Q: I’ve taken over the management of my family’s small apartment building and recently spoke with someone who answered my ad for a vacant unit. After talking with other owners nearby, I realized that I had set the rent $200 below market. We haven’t signed a lease yet, and I’m wondering if I can correct my mistake. –Tim A.
A: It’s a delicate matter to increase the rent after the unit has been listed or advertised at a specific rate. Whether you can do so with minimal risk of legal trouble depends, first, on your reasons, and secondly, on the extent to which someone has relied on the first figure. At one end of the spectrum, a typo in a newspaper ad, particularly one that resulted in an obviously wrong rent, could be confidently corrected. At the other end of the scale, a landlord who upped the rent to discourage tenants of a certain race or religion would unquestionably be breaking the law. You’re somewhere in between, having made a bad business decision that you now want to rectify.
The riskiness of changing the rent also depends on how far along you are in the negotiation process and whether your prospect has substantially relied on the original rent, making decisions that will now hurt her if you increase the rent. For example, if your prospect could prove that the two of you were just about to sign the lease, that she didn’t rent other similarly priced units in reliance on your stated rent, and that these other units are no longer available, she might get a judge to order you to stick with your first figure.
Finally, even if you think you can confidently adjust the rent, be aware of the possibility that your prospect may interpret your action as discriminatory. If she is a member of a legally protected class, which includes (under federal law) race, religion, color, national origin, familial status, disability and sex, she could complain to a fair-housing agency or fair-housing watchdog group, alleging that increasing the rent was a thinly veiled act of discrimination. That’s the last thing you want, since even if you explain yourself and revert to the original rent immediately, the experience of being charged with a fair-housing complaint will be most unpleasant.
Q: The apartment above ours had a huge water leak from an ancient, rusty water heater, which caused water to course down our walls and onto our floors. As a result, our apartment needs to be completely gutted, but the landlord expects us to stay in the unit and campout in a few of the undamaged rooms while the work is done. Aren’t we entitled to a substantial rent reduction or relocation to a separate apartment during the construction? –Mari M.
A: It sounds as if proper maintenance would have alerted the landlord to the age and rustiness of your neighbor’s water heater, and your landlord’s failure to monitor the signs of deterioration probably amounts to negligence. The result of that carelessness — a flood — has probably made your apartment unlivable, and if it’s the landlord’s fault, he needs to step up. If your apartment now lacks basic services, such as heat and water, and does not have a functioning kitchen and bath, it’s unfit, and you should not be expected to stay there. Unless your lease provides otherwise, you have the right to consider the lease at an end, and move out without responsibility for future rent.
Your lease may have a clause that deals with what will happen if the rental premises are destroyed. If so, it will apply here. It may give your landlord the option of offering temporary housing while repairs are being made (the two of you can always decide to proceed this way even if the lease is silent). You can fairly expect to be put up in similar accommodations (you don’t have to head for a homeless shelter, but don’t choose the Ritz, either). You should not have to pay rent during the time you’re away, and the landlord should pay the difference, if any, between the cost of your substitute housing and the amount of rent you’re not paying (in other words, you should not end up out-of-pocket). Many states will also insist that the landlord pay for moving costs and utility hook-ups, for tenants who stay away for substantial periods of time.
Things get a little trickier when tenants want to stay in a unit that is under construction but livable. If you stay in the apartment, you should negotiate a substantial rent reduction, in line with the value of living in a substandard rental. Setting that new rent, however, is not easy. You could aim for the market rent, but that will be an arbitrary guess because an apartment that is full of construction dust and without access to several rooms simply has no market value. Or, you could reduce the rent by the amount of space you’re now not using, but this method works well only when the off-limits space (like a second bedroom) is not essential and allows you to reasonably calculate the new rent (reducing the rent for a two-bedroom to a one-bedroom is pretty straightforward). When the living room is unusable, it’s a harder calculation. Hopefully, you and the landlord can come up with a figure that seems fair to both.
Q: My long-term tenant rents a two-bedroom house from me in a desirable part of town, where the rents are steadily rising. This tenant’s original roommate moved out, and he asked to bring in another roommate. Basically, he wants to sublease the second bedroom, without adding the new person’s name to the lease. My long-term tenant explained that he didn’t want a new roommate’s name on the lease, because he wanted to be able to terminate the newcomer’s tenancy if things didn’t work out. I can understand that, and I want this fellow to stay, so I said OK. Now I’ve learned that he is charging the new roommate at current market rates — he’s making only slightly less than the rent he pays me! This doesn’t seem right, and I want to stop it. Any suggestions? –Doug V.
A: It’s time for you to take a lesson from your fellow landlords on the commercial side. They, too, have encountered tenants who become landlords, by subletting part of their space; and like you, they figure that because it’s their property, if anyone is going to be making money from it, it’s going to be them. So here’s how to accommodate your tenant but still reap the benefits of your property’s increased value as a rental.
First, since your long-term tenant is asking for a new person to live on the property, you have an opportunity to re-do the lease. In the new lease, you don’t have to make any changes other than to make sure it specifies that the tenant may not sublet without your written consent, which you will not unreasonably withhold. This simply means that when evaluating the prospect, you’ll apply the same screening standards you used when choosing your tenant. The clause should also specify that if the tenant subleases, any rent received from the subtenant that is more than half the tenant’s current rent will be shared equally between you and the tenant.
This clause accomplishes your goals. By allowing a sublet, you’re accommodating your long-term tenant’s wish to remain in control. It also lets you share in the increased value of your property. Why should you share that increase? If you insist that the tenant rent the room at half of his current rent (which is presumably lower than market rates), you’ll make nothing.
You could insist that any new resident become a full-fledged co-tenant, which would enable you to re-do the lease and charge a market rent for the whole unit, for both tenants. You’d be making more money, but you’d take the chance of losing your original, desirable tenant — without the power to terminate his roommate’s tenancy, and facing a higher rent, your tenant might look elsewhere. In the end, you’re going to have to decide what’s more important: a modest windfall in the form of shared profits with your tenant or a new set of tenants who might prove to be problematic.
Finally, keep in mind that although you trust your tenant because of your long relationship with him, that doesn’t necessarily hold true for the new roommate. Your tenant himself expressed concern that the tenancy of a new roommate might not work out. Be sure to insist that any new resident pass your screening criteria before moving in. You won’t have to deal with someone who regularly leaves dirty dishes in the sink, but you will be involved if a new occupant causes damage.
Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord’s Legal Guide" and "Every Tenant’s Legal Guide." She can be reached at janet@inman.com.
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