Am I obligated to compensate tenants?

26 Replies

I own a condo property in Dallas area that had 5-6 leak incidents from the unit above.  I, as the Landlord have responded all repair coordinate/cleaning within 24hrs after the report.  However, the tenant is now threaten to suit for the inconvenience the leak has cause them during this period.  Am I obligated to compensate tenants anything? if any, I would think I should be responsible for the utility usage during the drying/construction time, and maybe cost of their old clothing used to soak up water. (although they told me it is okay since they are old clothing that they do not need).

your thoughts, or experience sharing is greatly appreciated.  Thank you in advance!

Shouldn't the unit that caused the leak be responsible?

Depends on several factors.  Did they have out of pocket expenses?  Was there a substantial loss of enjoyment?  Was the leak your fault or an act of god?  What does your lease say?  last but not least what can they prove or what can you prove?

Personally I have never compensated a tenant for such things. I consider that part of life. You might want to check the rules. Plus I don't want to get that habit started.

@Elizabeth Colegrove I agree with you; the items that they are requesting are: 

1) the clean up work they have done before GC/Owner visits (inspection/repair).

2) Taking photos as documentation.

3) lost personal time as they need to be there watch over the pets so they don't accidentally run out.

4) inconvenience due to 2nd floor leak

Item 1-3 to me are obvious.  We never request them do any pre-clean  before any visits. photo worth thousands of words; it is a better way to report/communication. and it is not lost of personal time as we pre-scheduled visits to accommodate their time.

it does create inconvenience (@Jerry W.  is this consider as loss of enjoyment?) however it is not cause by me and by signing a lease does not mean you get a brand new perfect property to live at.

I definitely don't want to set this as a start of a routine, but want to understand the boundaries.    

Hey @Mike H. , we are not really communicating well.  First was there loss of use of part of their property for more than a brief period?  Was the use of the rest of the house significantly affected.  Example were they unable to use bathroom 1 for 2 days but still had bathroom 2?  or did they lose their only bathroom for 2 weeks and had to go down to 7-11 5 times a day to use a bathroom?  See the difference?  Some leases have specific clauses that set out what happens if there is loss of use.  Like they can break lease and move if they want, or prorate rent etc.  The written contract is important.  Having workers there for 2 hours is different from having them there 6 hours a day for 2 weeks.  Was  the leak caused by 40 year old shingles coming off or a 95 mph wind?  All of things matter in giving you advice.

Here is what I would do simply based on what I'm reading for face value:

I would tell them they could break the lease and move out, if they would wish. Otherwise, they can happily pursue a lawsuit and we can settle things in court. 

I'm not seeing much that substantiates their claims as you seem like you seem like a responsible landlord that has done everything possible, in a timely fashion. 

I think they maybe trying to simply move out, or bully you.

Disclosure: I'm unfamiliar with your state laws 

Anybody ever hear of this thing called "renters insurance"?  I hear it is supposed to take care of such matters, and that is why it is required (or recommended) by many landlords. 

@Jerry W.  Thanks for the clarification.  That really helps.

This is a 2bd/2ba condo.  All water leak are from 2nd floor unit aged pipes.  All leaks had significant moisture enter the property at ceiling and wall.  I would say it would take 48 hrs to dry per occurrence.  Guest bathroom is the most of affected area, however the tenants told me verbally that they rarely use that room.  In conclusion, at worse scenario all 6 leaks might affect the tenants up to 12 days of time during this period due to the drying time.

Construction worker came in for repair work for two separate days, 8hr and 3 hr respectively.  

In the written contract we do not have a specific clause for this type of situation.  It is a standard Texas Lease, it focuses more on the responsibilities of tenant/landlord.  

They did not have any out of packet cost except the electricity used during construction time.

Does this info help? very appreciate your time and help!

and I am not sure if this will be a big factor; based on their initial description of 20 days affected time.  I did verbally told them that I would give them 1 month rent of compensation, until when I review their submitted information, I do not see myself responsible for the items they have claimed except some inconvenience time as described in previous post.

I have to admit this was a stupid hot-headed talk, not sure if there is a way to get myself out of this hole.

If there were 6 separate instances of leaking requiring 2 days of dry time I would definitely pay their electricity bill.  I do not see how they can justify lost wages through.  They do not get more than  a few dollars for taking pictures at most it only takes a few seconds and a phone.  Just to be sure why not take the lease and demands to a local attorney and get his advice.  He will know local laws and maybe even the track record of the local judge on cases like this.  It should only cost a few hundred at best, ask the price in advance for 30 minutes or an hour of their time.  The offer of a months rent seems to me to be fair.  You can never really know what a judge will think until he says his decision.  Always try to be fair, it is what the judge will try to do as well.  Good luck!

