Investor · Oklahoma City, OK · Member since 2013 · 54 posts · 11 votes
My tenant called, and they want to pay to install a tornado shelter (this is the kind that goes in the garage floor; only takes a couple of hours and costs around $2500). This is in Oklahoma, about 15 miles from where the big tornadoes hit last May. I was already contemplating getting one of these installed at my three houses, but hadn't mentioned it to them. The addition of a storm shelter will easily be worth $50/month in additional rent around here if they do leave.
They want to pay for it themselves and right now plan on staying in the house for several years. They are great tenants.
What is the best way to handle this? I know there can be legal problems if we get mad at each other later and they decide they want to leave but then decide that they want payment for 'their' shelter. I also know that I'll have to handle the permits.
A couple of options I'm thinking about:
1) Lowering their rent by $25/month, and having them sign a new 1 year contract at the new rate, along with a clause that states that they relinquish the shelter when they leave.
2) Or would it be better for me to pay to install the shelter myself, and raise their rent by $25?
After I wrote this, I'm leaning towards option 2. Would there be any issues with that?
Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
12y
I choose Option 3) If they want to install it let them however you should be able to approve the contractor because its your house. I wouldn't lower the rent. Why would you start to take less money from them? If they want to pay for it that's fine. Let them. However they need to understand that its a permanent fixture and they have no ownership to it. It stays when they go.
Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
12y
I choose Option 3) If they want to install it let them however you should be able to approve the contractor because its your house. I wouldn't lower the rent. Why would you start to take less money from them? If they want to pay for it that's fine. Let them. However they need to understand that its a permanent fixture and they have no ownership to it. It stays when they go.
Investor · Harmony, CA · Member since 2013 · 33 posts · 20 votes
12y
Jim
Personally, I would just talk to the tenant and let them know that you are willing to allow them to make this improvement, and that you will assist them in the permitting process as your contribution, while making it clear that when they ultimately leave, your expectation is that the storm shelter will stay. I don't see it as much of a risk if they leave in a year. You could deduct the cost of repairing the garage floor from their deposit if they take it with them, but most likely they will leave it in place, since it would be a pain to move and expensive to reinstall. Plus having a good tenant make an investment in the property is a great thing since they will be more inclined to stay. I also agree with Darren's comments about reserving the right to approve the contractor. The worst case scenario is not with the tenant, but a bad contractor who takes their money and leaves you both with a whole in the garage floor.
Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
12y
The permit process for storm shelters here in OK is usually pretty easy. Some companies will even pull the permit for you.
PM me if you want some recommendations on storm shelter companies.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
12y
I would work out a deal with them where they install it and if they stay at least five years, you will pay them back half the cost. You will get a valuable addition to your property and your good tenants will have an incentive to stay. Vacancies are a killer in this business. I like long term tenants.
Investor · Oklahoma City, OK · Member since 2013 · 54 posts · 11 votes
12y
Thanks for the replies. Is it necessary for me to get them to sign something acknowledging that the shelter stays with the house even though they paid for it?
Realtor · Fresno, CA · Member since 2013 · 471 posts · 225 votes
12y
I'm not sure about Oklahoma, but in California, once something is permanently attached to the house, it becomes "Real Property" and is considered to be a part of them home, no matter who installed it. Building a storm shelter into the unit would definitely qualify as something has become real property - but again, that is in California, but Oklahoma may have similar laws - you should check on that to see what it says in your state. I like what Darren said - be in control of who the contractor is and let the tenants know they can build it, but it stays with the home when they leave -
property manager · Las Vegas, NV · Member since 2012 · 502 posts · 171 votes
12y
@Jim Bentley We let tenant improve all the time. But we protect ourselves too. This is long, sorry, but these clauses can save the day. No liens please.
