Reasonable fees for Security Deposit retention in Arlington, Tx

16 Replies

Ok, lets get the "it depends on your state/local municipality" out of the way.  I am looking for a more general quesiton of what is a reasonable hourly rate (or per job) to charge for DIY repairs.  

For example, if a tenant chews up a few wall corners moving their things out and I am capable to doing the work myself what is a fair rate to charge, without waisting one of my contractor's time for a bid?  How about garbage collection/clean up of items left in a garage?  

Yes, I know if I pay somone to do it that is a tangable cost that I can easily justify by providing the invoice.  But should I be forced to work for free because I would prefer to save the out of pocket cost?  I am not trying to justify raking someone over the coals, just looking for what LLs with more experience in turnovers and SD retention think is a best practice.

We have been fortuniate that we have now only had 2 tenants move out of our homes in the last 7 years, one was our first tenant ever who finished her masters and moved for work and the other was an inheriated tenant of a home we bought in the 2Q of 2017.  The first one left the place imaculate (100% security depost refund) and this last one had leaks occuring for months that she never reported, and actually moved the moisture alarms without thinking to give us a call and notify us, as well as kids with permenant markers, nail polish left on the countertops, sheetrock damage, carpet trashed, oven gross, you get the picture.  

Normally, if security deposit retention is required, our plan would be to hire out the labor required to get the property ready again and just take it out of the security deposit and return the remainder.  However, in this instance the carpet alone was twice the SD and we are fully capable of doing the work to get the property back up and running.

We include the below text with our move out check list as a way to encourage tenants to ensure these items are clean and/or addressed prior to move out.  We also dont expect to charge the full amount in all instances.  For instance, we are charging $100 for 3 hours of bagging trash that was left in the garage and loose in the drive way and $50 for cleaning the oven, which was filty on the inside (not the $75 stated in the move out checklist).  

In summary, we want to do the right thing and save money by not hiring out work we can do ourselve.  As such we would love to get the opinion of the more seasoned investors as to how we can acheive this without putting us at risk of looking like we are gouging to a Judge if we are ever challenged on our itemized invoice.

For those of you who hung on this long I have included a copy of the invoice being sent for reference. I would love to get feedback that is specific to these items if anyone has an opinion.

You can use whatever rate feels fair, but be aware that if the tenant challenges it, all DIY work will most likely get thrown out.  We usually opt for a rate slightly lower than what it costs to hire the same work.

I would remove the garbage disposal before you re-rent.

I would remove the charges for light bulbs and mowing and add a comment at the bottom that you could have but did not charge for them, to show yourself as reasonable rather than petty.

As far as I am aware landlord time is worth zero. The courts consider your time to be compensated for through your investment in the property. Charging for your time as a landlord as far as I am aware will be thrown out by all judges if challenged by a tenant.

It is not allowed, your only risk however is if your tenant takes you to court for charging for your time. If they do you will lose.

I prefer to use contractors and take tenants to court to collect.

Being in Texas, keep in mind if you have to defend your deductions it will be in front of a JP Court Judge who is an elected official.  There are close to 1000 of these courts in Texas so no one can tell exactly how your particular Judge will rule. Some will allow the landlord to set a fixed cost for a deduction and some will not

My best advice is to deduct what you are prepared to defend in court

Originally posted by @Thomas S. :

As far as I am aware landlord time is worth zero. The courts consider your time to be compensated for through your investment in the property. Charging for your time as a landlord as far as I am aware will be thrown out by all judges if challenged by a tenant.

It is not allowed, your only risk however is if your tenant takes you to court for charging for your time. If they do you will lose.

I prefer to use contractors and take tenants to court to collect.

I understand your point about use contractors then get your money in court and I also understand that Canada is pretty harsh, in some respects, on landlords.  Honestly, this would typically be our preference.  This particular tenant is likely a no pay given the amount of late notices and repossession notices that have been received since move out.  As such, it seems like taking this person to court is kinda like throwing good money after bad and we are trying to document reasonable costs for a bad-debt write off and not actually expecting to receive payment.... If we do, GREAT but that seems like a very unlikely possibility.  

For the work that was required a cleaning company quoted $700, carpet cleaner laughed and suggested we just scrap it (replaced 4 years ago), and a contractor quoted $4500 for sheetrock repair, painting that was required in most rooms due to large nails being used for hanging lots of posters, replacement of floors damaged by water leak under sink that was unreported, replacement of hot water heater stand for damage from a separate water leak that was unreported, so by doing the work ourselves (its done at this point) we reduced our cost considerably, and if the tenant decides to make us whole we reduced the cost to do so considerably.

