Evansville IN huge rental issue

[Christopher Labonte]

Morning all!

I own a rental property in Evansville Indiana, and it preforms fairly well.  I do have a issue that's rearing its ugly head now.  One of the units lease is up March 31.  They called before the 1FEB to let us know they were giving they're 30 day notice.  Apparently they weren't aware of the lease (somehow...).  They also are about 200 dollars behind on they're water bill.  Unfortunately I only have 1 meter for this building (its a quad), but I do have individual in line meters going to the individual units.  I'm getting the feeling that im gonna end up getting stiffed.  

My property manager suggested when I bought the building that I just do a flat rate charge, and knowing what I know now I wish I had done it.  I was also contemplating shutting the water off to the unit, but I read a few BP posts and everyone says that's a terrible idea.  With all this in mind, does anyone have any suggestions on how I might go fixing this mess? Its either that or go the legal route, but with them moving in 2 weeks it looks like they're going to disappear.  All ideas are appreciated!

[Marcia Maynard]

Sorry to hear about this. Hope for the best, but prepare for the worse.

A few thoughts...

1. Since you have a property manager, they should be on top of this to mitigate your losses.
2. The four units are not separately metered, yet you say the tenants are behind on their water bill.... hmmm. Does this mean you are dividing up the bill that you are paying to the water company, and separately billing each tenant a portion?  That is your folly. It would have been better to either separately meter each apartment with the water department, which can be quite costly to do. Or you could have included water in the rent and charge more rent per unit than you currently do. We own an 8-plex that's not separately metered, so we include water at no extra cost to the tenants. But we do factor our expenses into the rent we charge.
3. You CAN NOT turn off the water the unit. That would be illegal to do. It would be construed as a "self-help eviction" and land you in court. You would lose.
4. If the tenants intend to vacate before the end of their lease, you can't stop them. People can move when they want to move. However, they will be breaking their lease one month shy of it's expiration date.  There will be consequences that you can impose according to the terms of your rental agreement. Does your rental agreement have a lease break clause? Follow it.  
5. Did you obtain a sufficient security deposit? Hopefully you did. At the end of tenancy your property manager will be doing a move-out inspection and an accounting of the monies owed by the tenant. In accordance with the landlord-tenant laws for the state where the rental property is located, a final report on return of deposit should be made. Typical deductions from the security deposit include:

• Unpaid Rent (past due)
• Unpaid Utilities (previously assessed and not yet paid)
• Unpaid Fees (previously assessed and not yet paid)
• Missing items
• Damages
• Extra Cleaning
• Lease Break Penalty

6. If after all the deductions the tenant still owes you money, the final report will show an amount still owing and a statement date of when those monies are due to you.  For example Due Upon Receipt or a specific due date within the next 30 days. You choose.

7. Then there is the matter of collecting on past due amounts. If the tenant fails to pay what is due to you in a timely manner, then the next step will be to send a "demand letter". This is the first step toward collection. A well written demand letter will motivate the tenant to pay what they owe, but not anger them. Open and honest communication, kind and professional, may work toward achieving your goal.

8.  Since the tenants are still in residence, the property manager (or you) should be working on getting them to follow the terms of the lease agreement and to pay the utility bill now. Everything's negotiable. Some leverage may exist. They may not want this to tarnish their rental history or credit history. So be clear about what you need them to do and the consequences of non-action. The goal at this juncture will be to facilitate a smooth move-out with the least amount of monetary loss and the least amount of damage to your property.

Good Luck!