The 7 Factors Of Rental Relationships
When the contract is all drawn up and signed, the tenant has moved in and the landlord is getting his rent; what comes next?
Is it the happily ever after ending where all tenant to landlord interactions go smoothly and simply?
Does the tenant respect the property and always pay his rent on time?
Does the landlord keep to his word; charging fair rent and taking care of property concerns?
And what exactly does the property manager do?
In my experience, I’ve interacted with numerous tenants who are renting individual rooms, single-family homes, and office spaces. A common aspect of all the properties I’ve visited is that there are almost always serious misunderstandings and frustrations on the part of tenants when it comes to property renovations that should have been done or should be done by the landlord and property manager for past and new problems. Right?
I’m going to try to clear up this maze of “who does what when what happens” in this blog post to hopefully decide on entering a rental agreement more understandable for both parties.
I’ll be covering the following 7 points to help justify my position:
- Pre-move in Contract.
- The Collateral List.
- Pre-move in Renovation Power and Execution.
- Post-move in Renovation Power and Execution.
- 3rd Party Property managers.
- Closing Contract.
- Breaking Contract.
1. Pre-move-in contract.
Arguably the most important part of understanding the relationship between tenant and landlord is in this first section.
For both parties involved, the contract sets the tone, expectation, and precedent for most if not all roles in the relationship when specific things occur. The contract is NOT just a declaration of who pays what, to live where for which period.
Non-vigilant tenants are usually the ones to end up disadvantaged due to contracts. The Landlord likely has a team who’s helped him draw up a contract that covers himself as much as possible; typically at the cost of the tenant.
That being said, the tenant isn’t just a sitting duck when it comes to the contract; even if they do act rashly and sign it without going over it fully (which should never be done). Most state laws are by default always in effect to protect tenants from landlords and if cases ever got too serious to go to court; state law typically favors the tenant.
Taking it to court is usually the worst and last case scenario and to avoid it, both parties should just take time to properly overlook the contract and sit down to discuss it. Taking special consideration to the following:
- Rent payment dates and Late fees.
How much does the tenant have to pay the landlord? When those payments need to be made and the repercussions of not making payment deadlines.
- Occupancy limits.
Who is and is not by the law of agreement allowed to live in the property. Allows the eviction of tenants who try to sublet without permission.
- Term of tenancy.
Is it a rental agreement; typically a month to month agreement or a fixed-term lease which can extend to quarterly, bi-annually or annual obligations.
- Deposits and fees.
What fees are legally deductible from the deposit before the tenant has to pay for damages and when and how does the tenant get back their deposit when they decide to leave.
- Pets restrictions
Are pets allowed; yes or no? If yes what type of pets are allowed, how many of them and where can or can’t they go?
- Repair and maintenance power.
Clearly defined responsibilities for who pays for what, when what happens. It also controls the renovations that the tenant can and cannot make without your consent.
2. The collateral list.
Our last point under “Pre-move-in contract” talked about the power dynamic for rental property repairs and maintenance. The “Collateral list” is a separate form of documentation that directly links to that aspect of the contract which is often the start of most friction between tenants and landlords.
The document is a list of the current state of the rental property before and during the tenants’ stay. It is brought up and signed by both parties at the beginning of a rental agreement and is updated periodically during the tenancy.
This protects the tenant from having to pay damages for damages that occurred before their stay or are the result of natural wear and tear. As well it protects the landlord from tenants who cause unnatural destruction to property.
3. Pre-move in Renovation Power and Execution.
With the terms and details of the contract and collateral list agreed upon and signed; pre-move-in renovation can take place or be reviewed if they had already been done.
The legal consideration of pre-move in renovations is that a landlord is not allowed to falsely advertise a property towards a prospective tenant. If the property was listed as having 4 bedrooms, borehole water access, and a newly installed flooring; it has to have all the above verifiable to the tenant and the law for the contract to take effect.
At this point, tenants should have already made their special request renovations from the landlord such as fixing door hinges, fumigating against pests and fixing damaged tiling from the previous tenant.
