How Do You Invoice a Tenant for Damages?

Question

While a tenant is in place and damages property or is non-compliant with a rule that has a fee attached, how do you charge your tenant? Do you write up an invoice? A demand letter? Write it on a notice to conform? Have a standard form you fill out and give them? Tell them to pay it now; before the end of the month; pay it with their next rent? Hand it to them? Mail it to them? Serve it?

One of my current tenants has two very destructive children. I am preparing to charge the tenant for damages they caused to the unit, the shared common areas, and the landscaping. I want to improve how I do this and hope you will share with me your best practice. Thank you in advance!

Account Closed · Answer

Good job on finding this stuff and holding them accountable while they are still occupants! We do routine inspections for this reason. It is much better than getting "surprised" when they move out. We invoice and line up the work. We don't allow tenant to do the work. Don't use the security deposit while they are still occupying the property. If they don't pay, the invoice then it is taken from the rent. Like @Roy N. said, you apply their payment to all other charges first. Then if you need to take it further you are pursuing them for rent money. Careful on the common area stuff. You may need to have pictures or good documentation to prove it was them. If you don't, then just pursue the stuff that is documented and obviously them. How rent is applied and damages should be covered in your lease.

Account Closed · Answer

@Marcia Maynard it all comes down to how you have it referenced in the legal contract you signed with the tenant (The LEASE). I have my leases clearly defined that state any damages caused by the tenant outside of normal wear and tear are to be paid immediately. Any funds collected from tenant are first applied to those balances, then the rest will be applied to any rent. Tenant is given a time to challenge the damages being caused by them in writing. If they fail to do so, then they pay their rent, I then put up a 5 day notice to evict for the failure to pay rent in full, as the other amount went to pay for the repairs. But it must be CLEARLY DELINEATED in your lease. Before being a landlord, people need to check with the local munincipality about their lease requirements. A lease is a binding contract, that should not be taken lightly and shouldn't be downloaded from a free forms website or bought at an Office Supply store. This is a contract that could wind up costing you tons if not done correctly. Be safe, get it done right!

Marcia Maynard · Answer

I appreciate all of your thoughts on this. We do have it defined in our rental agreement as: DAMAGES: Tenant agrees to pay for repairs of all damages that they or their guests have caused. Landlord agrees to initiate repairs in a timely manner following discovery of the damage or can choose to defer repair until Tenant has vacated the premises. Repairs done by a professional will be billed at the professional rate. Repairs done Landlord will be billed by the job or as labor plus materials. PAYMENTS: All payments made by Tenant to Landlord after the tenancy commences, no matter how designated by Tenant, will be applied as follows: First to any outstanding amounts due for damages/repairs, utilities, etc.; second to any outstanding service charges and fees from prior months; third, to any rent outstanding from prior months; fourth to any service charges or fees due in the current month; and lastly to the current month's rent. Our rental agreement terms have had legal review and will hold up in our jurisdiction. Heck, our former landlord-tenant attorney is now one of our superior court judges! My folly has been in my timeliness of invoicing and how I invoice. @Andrea M., @Roy N. , @Clint C. , @Ryan Steele, you mention some good points. I created a form for charging contract violation fees with a "check the boxes that apply" approach. Easy and quick and states at the bottom the total due and reiterates the payment section from our rental agreement. That has worked very well. It was harder for me to wrap my head around an easy and quick way to invoice for damages, as well as the time line for the tenant to pay, before serving a legal notice on the matter. I learned long ago it is harder to get tenants to pay for damages when they are on their way out or already gone. I am firm about the security deposit staying in the trust account until after I have regained possession of the unit. No matter, there are some tenants that won't accept that they can't just "use" the security deposit to pay for damages or rent prior to the end of their tenancy. For my current situation, I am thinking about splitting the damages into two letters/invoices. One for damages inside their unit and one damages outside their unit. The children were actually seen doing some of the stuff in the common areas, and I found some of the evidence in the wall cavity of their bedroom when repairing a hole they made in the drywall.

Account Closed · Answer

A judge can only decide on the merits of the "Legality" of it. And if you follow the local laws, then the judge has to decide if the contract is legal. That is it. The lease is a contract that needs to be followed. Look at Chicago and their dumb "Parking Meter" lease deal that they can not get out of. One of the most one sided and dumb public contracts in the history of stupid politics. A judge can't decide anything other than, did both parties sign it of sound mind and with ample time to understand it. And are the terms in any violation of law. NOTE: I am not an attorney, just a guy that has been investing for over two decades and has been a landlord to thousands of tenants.

Andrea M. · Answer

I would invoice net 30 days

Steve Babiak · Answer

@Marcia Maynard - I have to admit I have only had move out damages where I have had to itemize and collect; recently a tenant had broken glass on a storm door and upon my next visit to assess things, it was already fixed. But maybe you could adapt what I do for move out. I create an excel spreadsheet that itemizes what had to be done and of course it totals on the bottom line. That spreadsheet is then embedded into a word doc that explains things; the word doc would be your basic form and the excel spreadsheet is the customization because every tenant will differ in what they damaged or neglected.

Account Closed · Answer

@Andy Luck, Here in Dallas the judges see a lot of landlords trying to get over on tenants, and they look over the lease very careful. I sit in on an eviction last week where a landlord was doing an eviction on damages to the property, and the tenant disputed the amount the landlord was charging and the tenant said the landlord did not give the tenant ample time to have someone come out and give an estimate of the damages to see if the landlord was charging a fair price. The eviction was postponed for three weeks until the tenant gets an estimate of the damages. And the landlord had everything in his lease. Joe Gore

Andy Luick · Answer

Since we switched from single family rentals to shared housing, we have almost none of this stuff. When it does occur, shoot a video documenting the damages and take plenty of pictures. We use to video the single family rentals before and after each rental. The damages during and after tenancy was one of the main reasons I stopped renting to families. @Joe Gore - what the law requires and what a magistrate judge, who in many states may not even be a lawyer, decides can be very different things. I've been using the same lease form for over 20 years....modified here and there over time to contend with situations that came up. I've only had one paragraph that a judge threw out - it had a dollar amount for each period of lateness. The judge made me switch to percentages instead. The previous dollar amount version was perfectly legal and I would have won on an appeal....but those are expensive and time consuming.....so I just made the change and moved on..

Roy N. · Answer

@Marcia Maynard Our Security deposits are handled very much like yours. The principal difference being we must remit security deposits to the Office of the Rentalsman who holds them in-trust until the end of the tenancy. Within 7-days of the tenant vacating, we provide the Rentalsman with a notice indicating whether we will either be filing a claim or they can release the deposit to the tenant. Like you, we have learned it best to deal with damages and collecting payment when they occur (or as soon as we become aware) rather than wait for the end of the lease. We invoice our tenants Net-30 and the due date is clearly indicated on the invoice. The invoice - which was derived from my other business - also indicates overdue invoices incur late fees at the rate of 1.9%/month (25.34%/annum) {Hey! - our late fees are lower than the utility companies}.

Roy N. · Answer

Joe, That will depend entirely on the tenancy law in your jurisdiction. Here it is clear we are permitted to apply payments to arrears first, but it must be documented in the lease.