When a rental property begins to undergo a construction process, this is typically treated as a special circumstance by the leasing agreement.
Landlords have a right and often a duty to repair the property so that it is safe and secure to inhabit.
Unless the work is being completed within the interior of the rental unit, there may be very few remedies available to the situation from a tenant’s rights perspective.
If, however, the construction interferes with the quiet enjoyment of the property outside of the confines of health and security, then this may entitle a tenant to break the lease and seek out financial assistance from the landlord because of it.
What Can a Tenant Request if Breaking a Lease?
If construction allows a tenant to break their lease, then there are numerous ways a landlord may be required to compensate the tenant for their trouble.
Relocation Assistance. Landlords may be required to pay for moving costs and other fees associated with a tenant moving to a new residence. If the relocation is temporary, a landlord may be required to pay for hotel fees or the costs of moving to a new rental unit until the primary unit has been repaired.
Rent Reduction. Some jurisdictions allow a tenant dealing with ongoing construction to be entitled to a reduction in the amount of rent that is owed.
Actual Damages. If a landlord has permitted a tenant to operate a business out of the rental property and the construction impacts that business, then a tenant may be entitled to claim actual damages and losses that they have experienced.
The quiet enjoyment of a rental property is a rather vague term, which means each circumstance is evaluated on its own.
For someone who is single, working full-time, and rarely home except for the weekends, then no accommodations may be required for construction that happens on weekdays while the tenant is at work.
On the other hand, if a tenant has four children that are all under the age of 5, works full-time at home with an approved business, and has limited access to their rental unit because of the construction, the tenant may be able to make several claims.
This is especially true if the tenant can provide evidence that the landlord was aware of their living situation.
If the quiet enjoyment stipulation is violated, a tenant may have the right to sue for the nuisance that has been caused by the construction.
Some jurisdictions allow for a breach of contract lawsuit.
The construction company, each contractor, and even the laborers may also be allowed.
How Are These Two Rights Balanced?
There must be some give and take from both parties when there is construction involved with a rental unit.
Some jurisdictions do have specific policies and procedures to follow, but in general, the need to repair a property becomes a negotiating point in combination with the quiet enjoyment of the rental.
Normally a conversation or two regarding the situation can balance out each right so that everyone feels like they come out ahead.
If a landlord serves a notice on a tenant to temporarily vacate the premises without compensation, however, many landlord/tenant laws allow this notice to be ignored.
It is considered a breach of the contract to force a tenant to move when they have a valid right to be there.
If a landlord attempts to force a tenant out, even temporarily, then the only allowable method is typically to pay for all expenses during the construction period, including food and incidental expenses, while giving the tenant a time to return.
A 60 day notice for this type of temporary move is usually required as well.
Tenants may also have the right to call out building inspectors to determine if the building is remaining up to code during the construction process.
If the housing is deemed to be uninhabitable, then the landlord may have 24 hours to rectify the situation or risk the lease being broken with cause, meaning a tenant may be able to gain their full deposit back unless there are provable tenant-caused repairs that must be made.
For the most part, landlords should generally work on rental properties when there are no tenants in a unit to prevent this situation from ever occurring.
When emergency repairs are required or a unit needs to be updated, however, it pays to give tenants as much notice as possible and make it worth their while to put up with the noise if the problem isn’t their fault.
Otherwise that construction cost might not be the only charge that has to be paid.
In just about every jurisdiction, landlords are required to provide tenants with a living space that is safe, healthy, and livable.
The definition of what constitutes what must be provided to make the space this livable may vary, but one of the basic items that must be provided in every jurisdiction is hot water.
If there is a hot water issue within a home, then it generally qualifies as being a 24 hour emergency repair.
If the repair is not made after a written notification to the landlord is made, then the tenant may be able to break the lease without penalty.
Depending on where the property in question happens to be, a lack of hot water may also allow the tenant to take the following actions if they choose not to move out without notice.
Withhold their rent to make the repair on their own if there is no response from their written request for hot water repair.
Pay for the repair needed to have hot water again and then charge this cost to the landlord through an invoice.
File a lawsuit against the landlord for not providing conditions as indicated in the leasing agreement.
The reason why a tenant has these options is that landlord-tenant laws have an implied warranty of habitability included with every rental arrangement.
Tenants have an expectation to live in a home that meets their basic needs.
