Old House Disclosure Statement

4 Replies

Hi, my name is Nate and I am new to BP and new to rental real estate. I flipped a few homes and have decided to try a longer term approach. I am close to closing on my first deal involving 3 multi-family homes that were built in the 1920's and total 13 apartments. The homes are safe and clean, but have antique railings (wide gaps), some knob and tube wiring, and asbestos based building materials.

I am in the midst of writing my lease agreement and would like people's opinion on the benefits or necessity of adding the following disclosure statement to the Indemnity Section:

"HISTORIC HOME DISCLOSURE - The Owners disclose that the Property was built before modern building codes existed with building practices and materials that were common at the time. The Tenant(s) agrees that they will indemnify, defend and hold the Owner harmless for any damage or injury resulting from building practices or materials that were used in the construction of this Property."

Thank you in advance for your thoughts!

@Nate Baumann

Not sure that your waver would amount to any form of protection - but I am not an attorney.

Here, insurers have becoming more and more reluctant to underwrite buildings with active knob-and-tube - there are only two covering our are who will and the premiums are punitive.

When it comes to asbestos, it really depends on where the asbestos is used, whether it is friable and if there is any possibility of exposure to the inhabitants.  While most jurisdictions require disclosure of asbestos on sale of a property, there are few to-date which require disclosure when renting (but it is coming).  That said, the liability of knowing about the presence of asbestos in the living area or HVAC system (ie in plaster or floor tiles, duct wrap/mastic), but not disclosing it could come back to bite you if something ever did occur.

Much of our building stock is old here in the east - 1920s-1930s would be newer buildings in some neighbourhoods.  When we acquire a building with asbestos, we usually price the cost of any remediation into our offer and deal with any potential exposure before placing the building for rent.   That said, if the asbestos is not friable and/or in an area accessible to the tenants (or from which airflow can reach the living space) and can be contained (i.e. pipe insulation in the cellar and walls that can be easily encapsulated), then you would be fine simply encapsulating it.

1920's is kind of a new building, I don't think I've owned one that young...

With that said I'm not a lawyer or a building inspector and try not to play one on the internet. 

If there really is a safety risk to the tenants and someone gets hurt I doubt that your disclosure will help you in court or even help you sleep better. 

Regardless of the year built, if you know your property cannot meet the health and sanitary code requirements for a rental unit then you have to fix it. If you are not sure if it meets the code, call the inspector who covers your area and ask for a courtesy inspection. This will let you know what you need to fix and will let the inspector know that you are an upstanding landlord who wants to do the right thing.

I did this on my first rehab --> rent deal just before moving in my tenants and did have to fix a couple of small things, but it established a great relationship with the inspector which lasted over 15 years. 

Thank you for the thoughts. The asbestos is all encapsulated or in the attic, siding, etc.  It sounds like you are suggesting that I simply disclose that it exists. I just did not want to get people too concerned. The existing tenants claim that they were not even informed of the possibility of lead based paint. Since I am new I am just not sure how detailed to get. 

I don't think it will be much help to you to state the indemnification in the lease,  stating the condition in the lease may help when people claim they didn't know.   I go over lead and asbestos in the lease but also verbally when they rent from me.  Personally I believe anyone who doesn't know there was lead based paint  in building of this age is living in a vacuum that being said all of our leases have standard lead disclosures.  You need to give a disclosure at the time of rental  here and  I think nationally where you hand out the EPA brochure on protecting your family.  Check EPA web site. There may be other applicable lead laws in your state.  Also see the existing lease, we always put that they received the lead disclosure in the lease.

Asbestos I don't believe there is an official disclosure but we do disclose.  For railings etc you may need to fix those items for your  own protection and to get insurance. Personally  I would lose the knob and tube wiring might be tough to get insurance and even if you get it they may want you to update.  We had fuses and the insurance required they be gone in 6 months.   

 An older building is always going to have some differences based on age and go over those difference on showing a place.  Basically acknowledging with the character there are things based on the age of the property that won't change or won't change anytime soon will hopefully get you the right tenants.  We keep an eye on safety so you need to decide if things like the railings are a safety risk or building code difference.  An immediate risk to the tenant you are renting to is something to fix right away, building code or not. We have added additional fencing to a pool even though it was not required but not fixed railings that were an inch out of building code because they were not a risk in our opinion. Of course you can always have a suit happy tenant. Good luck.

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