What Precautions Can a Landlord Take to Protect Themselves against the instance a Tenant-occupied Property Becomes Uninhabitable Due to a Costly Repair that Far Outpaces Annual Rental Income?

8 Replies

Let's say a sewer system for a single-family, low-income rental house in an economically depressed area of NY State, dies. Let's say the hypothetical repair costs $20,000, and monthly rents are $750.  Let's say, for cash flow reasons, it makes better business sense to postpone making the repair, ask the Tenant to vacate, and cover their "reasonable" lodging and moving expenses for some "reasonable" amount of time and cost.

Can a lease contain language that protects the property owner, giving them the right to remove a Tenant in this instance (even if sewer goes by no fault of the tenant's).  

If so, what legal responsibilities, does the Owner have to cover moving and lodging for the tenant?

If not, what other protections are available to an Owner in this instance?  

Legally, are there minimum triggers that give the owner that right: e.g. a repair that will cost more than, let's say, 3 months rent?  A percentage of annual rent?  Other?

Or is it up to the discretion of the landlord to identify their own terms for, say, :

A. Cost of the triggering repair 

B. Lodging - number of days , time with a "not to exceed"

C. Moving / Storage costs - one-way to temporary lodging 

What resource in NY State is best to consult to further explore / validate legally acceptable options?  

If you're really scared of such an event happening, you could get a home warranty so that you do not have to pay that much.  You could also try bidding the job out on Craigslist under labor gigs and I bet there will be plenty willing to fix the plumbing for well under 20k.  You should also put a condemnation clause in your lease like this one:

CONDEMNATION. In the event that the Premises or any part of the Premises is taken by any authority exercising the power of eminent domain, this Lease shall terminate as of the date possession shall be taken by the condemning authority. The Tenant waives all claims against the Landlord or any condemning authority due to the complete or partial taking of the Premises, and shall not be entitled to receive any part of any award that the Landlord may receive.

You need to take care of the tenant, and you don't want the tenant report you as a slum lord for not fixing the problem. I think the best thing let them out of the lease if there was one give back full deposit and get them a moving truck and pay for at least two-month rent. So you had no budget for repairs.

Joe Gore

I have had a sewer line fail and require immediate repair.  It was $6200, not $20K.  This isn't the first one I've replaced and none came close to $20K.  So, IMHO, that $20K number is a purely hypothetical number.  As a landlord you truly must have cash reserves readily available to handle a large and expensive repair quickly.  Repairs are you're problem.  You're signing up to fix them when you start being a landlord.  Whether they're a months rent or five years worth.

That said I do have language in my lease that covers fire damage:

Damage by Fire. In the event that the building is damaged by fire and through no fault of the tenant, and cannot be restored within a reasonable time in the opinion of the Landlord, this lease shall terminate with no further liability of either party.

You could expand that wording to cover other events.

It's cover in condemenation in my lease. It is also the reason why I do not invest in low income properties because large repairs get expensive.

I have similar langhage in my lease that states if the property becomes uninhabitable (which could be fire, plumbing failure, structure failure, whatever it may be. The lessor has the option to terminate the contract and pay back prorated rent up to the last date. 

I think the sewer example was a poor one as one needs to repair that regardless and in most cases the repair work does not make the house uninhabitable. I had a prospective tenant who had to move from her current home. She said the back wall of the house in the kitchen was alway really cold in the winter and was also moldy. I live in wisconsin and it gets pretty cold. Turns out the majority of the wall had filled up with water from the roof runoff the wall was pretty much solid ice inside. The owner could not repair in a timely fashion and it became such a large issue that even if the owner could financially swing the project it would cause such a disturbance in occupying the property that the lease was terminated...

@Jon Holdman  

  the hypothetical sewer problem could be a failed septic sytem that now needs to have a Mound system or other very expensive system put in ... Very common for Mound systems and other alternate systems to cost well in excess of 20k.. Agreed on a simple sewer line to the street.. most are 1500 to 3k in my experience a 6200 one would be top of what I have seen. unless it was a very long run or very deep

@Jay Hinrichs   that was a combination of the first plumber trying to just replace a bad section of cast iron pipe in the crawl space and then immediately outside the house.  But the clay pipe through yard was in bad shape, too.  So, I hired an excavation company to replace the clay all the way to the city tap in an alley.  As soon as you dig up an alley it gets more expensive.  If you have to dig up a street, its even worse.  That would have doubled the price of the job.  I've, unfortunately, done several of these.  Never been able to find anyone as cheap as $1500-3000, and I've had a LOT of bids.  Many that were much higher.

Regardless of the specific issue, you, as the landlord, have to be prepared to deal with the problem.

@Jon Holdman  

  I hear ya my experience is not replacing them When I was buying rentals.. And it was a tree lined street or big tree in yard and older pipe 20 years or so.. I replaced them procativly. So we did them with our rehab... and just ran a new service and abandoned old one. and this was in Mississippi  were the streets did not have side walks digging was easy and it was a simple matter of a ditch witcher and lay new pipe and a sewer tap.

In PDX its customary to spend 3 to 4k replacing an existing one so that is much more in line with what you experienced.

Having done a lot of business in the rural areas and having dug my share of wells and built my shared of septic systems.. It used to be in the day we could do a standard system for 3500 to 5k  that was 20 plus years ago.. they are now 10k and a mound system will be every bit of 20k... So just another thing for an investor to know and plan for if they are buying rural properties for rentals,, and or second homes or primary.. Septic cost money when they go bad

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