The structure should be intact, not develop mold, be susceptible to pests, and have hot water available.
What About Hot Water That Runs Out?
The provision that landlords must generally follow is to provide a “reasonable” amount of hot water.
This means a tenant can potentially use up all of their hot water and the landlord would not be liable for this fact.
For example: if a tenant takes a 45 minute shower every day and leave their child with no hot water for an additional shower, then this would be a tenant issue instead of a landlord issue.
Where shades of gray begin to form are in how the hot water is provided compared to the size of the household that occupies a rental property.
A single person, for example, could have a 20 gallon hot water heater and probably have their reasonable needs met.
If a landlord rents a home to a six person household, however, that 20 gallon hot water heater isn’t going to meet needs very efficiently.
In the latter circumstance, the 6 person household could have a potential claim against a landlord who doesn’t upgrade the hot water system.
Hot Water Is Considered a Major Repair
The problem that many landlords have with hot water repairs is that they tend to be expensive. If the hot water heater fails, then there is the cost of a new appliance and the emergency labor required to install it.
There may need to be additional plumbing repairs needed to install the new unit.
This type of repair could easily reach $1,000 or more, which might exceed the amount of rent that is paid each month.
Because hot water is considered an essential service and a tenant right, it is always considered a major repair because it is needed to provide habitable conditions.
Sometimes hot water can be considered a minor repair because it is being provided, but not in a way that is satisfactory to standards or preferences.
No hot water would be a major repair.
Having hot water that is heated to 5-10 degrees lower than what landlord-tenant laws stipulate would be considered a minor repair.
Both would need to be completed, but minor repairs can often be completed in a 10 day window instead of a 24 hour window.
If a hot water heater is leaking, but still providing hot water, then a landlord may wish to consider it a major repair.
After notifying a landlord of a leak, the tenant is not responsible for the maintenance of the hot water heater.
This means the water can get into the walls, flooring, and other components of the structure and cause additional damage to the structure that may make it eventually uninhabitable.
The statutes that govern hot water can vary somewhat from state to state and jurisdiction to jurisdiction, but there is always a requirement to provide a water supply and a way to heat it up.
You may be required to heat it to specific temperatures or provide specific amounts.
Check your local laws if you’re unsure to determine what tenant rights and hot water regulations must be followed so every rental unit can meet the legal standard.
Your landlord’s insurance policy on your rental covers damage to the building, items the landlord uses to maintain the property, and some liability coverage. Your personal property and liability don’t fall under the landlord’s coverage, so you’re the one paying if you lose your property in a house fire or get sued for damage you cause.
The National Fire Protection Association found the average loss from a house fire was $19,500, which could drive you into significant debt. Thankfully, you have another option that gets you off the financial hook for your losses: renter’s insurance. Here are the biggest benefits offered by this insurance option and common rental scenarios it covers.
Personal Property Loss
Do you know the total value of your personal possessions?
Bankrate found people routinely underestimate this figure — the average value ranges from $20,000 to $30,000. Renter’s insurance prevents you from paying out-of-pocket if your things get damaged or stolen by covering your losses. You might not be able to replace sentimental mementos, but at least you don’t have to outfit your entire apartment again. If you own particularly pricey goods, such as an antique grand piano or expensive art pieces, most insurance companies let you increase the overall coverage limit or add a specific rider for these assets.
Insurance companies offer either the fair market value or the replacement value when they calculate how much money you receive to replace your personal property. The fair market value looks at the average price for your used items and typically gives you fewer funds to work with. The replacement value gives you the cost of brand new products.
You maximize the protection offered by renter’s insurance by creating a comprehensive home inventory.
Some insurance companies offer applications to streamline this process for you, although robust note taking tools such as Evernote provide a valuable alternative.
You need a picture of the item, the receipt if available, the average price for a replacement and any other relevant information. Once you assemble this inventory, keep multiple copies in different locations.
An inventory doesn’t help you if the only copy exists in the house that burned down. Online-based storage options let you safely store this information in an easily accessible location.
Protection Outside the House
Some renter’s insurance policies extend personal property protection outside your rental. For example, if you leave your laptop in the car and someone steals it, your coverage kicks in and pays for a replacement. You may also get protection for lawn equipment, outdoor furniture, and other items in your yard.
Temporary Living Costs
You can’t live in your rental property during building repairs, but hotel expenses add up quickly.
