Property managers using "tenant-friendly" lease forms. What to do?

Question

I need some advice with property management companies and their standard practice of using what I consider “tenant-friendly” lease forms. These lease forms are boilerplate and typically are created by the state’s real estate commission (i.e. TREC in Texas), and tip the scales more in favor of tenants. I want to use my “landlord-friendly-but-legal” ones, but when I was asking different PM companies about lease forms when interviewing, they said they used the form of the state real estate commission only. Maybe I did interview enough PM companies, but needless to say I was disappointed by this news.

I would like to manage these properties myself, use my forms, and save some money, but it is just not practical as I am out-of-state.

Has anyone else experienced this, and what do you do? Just suck it up and soldier on?

Thanks!

I would like to manage these properties myself, use my forms, and save some money, but it is just not practical as I am out-of-state.

Has anyone else experienced this, and what do you do? Just suck it up and soldier on?

Thanks!

Paul Winka · Answer

Account Closed  No, I did not pay more than $600 in repairs when I had my own lease, but I sure did after that. Despite that using a deductible like I did is not a best practice, I think I got very lucky.

But to both of you, or anyone else monitoring this thread, how do you address it with the tenant when you don't give them the benefit of the doubt with a repair matter? Have tenants given you a lot of flack about billing repairs back to them?

Account Closed · Answer

I generally get some flack about it.  This is a really easy dispute to have though, because it is something that is actually their fault, and they know it as well as you do.  So we put it on their statement.  What might happen is they don't pay it when they pay the rent.  So we apply the money first to the repair, then to rent, just as our lease sets forth.  So what is going to happen is that the statement shows they paid for the repair, they just didn't pay some of their rent.  We continue to carry this balance on their statement until either they pay, or the end of their lease comes and they leave, at which point the statement charge becomes a deduction against their deposit.

If the original repair could possibly not have been due to the tenant, if theirs any other possible reason, we give the tenant the benefit of the doubt, but when we do we always point explain how this charge should probably have been charged to them.  We try to use it as a teaching experience.

The bottom line is that you have to try to run your rental by the rules set forth in your lease.  If it's going to cause some flack, you're going to know they were in the wrong, that you're acting in accordance with their lease.  The flack is misguided.  We've never lost a tenant over that type of issue.  Sometimes we have collected payments over a few months to help the tenant.  And somethings were the repair might have been larger, we'll bill the tenant less to help them out.

Account Closed · Answer

Some of the standard realtor forms are pitiful in my opinion.  I have a lease which was written by a landlord attorney here in town.  It complies with Missouri law.  However, I don't have a property manager.

That said, I would not be comfortable with have the tenant responsible for the first $50 of all the repairs.  I would be very concerned about repairs going unreported because they don't want to pay that $50. Further, in my area the landlord is made responsible for the upkeep of the property ie property ordinances.  Your city is not going to listen to how you have a deductible system.  They could care less.

Some things are the tenant responsibility.  An example: the tenant's kid breaks a window.  We fix the window, but we bill back the tenant for the repair.  And by the way, we don't allow repairs to our units by either the tenant or a third party.   Our authorized representative does all repairs.  Another example, tenant's kid throws something down the toilet that gets caught in the toilet.  Again, we'll remove it.  But the tenant is billed back.  Now, if there is a bad leaking flapper, or some other defective part in the toilet, that's our reponsibility so we fix it.  However, replacing a flapper is an easy job, that the tenant might well not call about because it's going to cost him $50.  A nail down the garbage disposal?  I guess I'd wonder what the tenant was doing with a nail around the garbage disposal.  He's not supposed to be working on anything without our written authorization.  However, are you sure one of your contractors did not mistakenly drop a nail?  If there is any doubt about responsibility, we give the benefit of the doubt to the tenant, so maybe we pick up a few things that we shouldn't have.  But in the bigger scheme of things, we have the money already allocated for repairs.  It all works out.

Around here all the property managers don't use the standard realtor form.  If your lease is approved by a lawyer, then you should be able to use it.  My guess is though that no lawyer put that $50 clause in your lease.

Elizabeth Colegrove · Answer

Paul we are out of state investors who self manage just fine for the exact reason that you describe. While we certainly did not plan on self-managing out of state is has become a huge part of our business plan. It is a huge topic on blog too. I wouldn't give up on your idea just because you are out of state!

Steve Olafson · Answer

I have a maintenance crew.  We don't usually bill back for repairs although we do let the tenants know that we could and will next time the same event happens.  When it is obviously the tenants fault, we will bill back.

Steve Olafson · Answer

Are you concerned with substandard repairs done by the tenant?  How about the $50 difference, are you paying more than $600/year in repairs?

I don't like to see most tenants doing much more than plunging the toilets.

Paul Winka · Answer

TLDR; Yes, there is an issue with what the lease is missing, not what it has. I want tenants to have some skin the game with repairs to cut down on petty repair requests. The idea is that they will take better care of the property this way and only call for the big stuff.

**

Yes. Before when I was without a property manager, when I took in tenants, I gave them a choice at the outset: I would change $900 rent with a standard $900 security deposit. Or, I would change $850 rent, and take a $1100 deposit, and they would be responsible for the first $50 of any repair (a deductible, if you will) that was made on the property, and I would cover the rest with a contractor. They took the latter option, which is what I wanted. The system worked well and the unit was left in excellent shape, and noticed it cut out on the petty requests for repairs that nagging tenants could make. I realize there is hazard in doing this with some tenants, but no landlord can ever remove all risk. The tenants were DINKs with 700+ credit scores.

Fast forward 2 years later. Because I moved out of state for work, I was forced to use a PM. The PM refused to use my lease to renew, and I tried with 3 different PMs when shopping around. Well, I did not have much choice but to choose the best of the lot of PMs I found, even though they would not use my lease. When I got new tenants with the new PM, my repair costs went up. Toilet jammed? My bill. Garbage disposal broken because they dropped a nail down the drain? My bill.

I am a newbie, admittedly, but it seemed the tenants took better care of the property before when they know they would have to share the cost with me. With my old lease, the tenants would have some skin in the game.

You might say that with the old lease the tenants would ignore things that fall into disrepair and not tell me about it, but in that case, I would foot the bill anyway when they moved out and would withhold it from the larger security deposit. Most good tenants will not put up with a place in disrepair anyway, and would adhere to the "$50 deductible" system.

@Steve Olafson & others: Please critique this deductible system I have. Maybe I just had good luck with this deductible system before, but what I really did was expose myself to more danger than I should have.

Russell Brazil · Answer

You should find out why they want to use those leases.  In the jurisdiction I live in, and have one property in.....the County insinuates that if you do not use the standard lease they have approved, that other leases may not hold up in court proceedings.  So property management companies in this county will only use that standard lease.  The laws here are highly favorable to tenants.

Im guessing theses companies may have at some point wound up in court and had other thought to be legal leases negated by the court at some point.

Steve Olafson · Answer

There are some advantages to using the standard forms.  The courts and management companies are used to them.  It is easier to resolve disputes when they arise as a result.

Texas has decent laws for a landlord in the first place.  I found it pretty easy to deal with tenant issues in that state.

Is there a particular issue on the lease that is bothering you?