4. Post-move in Renovation Power and Execution.
There are 2 types of post-move in renovations that occur during a tenancy. Tenant driven renovations and Landlord driven renovations; these can be further categorized into being fixed or temporary renovations.
Tenant driven renovations are renovations requested by the tenant or landlord at the cost of the tenant. If the tenant break and fixes a door, wants to mount a temporary wall TV station or repaint a room at their own cost; it’s a tenant driven renovation.
Landlord driven renovations are renovations requested by the tenant or decided by the landlord at the cost of the landlord. If the landlord wants to place outdoor furniture, bring in new wardrobes or repaint the entire house at their own cost; it’s a landlord driven renovation.
Fixed or temporary renovations identify whether the renovation is intended to stay in effect even when the tenant leaves or whether it’s only in effect for the period of the tenants’ stay.
As detailed above, the person who pays for the renovation is the deciding factor for who it’s driven by – not the person who requested it. As well, any post-move in renovations must be consulted between the parties.
Tenants not only need to ask for permission to make most forms renovations but will also usually have to request to make the renovation with the company they want to use.
Landlords, on the other hand, need to request or make plans for the tenant if the intended renovation will be a hindrance to their rental period. Such as if changes are being made to plumbing; the landlord will need to make a plan for the tenants’ bathroom and general water needs.
5. 3rd Party Property Managers.
Some landlords will opt to use a 3rd party property manager in the form of an agency to deal with most tenant interactions and responsibilities.
The agency mostly acts as an intermediary between the tenant and landlord; in charge of hearing tenant grievances, collecting, inspecting the property and listing damages that need to be renovated and automatically dealing with issues that come under an agreed-upon cost.
When it comes to dealing with substantial damages or renovations; the property manager agent only has the power to act within a contractual protocol or relay the issue with the landlord who then decides how to ultimately hand the grievance.
Agents will routinely inspect the property to update the collateral log for new and progressing damages. Dependant on the cause of the damages, they will either pay subtracted from the tenant deposit, compensated by the landlord or compensated by the tenant.
6. Closing Contract.
In this case, closing the contract represents either a mutual ending of the rental/lease agreement or a one-sided legal cancelation of the agreement not due to breaches of contract.
Closing a contract often but not always means that the current tenant and landlord are parting ways. At times a contract closes to be replaced with a new one such as in cases where after the scheduled close of the contract, the landlord decides to charge more rent for the property. A new contract would have to be drawn up.
A closed contract can be renewed if the exact terms are still agreed upon and both parties wish to continue the tenancy.
In the case that a closed contract is resulting in the moving of a tenant, agreed-upon provisions must be made for the returning of the tenant’s deposit (less agreed-upon damages). In cases where the tenant has enriched the landlord through agreed-upon tenant driven renovations they made; there may need to be provisions to compensate the tenant.
7. Breaking Contract.
Either party breaking the contract by doing something that goes against contractual obligations will either result in financial reimbursement to the affected party, cancelation of the contract or litigation.
The affected party must be able to prove without a reasonable doubt that they have been contractually or legally wronged by the other party. As such it crucial that both parties; as stated in the first section of the blog, have “read, understood and agreed on the contract” as well as default laws such as those for tenant rights.
Aside from the landlord ensuring that the property is habitable without risk to the tenant’s life, most breaches must be explicitly stated and identifiable within the contract. This is why addressing all needs and expectations pre-contract signing is so important for both the tenant and the landlord.
The landlord needs to be able to prove that a mutually agreed-upon contractual breach has occurred before they can evict a tenant or charge damages.
The tenant needs to do the same to exit the contract before its scheduled end, file for damages or legally encourage the landlord to commit to specific renovations.
Ultimately, it’s in the interest of both parties to peacefully get along as regardless of whether damages are charged or litigation is put into effect; the stress incurred from the event will likely negatively affect both parties.
The best thing is to state everything upfront and in the contract. The second best thing is to ask for a contract revision now for missed obligations that are important to one party in the relationship.
Nothing is worse in a rental contract than undefined responsibilities.