Renter’s insurance covers temporary living costs through loss of use coverage, so you aren’t forced to couch surf after a disaster. Many hotels and other short-term rentals don’t provide you with a full kitchen, so your food costs may soar due to frequent take-out.
Your increased living expenses also fall under this part of renter’s insurance.
Sometimes you end up in unfortunate circumstances where you’re responsible for damage to the rental building or injuries to a guest.
For example, if you light a lot of candles around the house and they start a fire, you’re legally liable for the property damage. A guest ending up in the hospital after tripping and falling down your stairs also falls in this category. Your landlord’s policy only covers tenant injuries and damages caused by the landlord’s actions, so guests are on their own without a renter’s insurance policy.
Lawsuits cost a lot of time and money. If you can’t afford to pay for damages, a public record judgment will show up on your credit report and background checks.
Renter’s insurance lets you avoid these problems through liability protection.
The policy handles these costs so you don’t drain your savings or face future credit problems, and the person harmed by your actions can cover their medical bills or repair the property damage.
Renter’s insurance policies provide many benefits and are also relatively inexpensive.
The Institute of Insurance Information reports the average annual cost for a policy is $188. If you use your existing insurance company for renter’s insurance, you get a multi-plan discount. The discount cuts your premium costs and makes this option even more affordable.
Two factors play a major role in your overall costs for this insurance: your coverage limits and your deductible. Insurance companies offer standard limits for personal property and liability. If you want additional coverage, you pay a higher premium. Your premium also depends on your deductible. A lower deductible results in additional premium expenses.
Renter’s insurance provides a broad range of protection for an inexpensive price.
You don’t want to think about your apartment getting robbed or a friend injuring themselves at your rental, but you need to proactively protect yourself from these situations. The only thing worse than suffering through these events is facing a lawsuit and a drained bank account.
Choosing a new tenant can be overwhelming, especially if you’re a new landlord or have had the same tenant in a property for several consecutive years.
It’s always good to remember that while vacant properties cost you money, delinquent tenants can cost you more.
While renters are looking for the right property to rent, as a landlord and property manager, you are looking for the right tenant for your property.
Not every applicant will be right for your property.
That’s okay. Don’t get discouraged.
A good game plan will help you streamline the process and take some of the stress of choosing a new tenant from the equation.
Screening a Potential Tenant
Tenant screening is an absolute must when you are looking for a new tenant to fill your property.
If you skip this vital step you are opening yourself and your investment up to terrible losses that could severely hurt your income.
Knowing who resides in your home begins with an application.
You may choose to use a physical version that you can hand to the applicant when you meet with them or, more likely, an online version that allows you to save time and paper.
Gathering application fees to run full tenant screenings on every single person that shows interest in your property can be difficult and time-consuming, so begin with a prescreening.
This begins with letting your applicants know what your expectations are.
Your listing should include information such as the rent rate, smoking policies, pet policies, and any credit/income requirements that you may have.
Letting your applicant know these things up front shows them that you are going to be honest with them and will allow them to bow out gracefully if they know that they will not be the right fit for your property.
You should have all of your policies in writing and they must apply to all residents that apply.
Sticking to your policies that you’ve created will help to hedge against appearing as if you are discriminating against an applicant.
Meeting an applicant face-to-face allows you to handle several items of business.
As the second round of prescreening, it allows you a chance to ask questions, give a quick tour of the property, and collect the application fee for the full tenant screening.
While this does not always hold true, if an applicant shows up late, does not have the full fee on hand, or is untidy in their appearance, you may think twice about them as a future tenant.
Do keep in mind that just because an applicant appears to be everything you’d ever hoped for, this is no reason to skip the tenant screening.
It is your first line of defense.
A full tenant screening should include a credit, criminal, and eviction report.
This will give you a fairly well rounded view of the history of person that wishes to rent your property from you.
You’ll want to watch for negative tradelines that indicate late or non-payments, as well as bankruptcies and collections owed on.
When you read over a credit history it is always a good practice to look at the details and not focus entirely on the score or recommendation given.
Verifying employment and checking with prior landlords are also part of the screening process, though a tenant screening company may not cover these.
Even so, if your applicant passes the credit, criminal, and eviction check, you still should not leave these two things to chance.
The sad truth is that people do lie about their income and past experiences.