@Jerry W.  Thanks for the advise; I like to play fair and will try to do so.  Thanks for your valuable time and advise.  Have a great Thanksgiving

@Jerry W.  made some good points. Mike, since you already promised them one month's worth of rent to compensate their inconvenience, stick with that if you wish. It is a generous offer. Way more than I would have offered by the way. Was there a substantial increase in utility usage as a result of the repair work? If so, compensate the difference. If not, then don't. 

Compensate the upstairs tenant too if they were inconvenienced in some way, since it was a pipe failure and not something they caused. If you haven't already, have your units inspected regularly and try to anticipate replacement needs so they don't erupt suddenly as a crisis. 

Next time a tenant asks you for compensation, don't make a decision on the spot. Buy some time to think it through. Thank them for their patience and understanding and that you will take the matter into consideration and will get back to them.

I think most tenants would be pleased with a $50 gift card for an inconvenience of this nature and compensation for the extra use of utilities.  After all, they were not deprived of substantial use of the residence and the interruption was less than a week. If they had had to kennel the animals, then you could have offered to pay for that. When we do work in a unit that has pets, our tenants just take the pets in another room and close the door. Asking for loss of personal time or work is a stretch. I think they are milking it. 

This is a real shame.  Sometimes things happen. 

There is renter's insurance for part of this but it is a major inconvenience.  You should not have told them you would give them a month free unless you meant it!  In my opinion an agreement is an agreement. 

I always give some type of compensation when something major happens.  Never for minor incidents. 

In the future, you could make sure that this is clear to the tenants when they are signing the lease.  Put something in the lease and have them initial it.  Then the conversation will be much more cut and dry.

The relationship with this tenant may be damaged at this point.  Any good will that you do show may be wasted. 

I think it comes down to your verbal agreement.

Someone vote for Jerry's last post for me please, I'm out of ammo! Excellent advice.

I may have offered a prorated rent reduction, part of the electric bill and hundred bucks. I think your greater offer may have signaled that there was a possibility of exploiting the situation, don't be too quick to cave in on demands, but be fair.

After their mention of bringing suit, I'd lean to saying goodbye!  I don't do business with people who threaten me, physically or financially. Lease terms can address such situations. I believe you can have additional covenants in a residential lease in TX, so you might consider amending your lease agreements addressing loss of use and tenant conduct. See your attorney. :)

@Marcia Maynard   

I am totally agree with your feed back and experience sharing.  I knew they had kennels but I just never thought of asking them to use it.  All services were pre-scheduled with their approval obtained, so asking tenants to place pets in kennels just never came in mind. I will put that in writing for future schedule requests just for protection. 

I actually only own the 1st floor unit, 2nd floor is owned by another LL.  Based on my search on local regulation, I am not legally bond to their claim except the utility bill + maybe 12 days of my estimate listed above.  of course, all these came afterwards and made me realized how foolish I was.  

I hope other BP newbies will learn from my experience, and I am very glad to hear all the valuable advises from experienced LL, including a podcast guest!! (awesome!!)

So, who's knocking on the upper unit landlord's door for compensation, you or your insurance co., or both?  And, was it a pipe leak Inside that unit, or from the "common area" pipes, belonging to and the responsibility of the Association?

@Mike H.

Even though you didn't personally caused this, the tenant's perspective is they rented a property from you and they didn't in any way caused this, so you are on the hook for some damages.  Just imagine if you go rent a hotel room at the Hiltons and water leaks down from the floor above, I bet you they would not charge you for your room and probably move you into an executive suite.

If it were to happen to me, I would probably count the total number of days that they were inconvenienced due to loss of use, construction, drying etc...and not charge them rent for those days on a prorated rate.  So if that's 10 days @ $40 a day, that's $400 rent credit.

On top of that, I would probably send in a gift of some sort, either a gift card or something, most likely in the neighborhood of $100 or so.

Most importantly, sit down with them, face to face, and work this out.  Educate them about the importance of renter's insurance, and set the expectations going forward.

Your offer of one month's rent is very generous.  I can't imagine they want more over that.  I wouldn't have offered that from the get go though, and not knowing what else may happen with the repair.

Now if they are threatening a suit...then they are just being unreasonable.

