Being a homeowner is preparing for potential problems, which may include asking tenants to move in, even briefly, while a problem is resolved.
In this case, do you owe compensation to your tenant? We asked Lauren Robinson of Rental Results to answer our reader's question …
Q: I have four tenants on my property and they have a fixed term lease (they only recently signed again). It wasn't that long ago, our floorboards started sucking, and it was discovered that this was due to a pipe leak under the island bench in the kitchen.
The damage is significant and is expected to worsen (due to the humidity present) if it is not repaired quickly. The insurance company has estimated that it will take 40 days to complete the repairs, and the tenants will have to vacate the premises. The insurance company will cover repairs to the floor, baseboards, cupboards and all other structural repairs, as well as loss of rent.
Our agent informed us that, whether we end the lease or move the tenants for 40 days, some kind of compensation will be required. We rely on rental income to make repayments on the property, so the fi nances are quite tight. I would be very interested to know my rights and obligations and to hear any suggestions you may have. I would also like to know what would be considered adequate compensation based on the current monthly rent of $ 3,800.
Sincerely, Bob
A: Hi Bob,
The question of whether to terminate the lease or move your tenants for the required period of time is really open to discussion with your tenants. You have a few options, as shown below:
offer the tenant a mutual termination and end the contract
move them elsewhere at your expense
compensate them for having to move for the duration of the work in progress
offer a rent reduction
If asked not to live on the property for the duration, it is generally expected that they will be reimbursed for the rent they paid for that period, unless you did not provide other accommodation.
If the property can be partially inhabited, then the compensation would be proportional to the areas they can and cannot use. However, there is no right or wrong formula; this is what can be negotiated fairly.
Before making a decision, the first step would be to discuss the matter with the tenants. Let them know the seriousness of the situation on the property; Explain what is causing the damage, how it affects the property, how it can get worse, how quickly repairs should start, the repair process and the options available to them.
In order to achieve the best result for the owner, it all comes down to good communication and a good relationship between the property manager and the tenants. Remember to put all information and agreements in writing and keep copies for future reference. Be respectful, firm and fair in your approach and be ready to refer to rental agreements.
If you decide to end the lease, it can be terminated due to the non-habitability of the property. Check the legislation of your state to know the specifics of non-habitability. For example, under Queensland law, property becomes unlivable when it is completely or partially destroyed, or can no longer be legally used as a residence. The uninhabitability of a property must be examined on a case-by-case basis. In this case, repair work is urgent, so the property can be considered unlivable until the repairs are carried out.
As for adequate compensation, there is no magic number. I would say it may not be necessary to have some sort of compensation. Again, it would depend on your discussion with the tenants.
Talk to your homeowners insurance company to confirm if you can claim any compensation offered to tenants; however, this would generally not be covered by the police. The key here is clear communication to get the best result for all parties.
Lauren Robinson is the Director of Rental Results and has over 17 years of experience in the property management industry
Main suburbs:
emerald
,
Canterbury
,
Kariong
,
sth toowoomba
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tweed heads south
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