against the cleaning deposit/fee amount. In some states, if the amount of the cleaning “deposit” exceeds the cost of cleaning (as the term is generally understood) the excess cannot necessarily be applied against damages that are not considered cleaning and the excess of the “deposit” must be refunded to the tenant. This fact is another reason to call the amount collected for cleaning, a cleaning “fee” rather than a cleaning “deposit” when such a fee is allowed by the particular state.

If the entire cleaning amount collected is not enough to cover all cleaning costs, the excess cost would next be applied against the security deposit.

Actual damages, including carpet and blinds, but not including “normal wear & tear,” would then be charged against the remainder of the security deposit. Damages in excess of the remaining deposit amount may be recoverable via a lawsuit. The reason for ending up with damages potentially exceeding the remaining amount held rather than cleaning is that a judge is more likely to award a judgment for physical damages (e.g., a broken window) that are easily documented via photos, assuming your move-in checklist signed by the tenant shows all windows were in good condition, rather than for a claim that something wasn’t cleaned adequately (e.g., some missed grease in an oven) that can be somewhat subjective and the tenant may be able to convince the judge that the oven was just as dirty when he moved in.

It is important to understand that, technically, you cannot charge the tenant for the total cost of replacing the entire carpet in the unit unless it was brand new when he moved in and there is irreparable damage in every room that is beyond normal wear & tear. There are two different issues regarding this issue. First, depending on the floor plan and the location of carpeting, it may be acceptable to replace carpeting in only certain rooms. Second, wherever carpeting is replaced you cannot charge for the full cost of carpeting, but must allow for depreciation.

The percentage of cost of replacing damaged carpet that may be charged against the tenant is determined by dividing the number of years the carpet has been in service (including the period the unit was occupied by the tenant who damaged the carpet) by the “useful life” of the carpet. There is more than one number that might be justifiable for useful life, but it is usually least arguable to use the number of years warranted by the manufacturer.

As examples, assume a carpet that the manufacturer had warranted for 15 years. If the carpet was 10 years old when the tenant vacated the unit and it can be proven that the damage did not exist at time of move-in, the tenant can be charged 5/15 = 33.3% of the replacement cost, with the cost perhaps being only for the room in which the carpet is damaged if appropriate. If the carpet had been new when the tenant moved in a year earlier, the tenant can be charged 14/15 = 93.3% of replacement cost for damaged areas, again depending upon floor plan. If the carpet was 14 years old when the tenant moved into the unit and the tenant remained for one year or more, the tenant cannot be charged any part of the cost of replacement because the carpet had no remaining “useful life.”

Similar considerations must be given to window coverings, appliances, and other components of a rental that would be considered capital items (have a typical useful life of longer than a year) when they require replacement rather than repair.

Charges for damages to painted surfaces can depend on a number of factors, including specific terms of the lease agreement and that the “damages” are actually “normal wear & tear.”

Landlords should not try to charge a tenant for replacement when a repair can fix the problem. When charges for damages end up in court the judge is usually concerned that the landlord was fair and reasonable.

Finally, to avoid penalties that are potentially significant in some states, landlords should always provide detailed accounting (including documentation) of charges against deposits and do so within the period allowed by state law for return of deposits and/or an accounting of amounts not returned.

Question

My tenant wants to extend her lease. The only item on the old lease that will change is the lease term. Do I have to enter into a new lease, or can I do a short amendment for the existing lease?

Answer

When changes are being made to a lease (or any other contract) you can always either amend the existing contract or create a new document. It is usually best to create a new lease document when the number and complexity of changes being made is significant relative to the overall document. If there have been changes to the lease agreement since the lease was signed, it is often simplest to execute a new agreement rather than update the existing lease agreement. There are no set rules regarding the decision point, but for your case, with only one simple change being made, one would usually do an amendment.

Be sure that the amendment adequately refers to the original lease agreement by date, tenant name, rental unit address, and states that all other terms of the lease remain as before.

Ending a Tenancy – Part 1

Tenants come and tenants go. Ending a tenancy should be a matter-of-fact business transaction regardless of whether the tenancy was a periodic tenancy (usually month-to-month) or a fixed term lease with a date certain beginning and ending date.

However, whether a tenancy ends with nary a whimper or with a big bang may depend on the landlord-tenant relationship, and the circumstances of the departure. A good ending may be the result of a good beginning when landlord and tenant clearly understand their obligations and duties.

There are legal issues that must be dealt with at the end of tenancy including preparation and service of termination notices, security deposit accounting and return, move-in/move-out checklists and possession of the rental unit.

Ending a tenancy can result from events in a tenant’s life that are related to personal or family health, family responsibilities, work relocations, military orders, domestic violence, death, or a voluntary decision to move on. A landlord may have his own reasons why the tenancy should be terminated.

A landlord can terminate a tenancy for a variety of business reasons but cannot terminate a tenancy for discriminatory reasons or in retaliation for a tenant exercising a legally protected right. Discrimination is illegal under federal, state, and local fair housing laws. State and local laws may regulate how a tenancy may be terminated with specific lease language, notice requirements, rent control protections, retaliation remedies or other landlord-tenant obligations and duties.

Depending upon the circumstances a landlord and tenant may need to work together through the legal or social issues associated with events to reach agreement on ending the tenancy. Some events may allow early termination rights for tenants if proper notice and legal procedures are followed. As examples, tenants who enter active military service after signing a rental agreement have a right under federal law and some states’ laws to be released from their rental obligation and victims of domestic violence in some states may have early termination rights and protections from eviction.