I just can't believe a judge, or anyone could say your time is worth $0 or that because you own the property you aren't entitled to charge for work required to get the property in the condition they should have left it if you do the work yourself but you can charge if you pay someone to do the work.  Of course, this assumes it is properly documented with before/after pictures and before/after property condition reports.  How do apartments account for costs of repairs when their own staff does the repairs? 

Again, I don't want to be the "stereotypical" sleazy landlord and gouge people by charging for things that were not their responsibility or overcharging for repairs, but I don't feel asking to be compensated for my time to take care of tasks they should have is unreasonable or sleazy.  I do appreciate your input and comment!

Originally posted by @Greg H.:

Being in Texas, keep in mind if you have to defend your deductions it will be in front of a JP Court Judge who is an elected official.  There are close to 1000 of these courts in Texas so no one can tell exactly how your particular Judge will rule. Some will allow the landlord to set a fixed cost for a deduction and some will not

My best advice is to deduct what you are prepared to defend in court

Very good point, I would rather error on the conservative side considering the Treble damages clause in Section 92 for unjustified deductions from Security deposits.   

Do you know of any precedence of cases like this in Texas?  I honestly, have no idea how to start research on previous court cases to determine if I am being "reasonable" by a previously tried case.

I know I am far less than the contractors were charging, but don't know if that is considered reasonable for a "DIY" solution.  I should mention that between my mother and I we have flipped about 25 houses (most work completed by us) all in the 300k+ price range (which is above average homes in Texas).  So DIY might be short changing our work a little bit if you use the standard definition.

Thanks for the helpful insight!

@James M Smith

JP courts neither set precedent or are help to that standard

Saying that in 27+ years I have never had a tenant overturn my deductions with less than a handful of challenges.  

Originally posted by @Michele Fischer :

You can use whatever rate feels fair, but be aware that if the tenant challenges it, all DIY work will most likely get thrown out.  We usually opt for a rate slightly lower than what it costs to hire the same work.

I would remove the garbage disposal before you re-rent.

I would remove the charges for light bulbs and mowing and add a comment at the bottom that you could have but did not charge for them, to show yourself as reasonable rather than petty.

Are you suggesting to not provide a garbage disposal or to replace the existing one?  In this area, garbage disposals are considered standard issue.  I see in your bio that you and your husband focus on low income housing.  However, our cheapest property is valued around 200k, in some areas this wont buy you a hole in the ground but in Texas it still buys a pretty nice home, so the expectations are a little different. Honestly, your returns are probably better but we find, in general, that we are more comfortable in the range we are in, for now.

Mowing was a cost actually incurred by our landscaping contractor and, in this area anyway, the city can be pretty quick to levy fines for having un-mowed grass (especially when it is knee high).  Also, it was knee high the day after they moved out, its not like we waited a week or two for things to get out of hand then tried charging them.

Lightbulbs are about $3 each but require a trip to the local Hardware store and time to remove the light shade, etc.   I feel like it might be taken as patronizing if I say not only are you not getting your SD back and you owe us an additional $2k but hey since I am a nice guy I'm going to wave $70 in fees I could have charged...  I just assume charge it all and if they want to question it I can accommodate at that point in time.

Do you not have the expectation that if you provide a property with all working lightbulbs that they give it back with all working lightbulbs?  Mind you, I wouldn't charge for 1 or 2 but where do you draw the line, 10, 15, all of them?  Not asking to be a jerk, it is just things like this that most don't consider until it seem like too much to them and everyones threshold is different.  This is exactly what this post was about, polling the general investor base to see what "on average" is considered reasonable.

Thank you for your input!

I know plenty of people in higher end rentals that remove the garbage disposals, it just depends on how much time and energy you want to invest in them.  Over and over again.

When we first started we charged for everything, over time it mellows out and we waive more items in favor of getting on with re-renting and our piece of mind faster.  The chances of getting paid are pretty slim, so the difference of a few hundred dollars doesn't matter to appear more reasonable to the tenant, their legal counsel, and/or a judge.  

Originally posted by @Greg H.:

@James M Smith

JP courts neither set precedent or are help to that standard

Saying that in 27+ years I have never had a tenant overturn my deductions with less than a handful of challenges.  

 Ah, thank you for the education and the history!  I have to regretfully admit my knowledge of the legal system is based almost souly on the season of Ally McBeal I watched many moons ago and the semester of BLAW I took for my BS.  

Given your relative proximity, years of experience, and Mod status would you care to weigh in on the invoiced items and amounts?  Please feel free to be honest as I feel you might be in the best position to weigh in and tell me if I am being unreasonable in any (or all) of the charges.  

Thanks again!

If you believe landlords should and can charge for their time try watching some of the e "judge Judy" type reality court shows on TV. Landlord time charges are tossed every time. Material cost and contractor fees are what a landlord may legally deduct from a security deposit..if they are lucky.