Also make sure you thoroughly dry out the affected areas, don't let mold take hold.

@Wayne Brooks 

the leak occurs at 40yr old overflow and tub drain.  I have obtained 2F owner info so for each leak occurrence I would get photos from Tenant and forward on to 2F owner w/ follow up calls.  He is very unresponsive and hence took a long long time to get things settled.  I am the middle person between 2F owner whose unit leaks and my tenants who suffers those incidents. 

@Sam Leon Yes, you do have a good insight.  I do agree w/ the hotel example, and I treat my tenants the way I wanted to be treated as well, hence things are repaired or responded within 6hrs from notification.  nothing hinders over 24hrs.  I've pretty much flipped the entire condo w/ moisture and mold resistance boards to prevent this type of issue.  We had company came and check, no signs of mold. :)

No good deed goes unpunished :-)

I had a fire-sprinkler pipe break one winter in a 4 plex. I put some folks up in hotels for a few days, even though my lease clearly called out they should have renters insurance. Things are over and all is well now, but if I had it do over over again I would have given all of them back their deposits and told them to move out. No one wants to pay the $9 per month for renters insurance yet they will spend $50 a month on coffee, smokes, whatever...

Let them sue. Did you receive a demand letter of what they want? Then you can officially reject that noise

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Originally posted by @Mike H. :

@Marcia Maynard  

I am totally agree with your feed back and experience sharing.  I knew they had kennels but I just never thought of asking them to use it.  All services were pre-scheduled with their approval obtained, so asking tenants to place pets in kennels just never came in mind. I will put that in writing for future schedule requests just for protection. 

I actually only own the 1st floor unit, 2nd floor is owned by another LL.  Based on my search on local regulation, I am not legally bond to their claim except the utility bill + maybe 12 days of my estimate listed above.  of course, all these came afterwards and made me realized how foolish I was.  

I hope other BP newbies will learn from my experience, and I am very glad to hear all the valuable advises from experienced LL, including a podcast guest!! (awesome!!)

Good luck in sorting this out!  Thanks for putting your question out on the BP forums! After all, we are Real Estate Investors helping other Real Estate Investors to be better Real Estate Investors! And Landlords helping Landlords to be better Landlords too! 

I didn't catch that the root cause of the damage was from another owner's unit and not one of your own, so that is another matter for you do deal with... the other owner/their insurance company and the condo association/their insurance company. Negotiation skills are good to have in many life situations, especially in real estate investing and landlording. 

I also agree with @Bill G. about interactions with tenants who are quick to threaten a legal suit. Keep a close eye on them and consider you may want them to move on out of your unit. (P.S. I helped you Bill G. vote for Jerry W., but would have on my own too!)

Maybe I missed it but how long have they been tenants? Has the relationship been good other than this? It sounds like you're a very responsive landlord & the problem was not caused by your neglect. That being said, it still doesn't soothe their feelings. 

Put yourself in their place- you're minding your own business & it starts leaking in the bathroom. If it's a guest bath you might not notice it right away & the mess is nasty to clean up. So they're aggravated & need someone to complain to/ about. All they know is they rent from you & where they live has a leak. Sure they should be happy that you are sympathetic & offered a month's free rent but sometimes people need to gripe & get it out of their system.

I suggest you definitely review your lease & modify it to cover any possible future situations that might happen like this. If I were in your shoes, I'd stop by to check that the repairs of the damage have been repaired satisfactorily. Then take the opportunity to let them know you understand their frustration with the leak & were glad they took initiative to try to clean up the mess & call you right away. Explain to them that the problem was caused by the pipes in the unit owned by the other landlord but let them know you have alerted him/her to the problem & will stay on top of it.

Sometimes just listening & validating their feelings will go a long way. Now if they are tenants that are more trouble than they're worth, that's a good opportunity to suggest they find lodgings that are more suited to them. Say something like, "I'm sorry you're unhappy & will totally understand if you'd like to give your 30 days notice."

I am lucky that I do not own any units with neighbors above, but I did have a basement flooded in one of my rentals. After clarifying that my insurance covers damage to the townhouse but not the tenant's belongings, and their renters insurance should compensate them (of course they didn't have one, and there was no real damage to the unit), I offered to pay them the estimated cost to run 10 loads of laundry, the shop vac and the drying fans I let them use for a couple of days. Generously rounded up to $150. With the clear explanation that if they keep clothes on the UNfunished basement floor with no renters insurance, I will not compensate anything the next time it happens.

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