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Real Estate Investing Forums | Real Estate Investing | Rehabbing, Landlording Forum (Moderators: $Cash$, Bluemoon06, kdhastedt, Mdhaas) | Topic: Rent reduction for loss of use during a remodel?
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IRO
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« on: July 12, 2017, 04:22:29 AM »

     A rental house had a water leak, and by the time it was found, mold had developed behind a kitchen cabinet.
     The pipe was repaired, but mold abatement required removal of base cabinets, counters and sink.
     The tenant wife is a new mother and was paranoid about the mold.  I gave the tenants a couple of hepa filters and put a dehumidifier in the affected cabinet. 
     My initial plan was to wait for the end of their lease agreement (which was 60 days away) and just have them move out so I could remodel.
     The tenants explained that moving would cause a financial burden, and they have family in the neighborhood, and wanted to stay during the remodel.
     I explained that it would probably take 10 to 12 weeks to do the remodel.  They agreed to tolerate the noise, ect.
     We used a ZipWall dust barrier, and things have worked pretty well.
It's going to take 8 - 10 weeks. 
     The tenants are now asking for a reduction in their rent for loss of use of the kitchen.  She described an incident of her older daughter tripping over a box of kitchen items an suffering "small knee fracture, hurt tendons and  soft tissue swelling on her ankle."
     I'm torn.  These tenants are pretty good.  They take care of the place, and pay their rent promptly.  That's really the only reason I let them convince me to permit them to stay during the remodel.
Previously, I've had crazy tenants turn completely demanding to the point that I just ultimately convinced them to move out; I don't want to go through that again.
What do you folks think I should do?
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Steve
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« Reply #1 on: July 12, 2017, 12:13:46 PM »

I have never successfully remodeled anything with a tenant in place. 

It's like brushing your teeth while eating a peanut butter and jelly sandwich.

You have to choose which thing you want to do.

Does your insurance cover this damage?  If so, does it cover lost rental income?  If so, it's even more prudent to evacuate the tenants before doing any work.

Meantime, this is a catastrophic lack of property management.  For mold to become so bad that you have to demolish your kitchen, just tells me that you are not paying enough attention to your rental.  Worse, the rents obviously are not at market rate, otherwise the tenant would have complained earlier about the dampness under the sink.

Of course your tenant doesn't want to move, and is willing to breathe mold spores, dirt, and feign injuries to lure you into letting them stay.  They've got a steal deal going on, and they don't want to upset their candy cart.

Nonetheless, you're creating a HUGE liability for yourself, trying to do construction with someone occupying the premises.

1)  Remove the tenants.
2)  Repair the house.
3)  Re-rent it at market value.
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realcoolproperty
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« Reply #2 on: July 15, 2017, 07:20:16 PM »

I agree with Javipa about liability and market value (if that is your situation). 

I have a similar situation going on right now.  But this was due sewer backup from clog in the yard between house and street. Letting my insurance co handle it all.  Poop backing up into the house involved a mitigation company cleaning up the mess and now a general contractor going in to put it all back together.

I have discussed the subject of removing tenants from the property during renovation with an attorney.  In Texas law there is nothing that says I have the right to remove the tentants or that they can be forced to leave for a while.  The attorney encouraged me to keep relationship pleasant as possible with the tenants. 

If I were you I would be concerned about the health of the tenants and them coming back to me later with liability, however, if you gave option to leave and offered to give the month's prorated rent back and they decided not to take it then it may be their risk.  However, living in a construction mess can turn even the nicest people into disagreeable nightmares.  There are crazy attorneys out there that take crazy cases.

Also, my lease says that tenant has RESPONSIBILITY to tell me if there are any problem especially pertaining to water leaks and damage.  Not saying anything can cause them to be liable for further damage.

You might want to check what your signed lease says, ask an attorney in your state, maybe even get a property manager if you don't already have one.

Fortunately I have loss of rent insurance and have offered to reimburse up to the prorated daily amount.  However, in this case the tenants are 2 single professional guys and they prefer to stay in the property during renovation and know they are expected to pay the entire rent on time, and cooperate with the contractors.  My property manager is handling everything for me beautifully and I sleep at night.

I hope you are able to work it out without it getting worse.
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« Reply #3 on: September 11, 2017, 08:22:28 AM »

 I agree with Jay. If state law does not  allow you to get the tenant to move on, I think I would insist on full market rent but offer a written release from the lease obligation.  Your best bet is to get the tenant out of there.  You never know what you were going to find a remodel. 