9. ALTERATIONS
Tenant shall not make any alterations, improvements, or additions to the Premises, including without limitation) drilling into, or securing any fixture, apparatus, or equipment of any kind to, any part of the Premises, without first obtaining the written consent of Landlord in each instance. Without limitation of the foregoing, it is the intention of Landlord and Tenant that Landlord shall maintain complete aesthetic control over any and every portion of the Premises visible from outside of the Premises. Tenant shall present to the Landlord plans and specifications for work at the time approval is sought. All such alterations, improvements, and additions made by Tenant shall remain upon the Premises at the expiration or earlier termination of this Lease and shall become the property of Landlord, unless Landlord shall, prior to or simultaneously with such expiration or termination, have given written notice to Tenant to remove same, in which event Tenant shall remove such alterations, improvements, and additions and restore the Premises to the same good order and condition as at the Commencement Date, reasonable wear and tear, subject to Tenant’s obligations under this Lease, casualty or condemnation excepted. Upon default by Tenant, Landlord may perform such restoration and collect the cost thereof from Tenant as Additional Rent. In addition, Landlord may apply Tenant’s security deposit against such obligation. Tenant’s obligations under this Section 9 shall, in all events, be carried out in conformance with the provisions of Section 10(h) below.
10. AFFIRMATIVE COVENANTS OF TENANT
Tenant covenants that it shall:
(a) -(g)
(h) Tenant shall have no power or authority to create any lien or permit any lien to attach to the Premises, or any interest of Landlord in the Premises or the Project, and all suppliers, contractors, artisans, mechanics, laborers and other persons contracting with Tenant with respect to the Premises or any part thereof shall be so notified in writing by Tenant. Landlord may record a memorandum (referring to this provision) that the interest of Landlord shall not be subject to liens for improvements made by or on behalf of Tenant, and Tenant agrees to do all things necessary to prevent the filing of any mechanic’s or other liens against the Premises or any part thereof by reason of work, labor, services, or materials supplied or claimed to have been supplied to Tenant, or anyone holding the Premises, or any part thereof, through or under Tenant. If any such lien shall at any time be filed against the Premises, Tenant shall cause the same to be discharged of record within ten (10) days after Tenant has notice of the filing of the same. If Tenant shall fail to discharge the lien within such period of time, then, in addition to any other right or remedy of Landlord resulting from Tenant’s default, Landlord may, but shall not be obligated to, discharge the same by paying the amount claimed to be due, procuring the discharge of the lien by giving security, or taking such other act on as may be permitted by law. Notice is hereby given that landlord is not and shall not be liable for any labor, service or materials furnished to tenant or anyone holding the premises, and that no construction, mechanic or other lien for any such labor, services or materials shall attach to or affect the interest of landlord in and to the premises or the project.
If they want to pay for it and use a contractor that YOU approve, AND:
1) they pay for it and reliquish it to you when they leave at no cost to you with no reimbursement to them whatsoever (and SIGN an agreement stating as such... absolutely must sign such an agreement)
2) AND they sign a waiver making you not liable for any injuries resulting from the use, install, etc. of the storm shelter.... (an absolute must to waive yourself of the liability)
.... then you might just have yourself a free storm shelter.
Make sure they sign both a liability waiver, and an "improvements/leave the shelter with the house for free" agreement. And use a reputable, insured, licensed installer that you approve.
I would not buy a storm shelter for them. Are you going to start buying everythign else they ask for? If they want granite countertops and a swimming pool, are you going to buy them those things too and charge $25 more? They want a luxury item and are willing to pay for it/sign waivers/leave it with the property/use a contractor (licensed and insured) that I approve, I'm in.
I would also use caution in that if you ever anger them or raise rent or anything else, they'll dangle this carrot over you forever. You try to raise rent and they'll say "but we bought you a storm shelter." They want a cat and you say no cats, they'll say "but we bought you a storm shelter." They pay rent late and you charge a late fee, they'll (again" say "but we bought you a storm shelter."
If they're good tenants with great references and sign both #1 and #2 above, I would probably agree to it. I mean, a "free" storm shelter. But, obviously, if anything ever goes wrong or you raise rent or they pay late, they'll hold this over your head forever. Personally, I would probably take this risk in this situation so long as they do all the above and sign all the above.
Also keep in mind that they need to make sure the storm shelter is installed property, doesn't flood or cause flooding, doesn't hit a natural gas or plumping pipe, etc.
