Lease Option - Who is Responsible for Repairs/Maintenance?

4 Replies

Hey BP!

When a tenant is living in your property under a Lease Option/Purchase contract...are you, as the homeowner, still responsible for repairs and maintenance? Or is the tenant responsible since it potentially will be their property in the near(ish) future? Or does it just depend on the contract you draw up with them?

Thanks!

Depends on the language within your agreements with them.  The two scenarios I see most often is where tenants are 100% responsible or are responsible for up to $X on every occurrence.  Some examples would be where the water heater goes and the new install is $1,300.  Tenant pays $X (I often see $500) and owner would pick up the remainder.  If we stick with the $500 limit, lets say the following week the dryer needs repaired and runs $200, which would be paid entirely by the tenant.  Finally, the string of bad luck continues and the roof needs $600 in repairs, $500 would come from the tenant and $100 from the owner.

Also, in the case where the owner is contributing towards the repairs, the agreement usually includes language giving them final say in any repairs.  The examples above are rather necessary but there are times when they aren't and the owner can exercise their discretion.  In a case where a tenant would like to replace carpet in the living room with hardwood flooring, not because of the condition but rather a preference, the owner can deny contributing to a project but may not necessarily prevent them from doing it as it may bring more value to the property.

Let's back up.

Statues (the laws of the state) supersede anything that can be put into a contact. Otherwise, you and I could agree a contract where I sell you a banned substance and we could tell the police and judge that it was fine because we agreed. That is not how it works.

When you are offering a property as a lease plus there is an option, you can agree a number of things. If there was a dispute (late payment of rent leading to an eviction for example), the judge does not care that much what was agreed. As a general principle, and to be verified at the state level, the landlord is legally responsible for habitability at all times. You can not change this by contact. Making sure the heating works, the roof does not leak the place can be made secure (doors and windows) are all going to fall on the landlord. At no time can the person who owns the home claim they are no longer the landlord. For that to be true the resident would need to be the title holder rather than a tenant with a lease.

So, negotiate what you like. Be aware that you could be undermining your ability to enforce the lease as just that, a lease. The more you and the resident make it look like they are the owner responsible for maintenance, the more the court could decide they have equitable interest in the property and you have to foreclose to get it back. Not good if you have an existing mortgage on the property and they are not paying. In the absolute extreme, if the contact is found to be so defective that it is not considered to be in effect, the landlord might owe back rent to the tenant. You can not collect rent on something that was not legal in the first place.

So, check the state laws and understand the limits. If the tenant wants to do minor maintenance and the landlord wants to allow them to do so, find a way to make it clear who is still legally responsible (they ask you for permission to make a change and the change is not required for habitability). Speak with a savvy lawyer if you really want to know the rules in your state. Many lawyers are not very clued up on this as it is a very niche situation.

Hello Brandon!  I tend to agree with the previous responders.  The contract can discuss anything including who is responsible for what.  I agree that the maintenance agreement that makes you involved in major decisions that are voluntary and you hold them responsible for all repairs 100% under $500.00 and any that effect value.

Good luck to you!

Thanks for your insights! I like the idea of an agreement that shares responsibility depending on the amount of the repair/improvement and its effect on the value of the property.

I'll also make sure to consult with a knowledgable lawyer about Florida's laws in this area 👍.