Lowering rent for tenants to take care of maintenance

34 Replies

kind of hard to fire your tenant for not doing the job.....

@Michael Plante my concern with this is that your tenant doesn't have any business insurance to do the work they will be doing, so if they get injured doing the job, or someone gets injured because the work they didn't wasn't up to par it falls back on you. If your tenant does happen to be a professional at doing the task at hand then I would work up a formal agreement to pay him for the work he does, but keep the rent the same.

pros -fewer calls 

cons - deferred maintenance that will cost you much more $$ when the tenant moves out. 

Tenants will not treat your property like you would. 

e.g. Would the tenant pay someone a couple of hundred to fix a leak under the sink? or simply put a $10 bucket there, and hope to remember to empty it when it's full ? 

@Michael Plante This can create some odd situations that reduce your leverage as a landlord. It's not a practice that's scalable or sustainable since it can create unknown and hard to measure risk. As a landlord your bread and butter is being able to do what you're doing right now over and over again, so whatever doesn't fit into that mold can and will eventually be a roadblock to greater success.

A few issues to consider:

  • Are the tenants skilled at maintenance?
  • Will they property document material costs and time spent on performing labor?
  • What happens if you're not happy with the job they did but they still want rent reduced above what you value the work?
  • What happens if they perform work, don't fix the issue, and then "re-fix" it again and want rent reduced for both instances?

In all of those situations with a contractor you'd expect (I hope) that the work would have some sort of guarantee, or if the job is done poorly that the reimbursement would fit the quality. In those muddy waters the tenants would likely argue that they're doing you a favor and that you should just "be fair" and eat the cost, which of course isn't fair to you.

Those are only a few cases that would create challenges for any landlord, and if a landlord-tenant dispute were to go to court having those arrangements with a tenant weakens your position as a landlord.

There is an important distinction, where if the tenant is an actual contractor who does work on residential properties and actually bills and warranties their work through their company. That situation could be fine as long as everyone is incredibly clear about the professional distinctions, but it can still create bad blood if something were to go not as planned, at your risk of incurring unexpected vacancy. Typically I never see that discussed as that situation though.

Suggestion? Don't do it. 

If you do this, remember you pay taxes on the full rent amount, not the reduced amount traded for services.

I agree with all of the posters.  This is a bad idea.

One of my rentals is rented to an employee of my contractor.  He was doing work on the place while it was between tenants, knowing most of the work he does is for landlords he asked if it was for rent.  He and his family has been there since 2015.  With the contractor's blessing, I give him odd jobs in exchange for rent credit at about 60% of what I would usually pay my contractor.  It's usually handyman jobs that my contractor only does because of the other work I give him that my husband could probably do himself like minor plumbing.  I make sure he doesn't do anything dangerous like getting on the roof due to liability.

I dont do it but for measurable activities it is an ok option if it doesnt create liability. Taking out the trash, sweeping common areas, gardening. Snow clearing not so much.

Great points!

I truly Am appreciative to each of you 

So no one has leases with something like tenant is responsible for maintenance items up to x amount 

So it is a bad idea to just let a tenant shovel the snow?

For a SFH we have it built into the lease that the tenant is responsible for snow removal and lawn maintenance. We do not offer a discount since it is required. I would not do this if I had an apartment building.

All other maintenance issues we take care of and do not charge the tenant. I would not want to risk a tenant ignoring a small problem to avoid having to pay for it and then have it turn into an expensive problem for us.

@Alex Cornwell I should have been more clear for single famlies in RI I have them shovel the snow but I would not in a MF. For SF I would not give them a break on rent for any maintenence, it is included or not in the lease but MF it is different.

This never ends up working long term. Bad idea.

It opens up the book to negotiations for future things that you don't want to negotiate.  

Any stories for those who have tried it on multifamily properties?

My single family tenants do it on the homes as part of the lease, but I'm looking at a smaller multifamily and the landlord currently pays a tenant to do it. My understanding is that it is a payment as opposed to discounted rent to keep it separate.

