Can I charge a tenant for my time making repairs? - In Virginia

11 Replies

Hi everyone,

My first tenant, who was a complete pain in the neck, decided to take my incentive and move out early.  I got a bottle of champagne and had a little party to celebrate... seriously, I did.

The problem is that he let the propane tank run empty and didn't heat the house properly, so now there's a water leak from frozen pipes.  It's in the lease that he's responsible for propane and also responsible for keeping the house above 55 degrees to avoid damaged pipes.  Luckily, I had a contractor come in one day to inspect the windows that he was complaining about (no problems with them, as I told him the first time).  That day we saw that the propane tank was empty and the temp inside was 42 degrees, so we have documented proof. I already have to take money out of his security deposit to cover money that he owes me, and I don't think there's enough left in the security deposit to hire a plumber.  Knowing that I don't want to take him to court for what the security deposit doesn't cover and that I don't want to take a loss, I was planning on doing the work myself, which I know I can do.

I know I can keep receipts and charge him for materials, but in Virginia, can I also charge him for my time making the repairs?  If so, is there an hourly limit?  I'm not looking to screw over my tenant, and I'm not looking to make a bunch of money on labor.  I just want to be reimbursed for the time I spent fixing what he broke.

Thanks for your responses!

-Joe

Account Closed

If you're not willing to go to court, how do you exactly plan on collecting?  If the tenant was a pain in the first place.. what makes you think you'll be able to get any money from them especially if they left early in the first place?

I'm not trying to be a Negative Nancy (no offense to any Nancies who might be reading this). But the truth is, even if you send them to collections, without going to court and getting a judgement, then garnishment, you'll probably never see the money.

 Probably going to just have to chalk it up to a loss, send the file to collections, and use it as a write-off at the end of the year.

I charge for my time . I am also a contractor . So it wouldnt make much sense for me to hire out repairs unless necessary .  Charging and getting paid over the security deposit ? That will depend on the courts , after you file and sue the tenant . 

Originally posted by @Chris Harkins :

@Joe Maciag

If you're not willing to go to court, how do you exactly plan on collecting?  If the tenant was a pain in the first place.. what makes you think you'll be able to get any money from them especially if they left early in the first place?

I'm not trying to be a Negative Nancy (no offense to any Nancies who might be reading this). But the truth is, even if you send them to collections, without going to court and getting a judgement, then garnishment, you'll probably never see the money.

 Probably going to just have to chalk it up to a loss, send the file to collections, and use it as a write-off at the end of the year.

I plan on collecting from the security deposit.  Much of it is used up, but a few hundred remains.  I wouldn't go to court for a a couple hundred dollars, if my expenses went beyond the security deposit.

Sorry, but I see the idea as trying to reach in your tenant's pocket, and you are but you're trying to justify it.

A security deposit is to "INDEMNIFY" you for a financial loss, it is not a profit center to tap into.

Even if you had a GC license, you can't charge yourself without departmentalized accounting, (the car dealer sends the trade-ins to the shop, the shop bills the sales department and the sales department ups the price to cover the shop hours, the same guy owns both sides and claims the net income) In RE, that isn't possible, making an improvement effects the depreciation to be claimed, you would be pumping up your basis in a property. Double dipping. Sweat equity and trying to be paid on top of that.

Having a GC license is irrelevant. And doing work on your own properties billing the property will be suspect, not just to taxes but predatory dealing and fraud. Barter work off with someone else and have someone else fix your owned properties. Otherwise you have a ball of worms for an audit.   

Your work is not at arm's length, it's a sham transaction charging for a loss that is not suffered as the owner. Small jobs are usual and customary for property owners, the value of such work is reflected in your equity, your ability to market your property for the income you create for yourself. Same with cleaning fees, those may not be taken from a security deposit, check with your state law as to what can be charged to a deposit and what is a billable item to a tenant.

If you have 500 units and you have a maintenance department and your lease states the rates charged by the maintenance department for services that are necessary, then that will be a different picture, but a small owner operator.....no, not from a security deposit without going to court. When the judge buys your argument of your financial loss from other opportunities missed due to your time, then s/he may grant you reimbursement. :)

@Bill Gulley

How is fixing a broken pipe an improvement that would be added to the basis rather than a repair? It adds no value to the house.  I don't see it as trying to reach into my tenant's pockets.  He caused damage to the pipes by not keeping the temperature within the range that he agreed upon in the lease, and I need those pipes back to the way they were before he moved in. 

Are you suggesting that if I fixed the damage myself at $10-$20/hr plus materials (taken from security deposit), that would be a sham transaction, but hiring a plumber at $80/hr plus materials (taken from the security deposit) would be more fair and honest?  Or are you suggesting that I don't have the right to charge my tenant for these damages?  I'm honestly not looking to cheat anyone, I'm not that type.