By the way, Jay's comments about being under market rents are exactly right.  Last year I bought a property from the gentleman that had a couple of his grandkids living there.  I posted about it on here.  The granddaughter was living in a two bedroom unit and was granted a new two-year lease immediately prior to me purchasing the property.  It actually happened while I was under contract but after placing the offer, which just made me livid.  I decided to go ahead and purchase the property anyway and honor the lease.  Shortly after purchasing, I said down with her and had the "come to Jesus" meeting. I told her that I was not her grandfather and I was happy to honor the lease, but not at all interested in accepting late rent from her, especially given that the unit was so far under market rent.  I gave her way too many chances and let it continue for about seven months with her paying late almost every time before finally evicting her.  When she did move out, I was surprised to find out terrible the condition of the property was.  I knew that there was some active termite history in there, but the entire back wall of the property will need removed.  The wall in the kitchen was just literally crumbling with her in there. To be honest I have no idea what is holding up the second floor.  The bathtub didn't drain properly because the back of It had sunk due to do the termite damage.  The air conditioner was broken.  Lastly, the place was filthy. As soon as she started moving the other neighbors complained about mice.  It also look like she has been smoking indoors, with attached neighbors.

 I'm not really wound up about these things. I fully intended to remodel the place. It's going to cost me a little bit more than I am originally intended due to the additional termite damage, but it's not a big deal.  The point is that because her rent was so far under market rates she was willing to sit there and just let the place crumble.  She never once made any maintenance request or complain about the condition of the property.  I did have an inspection done and was aware of the termite activity, but not the severity of it.  I have been inside her unit a couple times, but it obviously not paid attention to the right things.  I feel very fortunate that she did not pay the rent and I was able to be better. I feel lucky that nothing was damaged and nobody was hurt due to a possible structural problem in the property.

 The good news is that after I get these units remodeled, I have been successful at getting them rented for well above market rates using short-term leases to people that are building homes. There is a real shortage of rental property in our area right now, and many landlords are not willing to consider short-term leases.  I like it because these people don't give me any trouble at all. Their household income is many multiples higher than a typical tenant for this property would be, and they are used to paying a mortgage much higher than my rent.  They appreciate that it is newly remodeled and love the amenities in there, even though it is very small.

 So much good has come out of being proactive with underperforming tenants and properties.
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« Reply #4 on: September 21, 2017, 06:41:30 AM »

Hi,

    I have a lot of remodeling experience and have had both good and bad tenants. Typically I don't want to lose good tenants in a higher vacancy rate area and good tenants don't want to lose a good location with the right situation in a very low vacancy rate area as it can be hard to find replacement housing.

My solution was to rent a trailer tow / 5th wheel trailer and park it either out front on the property or find a temporary location to park it while construction goes on, typically living on site creates a on site security situation and although offsite may cost a little something for space it can be worth it to keep good tenants.

There are a lot of private owners who will rent their trailer for a few months and a local honey bucket pumper can provide an oversized holding tank that can be pumped two or three times a week as needed.

Typically renting a trailer provides a kitchen, TV, complete bathroom with tub, heating and air conditioning and beds for everyone family size appropriate!

It can be a win / win for both parties and the tenant continues to pay his full rent for the period of construction, then moves back in after completion.
Personal property can be stored in a shipping container for a couple of months, a garage or a move off / move back container storage company.


                                     GR
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« Reply #5 on: September 22, 2017, 07:32:04 AM »

The horse has already left the barn...thus, at this point it is simply a question of whether or not to give them a reduction in rent.

If so, what % are they asking for and for how long (how many months)? I don't know anything about your property, rent, etc. Being absent of all facts, it is hard to give you my experience. Anyway, review your lease and speak with an attorney just to get a handle on the legal side of this, and the related potential issues you may have (injury and long term).

That said, if you decide to give them the rent reduction -- I would still speak with an attorney regarding the injury and making sure that doesn't become an issue, as well as a future long-term health issue. Who knows what they might claim, and documenting that they chose to stay can't be a bad thing.

Good luck.
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Gold River
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« Reply #6 on: September 24, 2017, 02:23:00 PM »

Hi,

    The real question is what quality horse are we talking about a broken down old horse put out to pasture or a thoroughbred who just won the triple crown?

You see I just fell off the turnip truck and discovered in my limited construction and investing experience that there is the distinct possibility that this house and correct me if I am wrong, but could have asbestos, lead based paint, leaded pipe joints, etc. which can cause harm if built before 1978?

Now Jay was right on when he said that moving them out was probable best, I suggested from my 17 hours of expertise in construction and real estate you move the tenant into a trailer if you want to keep them!

So it's not simple a question of reducing rents and not clearly a question of liability as you pretty much have issues with both I think, hold on I had better ask my mentor old redstar for the answer!


                        GR


 
« Last Edit: September 24, 2017, 02:24:34 PM by Gold River » Report to moderator   Logged
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« Reply #7 on: September 25, 2017, 09:57:29 AM »

Declare the property uninhabitable.  Based on the void the lease and evict the tenant.  Rehab the place and put it back on the market with stepped up rent because of the newly upgraded property for more rent.
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Real Estate Investing Forums | Real Estate Investing | Rehabbing, Landlording Forum (Moderators: $Cash$, Bluemoon06, kdhastedt, Mdhaas) | Topic: Rent reduction for loss of use during a remodel?
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