Tenant Compensation and the Law
The question of tenant compensation arises almost exclusively from landlord/tenant laws. As a property owner, you are liable for ensuring that your rental house is in a habitable condition. In particular, this means that your rental home is clean and livable. It also means that your roof keeps the house dry and that the appliances and other elements work as they should. When the property isn’t habitable, for one reason or another, that can lead to situations where a tenant may be compensated.
Reasons to Compensate a Tenant
Some of the most common reasons that a property owner may need to compensate a tenant include the following:
Repairs. One of the most common causes a property owner would need to compensate a tenant relates to repairs. In certain conditions, a property owner may not be able to conduct essential repairs timely. Whether you are out of town or otherwise unavailable, if something breaks and causes your tenants to lose the quiet enjoyment of the rental house, you have to replace it. If you can’t, your tenant may have the repairs done within the confines of state law. It’s good if the tenant obtains your permission beforehand, but even if they don’t, the possibilities are that you’ll need to reimburse your tenant for the cost of repairs if they follow the state requirements.
Broken appliances. Sometimes compensation comes up in arguments concerning the condition and functionality of appliances. Failure to accept responsibility for broken appliances is one of the most frequent causes a property owner gets sued by their tenants. Part of this is because the problem is more complex than it first appears. Landlords sometimes argue that a broken dishwasher, while inconvenient, does not make the entire property uninhabitable. At the same time, a busted oven or refrigerator is perceived as a significant issue, and tenants may argue that the home is uninhabitable. Suppose you have provided appliances with the rental house. If one of them stops working, and you can’t repair or replace it promptly, your tenant may be justified in repairing the machine and deducting the amount from the rent, as prescribed in your state’s landlord/tenant law. This is particularly valid if your lease documents assign responsibility for the appliances to you as the property owner.
Cash for keys. More often than not, a property owner may need a tenant to vacate a property before the lease ends. In such instances, a landlord may offer to pay the tenant to move out. Property owners sometimes employ this tactic to avoid a drawn-out eviction process and encourage a problematic tenant to move on sooner than later. Considering how long it takes to evict a tenant and that you probably won’t be collecting rent during eviction proceedings, offering to pay them to move may save you money in the long run.
Although the most typical, these are not the only reasons you may need to compensate a tenant. Nonetheless, if you find yourself in a position where payment is essential, it is imperative to document everything properly and issue the funds immediately. If you are pro-rating a rent payment, keep in mind that you need to record it and notify your tenant in writing. If it is necessary to send payment to your tenant directly, select a method that creates a paper trail, such as a business check.
While landlord/tenant laws vary from place to place, staying on top of tenant compensation is important in maintaining excellent tenant relations. As a Shelby Charter Township property owner, you’ll need a complete understanding of the landlord/tenant laws that control compensation to safeguard that you are in full compliance. Real Property Management Silverstone can help you prepare a lease to cover these issues or even manage your property entirely. Contact us today for more information.
Originally published on October 9, 2020