I understand your statement about the work not being at arm's length, and I appreciate your insight there.  I can see why that would look a little suspiscious. I've heard of it being allowed for Landlords to charge for their time for labor in repairing damages in some states, but I wasn't sure about Virginia.  However, given your concerns about the IRS and potential fraud charges, it doesn't sound like a bad idea to just pay a little more and have someone else do the work.

Often we don't see the forest for the trees, it sometimes takes a view from a different position to understand how things may be perceived and that matters.

Yes, I was suggesting that you shouldn't force your tenant to hire you to cure a problem, even one caused by them.  You aren't a plumber, you're a landlord that needs a pipe fixed, the tenant is responsible to cause that pipe to be repaired, they have a security deposit set aside for such expenses. Yes, you should call a plumber and have the tenant pay the freight.

Here's another issue, might look at state laws concerning escrowed funds, funds held in trust. You are holding the funds or have access to an escrowed amount, you're using those funds held in trust are disbursed to pay you personally, you are comingling personal accounts, your fees, with trust funds. The proper disbursement would be in paying a third party, which indemnifies you for your loss, at the expense of the tenant as agreed by your contract. That is clean, transparent, legal, ethical and good management. Now, that is to a security deposit.

Rent deposits are to pay you for lost rents, upon default that money becomes yours, it is money held in trust but reverts to you by agreement and is conditioned by the default of the tenant. Apples and oranges.

Nothing personal was meant, as to your honesty.....you were asking, in RE matters it's easy to let logic get in the way and mess up if we don't see the forest.

Don't forget, all RE is local, ask your attorney once about what is customary and from then on you'll know what you can do. Good luck :)   

I spell out in my lease who the contractor is that does the repair  ( my company inc ) I also spell out the minimum hourly charges  ( same as I charge any one else ) . I had a tenant question that 1 time , I simply explained , they cant contract for repairs on a property they dont own , have moved out of and have no right of entry .. If they dont want to pay my rates I will hire another contractor and they will pay their rates .  IN ADVANCE .    They understood at that point and it was less than they expected .  But yes I profit from my time regardless of whether I own the property or not  the tenant pays the same for damage repair regardless .

Let me preface this by saying; this is what I do in Oregon, I have no idea if it would transfer to Virginia... 

If its not spelled out in the lease who, what, and how much then I would want an invoice to point to if it made it to court. If you have it in your lease what costs are if the tenant is at fault then you should be fine. Also keep in mind that if you legally let them out of the lease and found the damage after you took back possession of the property then you have no way of proving that their negligence caused the damage and not your own. For instance, you let him out of the lease on Feb 28 and find the propane tank empty and leaking pipes on March 5, that leaves a question as to whether it was him or you that caused the problem. My attorney likes to say that landlord/tenant law has less to do with the "law" and more to do with what a judge feels is reasonable.

If you don't have those things in writing in the lease, then add an addendum for next time stating that you will charge a minimum of X per hour + materials for whatever damages the tenants are at fault for. Again, this has to be justifiable, you can't charge $100 per hour for your work when a contractor is charging $40. I charge a minimum of $30 per hour for my labor or the invoiced amount for a contractor, plumber, electrician, etc. My addendum spells out charges for the most common tenant caused damage (doors, drywall, water damage, broken windows, wrecked blinds, etc) and then state that it will be a minimum of X per hour + materials up to market rate for anything not listed. This is one of MANY ways that a really good professional lease agreement will save you time, money, and frustration in the long run.

Check with a VA real estate attorney before doing ANY of this, landlord/tenant law can vary wildly from state to state.

Updated about 3 years ago

Ultimately, you are the one in control. Most renters don't have to means or the persistence to actually take you to court, especially over a few hundred dollars. However, it would be in your best interest (and your tenant's) to treat every situation in yo

I don't see what difference it makes if you're charging him for a plumbers time or your time, either is more than the remainder of the security deposit. Snap a few pictures of the damage and keep copies of the receipts as you should be anyways.

Zero security deposit back, if he questions why, remind him about the plumbing repairs and stress to him, he's getting off lightly as the repairs were more than the remainder of security deposit. End of story no further explanations given to him. 

I know it's too late at this point, but in my residential leases, I add a clause that charges an hourly rate for repairs if the landlord makes the repairs himself (me). I think it's an idea I got here on Bigger Pockets, and it may be something you want to add to your leases in the future. 

I personally do not do the work myself because as far I have heard (not a lawyer ) you can't charge in vb . Plus I honestly prefer just hiring the work because it is easier and cleaner

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