The following discussion focuses on some of the issues in ending a periodic tenancy that is month-to-month.

Month-to-month tenancies can be terminated by either the tenant or the landlord with proper notice according to state statute. Most states do not require a landlord to provide the tenant with a reason for termination, but in a few states a landlord must have a just or legally recognized reason by statute for termination of tenancy.

Ending a month-to-month tenancy is a relatively simple matter in most cases and in most states. A landlord provides a written notice to the tenant to move allowing the minimum number of days as required by state law and stating the date on which the tenancy will end. Typically the landlord notice period for terminating a month-to-month tenancy is 30 days, the same amount of notice period as would be required of a tenant to end his tenancy, but in some states the landlord is required to provide a longer notice period, such as 60 days.

The state and local laws where the rental property is located will govern the requirements and procedures for preparing and serving termination notices.

While the typical tenant notice period to terminate tenancy is a minimum of 30 days, in some states and in certain circumstances, the notice period may be less than 30 days or a period that corresponds to the rent payment interval.

Language in the rental agreement must comply with state statute notice requirements for termination. It is a good business practice to require a written termination notice from the tenant that gives the specific date the tenant plans to move out. The written notice provides a means of defense should the tenant not move out as planned and the landlord has already accepted a new tenant.

A tenant may encounter a change of plan that affects his move-out date. If a landlord accepts rent for any period beyond the agreed upon move-out date, the termination notice is effectively cancelled and a new month-to-month tenancy has been created. To terminate this new tenancy a landlord must prepare and serve a new notice to start the process again.

However a landlord may agree to extend the tenancy for a short period at a prorated rent. A written agreement should be prepared for the tenant’s signature detailing the terms of the agreement.

When a tenant fails to give notice in a timely manner (e.g. short notice) but does move out, he is still obligated to pay rent through the end of the required notice period. A landlord in most states has a legal obligation to try to rerent the unit before charging the former tenant for the remaining days of the notice period.

A material violation of the rental agreement by either landlord or tenant may be remedied in different ways. If a landlord fails to comply with his legal responsibilities, as an example, the implied warrant of habitability, a tenant may have the legal right to remedy the situation by moving out without giving the proscribed notice period. A material violation of the rental agreement by a tenant, as examples, failure to pay rent, or causing property damage, may allow a landlord to more quickly terminate the tenancy with a shorter notice period or to evict a tenant if the situation warrants.

While most tenants leave voluntarily and cause little fuss, there are some tenants that will holdover, skip out, or require an eviction proceeding to remove them from the unit. Any of these behaviors will require additional effort on the landlord’s part to end the tenancy and gain possession of the rental unit.

Holdovers

If a tenant stays on after the term of his rental agreement has expired, without the consent of his landlord, and the landlord does not accept offered rent, the tenant is considered a holdover tenant. In effect a holdover tenant is a trespasser. A landlord will need to serve the tenant with a notice to quit and if the tenant does not move out, file an eviction lawsuit

Skips

A tenant may make an early departure and “skip out,” possibly leaving unpaid rent, property damage, or abandoned personal possessions. A landlord has the right to re-take possession when it is certain that the tenant intended to depart for good. In general, a tenant is liable for rent for the remaining term of the rental agreement. In turn, a landlord has a duty to mitigate damages, that is, make reasonable effort to find a replacement tenant. Recovery for any losses from unpaid rent, property damages, and/or certain other expenses incurred due to the default by the tenant that are not recoverable from the security deposit may be sought through a lawsuit.

Determining whether the tenant has actually given up possession can be an issue if the tenant has not given any indication of vacating. Minimizing questionable vacancy issues begins with including in the rental agreement what the tenant must do when vacating and what will happen if the tenant fails to act as agreed.

Personal property of the tenant that is left behind in the unit or on the property can be another issue that will need to be resolved but according to state laws.

Each state has its own laws regarding how a landlord must handle property that appears to have been abandoned by the tenant without any certainty that such was the intent. These laws vary from essentially no rules to extensive procedures that include secure storage and certain legal notices and the procedures requiring several months to complete.

Eviction

A tenant who refuses to vacate upon termination of a month-to-month tenancy or who fails to correct a noticed default on a material term of the rental (including non-payment of rent) can only be removed through the judicial procedure of eviction.

Move-Out Letter

No matter how the tenancy is being terminated, a landlord should provide a move-out letter to the tenant prior to the termination date. The letter serves to remind the tenants of the terms and conditions they agreed to when they signed the rental agreement. This can be particularly useful in avoiding disputes with tenants at the last minute.

The letter should provide details for the move-out inspection, utility transfers, the return of keys, cleaning of the unit, removal of personal property, and any other tasks expected of the tenant. The tenant will need to provide a forwarding address for any future communication needs including the return of any potential deposit refund.

Exit

As part of the overall property management plan, the same attention to detail that goes into tenant screening and selection should be given to tenant departure. With procedures in place, the exit of a tenant can be handled efficiently and with less stress on all parties.

In a future article we will discuss ending the tenancy of a fixed-term lease. While many issues of ending a fixed-term tenancy are similar in nature to issues discussed above, the legal requirements and remedies may vary.

The discussion of issues in this article does not constitute legal advice and readers are encouraged to perform their own due diligence and seek appropriate advice from qualified professionals as warranted.