An eviction may not be on the records yet if it is in the process of being filed for the property that they are currently in or the landlord may have decided to take another route that might not show on a typical tenant screening.
Reaching out to employers and asking for pay stubs help to give you peace of mind that the applicant is gainfully employed.
Checking with prior landlords (usually two or three back) ensures that they are not trying to slip past your safeguards.
If you’re on the fence between two or three qualified tenants you may have a difficult time choosing between them.
Some landlords are turning to social media for an alternative form of tenant screening, but you should always be careful with this.
While it may give you a great outlet to check on an applicant’s lifestyle – are they partiers? Tidy? Slobs? – and if they have any pets that they may or may not have mentioned to you, a landlord or property manager should tread carefully so that they do not appear choose one applicant above another using something that may be deemed illegal according to the Fair Housing Laws.
If you choose to take this route, make sure you are up-to-date with all of the laws associated with it. Social Media is a great tool, but you don’t want to risk landing yourself in trouble.
Follow the Law
There are local and federal laws that dictate the process that you will need to follow to find, screen, and accept a tenant.
While the federal laws will cover the country, you’ll also want to check in on your state, county, and even city laws to make sure that you are fully informed.
Ignorance is not an excuse that can be used if someone claims that you’ve broken the law as a landlord or property manager, and it can cost you in money, time, and reputation.
These laws are meant to help you both, so being fully aware is a must.
They are consistently changing and updating to meet the needs of landlords and tenants and better help to regulate that relationship.
The Fair Housing Act touches on situations from the moment that you start marketing your property and all the way into the actual tenancy and was put into practice in 1968.
It has been updated as different situations arise.
On whole, it’s meant to keep people from being turned away from housing based on race, color, national origin, religion, sex, familial status, or disability, though some local laws will add to these, so it’s best to make sure that you are well aware of all laws that apply to your property.
You will want to be very careful in how you word your advertisements for your properties as well as what questions that you ask those that apply.
If you even appear to be leading them in one direction or another – for example, indicating that an apartment close to the playground would be better for the applicants when you find out that they have children and not offering to show other properties as well – that may be seen as discriminatory.
Refusing a disabled applicant reasonable accommodations such as a service animal in a property that does not allow pets may also be seen as discrimination.
There are also exemptions to the FHA that might com into play.
Once you have found an applicant that appears qualified and has passed the pre-screening, you will need to receive permission to run a tenant screening on them.
While criminal checks are performed on public criminal records, it is a good practice to be upfront and clear with what kinds of reports that you will be running on your applicant.
You will need direct permission to run a credit report.
Some tenant screening sites make it easier on you by reaching out to the tenant directly for this permission, but you may consider keeping a signed permission slip on file for your records as well.
State-specific documents such as these are easy to purchase and download online.
Finally, once you have chosen the best applicant to become your tenant you will sit down with them to sign the lease.
This is a legal document that should always be signed by both parties before the tenant is allowed to move into the property.
The lease will dictate what is expected from all parties involved so that if there are any questions at a later date, you may refer back to the document.
This will be one of the most important ways (aside from the screening process itself) that you’ll protect your property and your investment.
It legally binds you both to the promises made and will help to simplify your landlord-tenant relationship.
Finding that perfect tenant can be stressful, but you’ll find the policies that work best for you with each time that you go through the process.
Speak with other landlords and ask advice. While learning from your own mistakes is a necessary part of growing your business, learning from others so that you can avoid the mistakes that they made is even better.
Choosing a great location that will appeal to the types of tenants that you’d like to attract, going through a full and detailed tenant screening process, and abiding by the laws set up to govern the landlord-tenant relationship will help set you and your new tenant on a smoother path and encourage a great working relationship.
How to Read a Credit Report
When you open your rental property up to a person it is safe to say that you’d like to know that you are making the best choice in the tenant that you accept.
You have gone through the first steps of the screening process: you have asked the interested individual to fill out an application, have spoken to them briefly about their qualifications, and have collected the screening fee.
This process has likely helped to narrow your pool of applicants down to a serious few and now it’s time to look over their credit and criminal repors.
If you are a new landlord or are switching the service that you use to run tenant screenings, you’ll want to make sure that the tenant screening that you order provides, at minimum, a full credit report and a nation-wide criminal check.