Originally posted by @Michele Fischer :

I know plenty of people in higher end rentals that remove the garbage disposals, it just depends on how much time and energy you want to invest in them.  Over and over again.

When we first started we charged for everything, over time it mellows out and we waive more items in favor of getting on with re-renting and our piece of mind faster.  The chances of getting paid are pretty slim, so the difference of a few hundred dollars doesn't matter to appear more reasonable to the tenant, their legal counsel, and/or a judge.  

In 7 years we have only had one issue with garbage disposals but I imagine if we begin having issues on a regular basis, as it sounds like you have, we will reassess.

I agree, the chances of receiving payment are slim and we aren't going to press this matter in court (blood out of a turnip). I don't actually expect this tenant to pay a dime given a number of final notices that have shown up since they moved out.

However, documenting the charges allows us to write the amount owed off as bad debt on our taxes. As such, I want to ensure our charges are reasonable from the standpoint of the IRS and, in the rare possibility she challenges us in court over the charges, reasonable before a judge.

I feel like our total amount being less than 1/2 what it would have been if we hired someone else to do it helps justify that we were reasonable with our charges. I think Greg hit the nail on the head that in Texas some JPs will allow LL charges and some won't and if I combine that with your point of charge less than the going rate I come up with something like: "Charge a fair rate for your market and accept the possibility that a Judge might or might not accept it."

The only question, that unfortunately you may not be able to assist with, is in the event that a judge decides I cannot charge for my time how likely is it that he/she hits me with triple damages and is that only on the amounts they throw out or on the entire amount (again likely based on the Judge and if they had a good day or not). Just curious if anyone in Texas, or elsewhere that has a similar law, has had this triggered on them. It seems to me it is there to punish gross offenders but likely wouldn't be triggered in most instances. But again, most of my legal knowledge comes from Ally McBeal.

Again, thank you for your input! I truly appreciate your views (albeit different than mine in some instances) on these matters. I really do appreciate the dialog and, if you aren't too peeved with me, would appreciate the opportunity to discuss your experiences in the biz and how you've structured your communications with your tenants as I imagine they are different then mine. I would be happy to share mine with you if you are curious how us country boys communicate ;) I will try to keep the y'alls to a minimum.  

Originally posted by @Thomas S. :

If you believe landlords should and can charge for their time try watching some of the e "judge Judy" type reality court shows on TV. Landlord time charges are tossed every time. Material cost and contractor fees are what a landlord may legally deduct from a security deposit..if they are lucky.

Hopefully I never end up on TV for any of my investing activities, lol.  One thing to remember about Judge Judy and the like is that even though the show is called "Judge" Judy she is acting as an arbritrator not as a Judge.  Also, the show covers the cost of air fare to LA, accomidations, and actually pays the awarded amount for the losing party.  In this instance if they just paid the 3k for the carpet replacement I would be estatic and much better off than sending an invoice that will likely be written off as bad-debt on my taxes in 2017 or 2018.   That being said, as I have stated in other responses most of my legal knowledge was comes from Ally McBeal so who am I to "judge", haha.  

Thanks for the input!

James

I'm of the opinion, if you have good before and after photos - you should have NO problems in justifying keeping all the Security Deposit. From experience, if you have even minor damage, (i.e. replace the carpet) the cost to repair exceeds the security deposit.  

@Michele Fischer had pretty good advice, IMO. For things like light bulbs it's likely too small to count, though you can expense the actual cost of the light bulbs. For mowing, that is something that you would have to do if the tenant was gone anyway--it may be that they did not live up to their obligations, but again, as it would be "Normal landlord maintenance", hard to bill for.

@James W. the problem is that everyone has different levels of experience and courts vary based on the individual wearing the robe. I hate to say it, but it's true.

In my court, the judge has always sided with me. However, I document everything very well with pictures so I can show the before and after photos and demonstrate it was beyond "ordinary wear-and-tear". I've never, ever had the judge ask me for invoices or receipts to justify the charges. I present my case, the tenant retorts, and the judge decides. I don't have experience in other states but I don't think the judge would question the charges unless the tenant questions them.

What have you got to lose? Charge them for everything. Maybe they'll pay. Maybe they'll negotiate. If they refuse to do either, decide whether to take them to court or send them to collections. In either case, you are unlikely to get a dime from them but I always send them to collections so it sits on their credit report and perhaps saves another landlord in the future.

By the way, I don't know what a "fair rate" may be for Texas but I made a similar spreadsheet for my rentals. If you're not sure what a fair rate is for changing lightbulbs or patching drywall or hauling off trash, take a contractor or cleaner out to lunch and get some estimates from them so you have local, recent prices.

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