Avoid tenant rehab work for reduced rent if at all possible!!  In addition to previously stated issues (insurance, liability, etc.) depending on the state of your rental property, there may be state statutes against required tenant work without written consideration.  In Minnesota, where I practice real estate law, Minn. Stat. 504B.161 permits just this type of system, but only if agreement supported by "adequate consideration" and "in a conspicuous writing."  In sum, unless this arrangement is highly detailed, it raises the likelihood of conflict between the parties.  If the tenant takes issue with this arrangement or has alternative financial reasons to modify the deal, he/she can provide 14 days notice, and if not addressed, deposit rent into court and bring a 504B.385 rent escrow action.  Court results range from rent abatement of prior rent paid or any judicial option found in 504B.425.  There are also issues of landlord covenant of habitability which in Minnesota cannot be waived (at the end of the day the landlord is responsible should the apartment be uninhabitable, not the tenant who did not perform the work).  Having a separate contractor removes this landlord/tenant relationship all together.  Yes, you may keep standard caretaker work for cleaning, snow, lawn, but (in Minnesota) make sure to state on the lease specific monetary consideration ($40 month for snow, $20 month to clean debris, etc.).  At the end of the day, DIY can lead to trouble.  Do your homework or consult a local, landlord tenant specific attorney.  

You can do it as a separate contract (not reduced rent) with a tenant but the tenant must have proper liability insurance. They would be hired as a private contractor. If a stone flies out from under a lawnmower and puts out a child's eye or they trip and fall breaking a hip while doing work you do not want to be held liable.

Personally I would never trust a tenant to be responsible for any maintenance on a multi unit property. 

@Michael Plante ,

No, No, No.   Everything about the idea is a no.   Your tenant knows he can move,  so if he doesn't do a good job, it won't matter to him.. big dose of  "not my problem" and there's way too much room for error! 

The only exception would be if they say are a plumber, have a business and are licensed/insured and you can work with their company.    

Originally posted by @Michael Plante :

Great points!

I truly Am appreciative to each of you 

So no one has leases with something like tenant is responsible for maintenance items up to x amount 

 That's a different question altogether. Lots of landlords (I'm not one of them) have in their lease that "Tenants are responsible for maintenance/repair items up to $X ($50/100 seem to be common). I don't like the idea because I don't trust tenants to take care of things the way they need to be cared for, nor to just ignore things altogether since they're going to be paying out of their pocket. In any case, that's different than paying/crediting your tenant for doing maintenance/repairs, even on their own unit. Which I also would not do.

I believe in compartmentalized relationships. Tenants are tenants; handymen are handymen; contractors are contractors; friends and family are friends & family; and ne'er the twain shall meet. 

Originally posted by @Alex Cornwell :

So it is a bad idea to just let a tenant shovel the snow?

 It's only "bad" if you don't have a way to enforce it.... the quality of the job is subjective to an extent and it's much easier to fire a company vs your tenant. You might also run into issues with the tenant if you raise the rent to take care of the stuff they aren't doing, not impossible to deal w/ but likely an added headache. 

I've paid my tenants if they cook care of 100% of the Lawn care (spring/summer/fall) as well as the snow removal (winter) but have always kept he rents closer to market rate. If they do all thew work in January, I pay them $50 Feb 1st. If not, they still pay market rate.

I've never paid them to do handyman/professional work since I'm liable if things go bad. If my plumber does  a bad job I can have them re-do their work, but can't necessarily go back to the tenant if they're no skilled in that area to begin with.

Bad idea. You will have problems arise every month to offset the tenants rent. Also, how is this written in your lease?

Michael,

Check with your agent to see if the FL Workers comp. laws are similar to CT.   In CT, the Worker Compensation Board makes the determination of whether or not a person was acting as an employee at the time of the loss.   If the person who is injured, is determined to be an employee of yours at the time of loss, you or your workers comp. policy are responsible for the medical and Lost earnings based on the state statutes.   Even if it is a bogus claim, you or your company has to argue the case (Lawyers fees).   Here in CT there are tests that they use to determine the status at the time of loss.   Things like, who directed the work, how were they paid, who supplied the tools, equipment, & materials, do they work for anyone else, etc.  Hope this helps

I agree that is it a bad idea, usually the tenants idea for a reason from my experience :-).   Being in MN I like

Brad Schaeppi's response.

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