Some HOAs that your property may be apart of may require a certain level of criminal check to be performed in order to rent to an individual within that community.
Overall, it’s safer to conduct a full, nation-wide criminal search rather than rely on your applicant to provide you with accurate information of the areas that they have lived in.
A credit report may include somewhat varying information, but you should look for one that includes a credit score, tradelines, and public records (which should also include collections).
Below we’ll go through what is included in each of these, as well as a few other options you may wish to persue in a credit history.
For consistancy’s sake, we will be using LandlordStation’s sample report, though if you pull a report directly from a credit agency it may be formatted differently.
A credit score is provided by the credit bureau that the report is pulled from. For LandlordStation, this is Trans Union.
There are three major credit agencies in the United States, and while those scores may differ slightly depending on the information found in the agency’s database, they should be fairly similar.
Credit scores tend to range from around 300 to 850, though 800 is considered near perfect.
The tradelines found below the credit score will detail out what information the credit bureau has used to formulate the score itself.
Most tradelines will affect the score up to seven (7) years and will affect it less and less with each passing year.
In other words, if the year is 2015 a negative tradeline from October of 2014 will weigh heavier against the credit score than a negative tradeline from October of 2010.
Score factors are often detailed out next to the score provided.
These are notes that the credit agency will provide that explain what went into their calculations.
There will be times that no score is provided.
If a score cannot be calculated, this often means that the individual does not have an extensive or recent credit history.
Individuals that pay in cash, do not use credit cards, and do not take out loans will likely have a very bare credit history and a score may not be available for them.
This does not necessarily make them a poor canidate, though you may wish to focus more on other forms of screening (such as references and their criminal and rental history).
If your applicant claims that they should have a credit history or they find a discrepency in the history that was provided, they should contact the credit bureau immediately.
Credit Summary and Tradelines
A credit summary will be where you will see the summarization of the different items found on the credit report. The tradelines will be the details of that summarization.
There are five (5) catagories under the summary on LandlordStation’s credit reports.
1. Closed with Balance – This will be a summary of any tradeline that was closed with a balance still open. It may have been a loan or a credit card. The reasons that it was closed before it was paid off may vary, and those details will be found in the tradelines.
2. Revolving – A revolving balance will change. This is not a set amount, such as a loan, but one that is often being paid on and added to such as a credit card. The important thing to note here is the percentage of the debt that is being used at any given time. A person who have been approved for $100,000 of revolving credit and is using $10,000 is in a much better position than one who is approved for $5,000 and is using all $5000 of it.
3. Installment – Installment balances are lines of credit that will be paid in installments, such as an auto loan or a student loan.
4. Mortgage – Lines of credit for a mortgage stand apart from other installments.
5. Open – The open category is simply anything that is still active and has not been shut down either by the creditor or the invididual that the report is being run on.
Under the summary the individual and total amounts will be listed for the balance, high credit, and monthly payments.
Tradelines will provide details on the information under the credit summary.
Each tradeline (both open and closed) will provide information on the name of the creditor, the loan type (ie if it is a credit card, auto loan, student loan, etc etc), current rating (meaning if it is currently being paid on, if it is late, etc), the balance, if any money is past due, and what the credit limit is. It will also note the high limit, meaning the most owed on that tradeline.
This will include any fees associated with late dues.
Dates will be provided for when the tradeline was opened, closed, and also when it was most recently reported to the credit bureau.
Collections are lines of credit that were shut down by the creditor and the debt was sold to a collection company.
The collection company may be awaiting payment, and if so it will be noted in this section of the credit report.
The collection section of the credit report will note the name of the original company owed, the balance owed (this should be looked at for the current balance over the ‘past due’ section), the high credit, and the agency that currently holds the debt.
The collection will have a date opened section that will show when the tradeline was placed for collection, and if it has been paid and closed it will note that next to the open date.
If the collection shows a balance and does not have a paid or closed date, it likely is still an outstanding debt owed.
As of 2014 medical collections do not impact a credit score as heavily as other collections might.
Public records will include any legal proceedings that affect the applicant’s credity-worthiness.
This may be a civil judgement, a tax lien of some kind, or any number of things.
These are all considered negative marks against the applicant’s credit history.
Some credit reports will offer various other options such as previous address history, known aliases, and employment history.
This information can be vaulable when fact-checking your potential tenant, as they will often provide this information on the application that they bring to you.