Foundation damage and other issues

[Jessica G.]

Hello all! It has been a few days since my last post; therefore I have new questions.

In 2006, we purchased a SFH that had been flipped. A few months after we moved in, the house started to crumble around us. It turns out that the under-the-table foundation work the flipper had performed was just enough to hold the house up while it was on the market. The house needed $17,000 in foundation work, then another $5,000 in plumbing issues discovered during the excavation for the piers. (I assume most flippers are not so unethical, and yes, we had an inspection.)

The foundation work came with a lifetime transferrable warranty.

We started renting out the house in 2011. We haven't been inside the house much since then, because we have a PM company (see my other thread in this forum for that background. We are taking over the management as soon as the current lease is up on April 30).

The last time we were inside was early in the summer, right after the new tenants' lease started. We were going to put it on the market for an investor, and our agent wanted to go in and take iPhone pictures (yes, I'll make another thread about HER later). At that time, the house was in normal condition (although I was pretty sure that there were at least two extra adults not on the lease living there).

A couple of weeks ago, our PM company emailed us and said the renters were reporting enormous, 1-inch cracks in the walls from apparent foundation problems.

The foundation company with whom we have the warranty went out to the property last week. We haven't heard from them yet. Will call Monday.

Today, I went over for a walkthrough because I wanted to see these cracks, since the last time we saw the house, it was fine.

It was horrible. There were probably 40 cracks in the walls and ceilings, some of them incredibly wide. The floor is separating from the baseboards. It is hundreds, maybe thousands of dollars in damage. "How long has this been happening?" I asked while walking through. The tenants' daughter piped up, "AT LEAST SINCE THIS SUMMER!" Her mom kind of laughed and didn't answer.

Also, the carpets (admittedly old) were filthy, the walls and molding were really grimy, and the laminate in the kitchen had 1/2" separations between the planks, also unreported.

My husband is furious, and thinks we should keep the entire deposit and require more payment because the damage was exacerbated so badly by the delay in reporting it. It is also spelled out in their lease that they need to water the foundation; there is no evidence that they have been doing so (soaker hoses, etc.).

These tenants call the PM company for small repairs constantly: Running toilets, broken burners, etc. That's fine, but they couldn't bother to tell us that the house was cracking around them?

What are your thoughts on this? We are in Dallas, Texas and have let the PM company handle everything involved with being landlords so far. We have only recently decided to take the reins and begin educating ourselves, so we don't know how to handle this.

[J Scott]

Given that you said these tenants call the PM company "for small repairs constantly," that tells me that there have been contractors (representatives of the PM company) in that house on several occasions since last summer. Not only did the tenants not report the damage, but the contractors didn't report to the PM company what was clearly structural damage. While there is certainly some blame on the tenants, they can argue that they didn't know what was going on; but representatives of the PM company (the contractors) would have a harder time having that explanation accepted.

Ultimately, since the tenants reported the other stuff, there's no reason to believe that they were too lazy to report the structural issues; clearly, they were just too ignorant about what was going on. At least that's how I'm guessing a judge would see it.

As for you keeping the deposit, I don't think that's reasonable. If anything, they could argue that due to the damage (and potential risks of continuing to live there), that you should put them in another place until the damage is fixed. I'm not saying that's what you should or shouldn't do, but I could easily see them making that argument.

Regardless, here are the lessons learned:

- Be more careful when buying from rehabbers. I hate to have to say this, but many of those in this business aren't as ethical as the rest of us.

- If you know that there was structural or other complex work done on the property, make a point to verify that the repairs were actually successful. You (or the PM company) should have visited the property at some point between last summer and now to check to make sure there were no further issues after the foundation repairs.

- Always find a reason to enter the house at least once every 3-6 months. I like to put in the lease that I'll enter the house every quarter to replace the HVAC filter. This gives me a chance to check the place out myself (or have someone I trust check it out).

- You thought that they might be violating the lease by having extra people there, but you clearly didn't act on this earlier. The fact that you waited until after you discovered all the damage could make it harder to evict at this point (since the tenants could argue that you're just looking for an excuse to kick them out so you can more inexpensively do repairs).