I'm a recent lurker, first time poster. I purchased my first investment property back in September...an 8-unit building. The previous owner was a bit laxed in his management style. He did not regularly increase rents so they are WAY under market. The tenants were permitted to get away with quite a bit within the building, including late payments. And, the previous owner was not exactly attentive to the tenants and building maintenance. Needless to say, I have my hands full.
All of the tenants leases are up on 12/31. I am not in the process of providing them with new leases, which includes rent increases. One particular tenant acted as the "quasi" maintenance person and handled the grass cutting and snow removal for discounted rent of $50 / month. This was a loose agreement with the previous owner, as the lease simply stated that his rent owed was a lower amount and did not specify any details of their arrangement. Furthermore, the previous owner provided the tenant with the equipment to do so, such as a lawn mower and snowblower. Needing to get this particular tenant a new lease to sign, as well as winter fast approaching, I am in a bit of dilemma on how to handle this situation.
Here are the options that I come to mind:
1. Continue to have the tenant perform this work for a reduced rent using my equipment using an informal agreement similar to what the previous owner had.
From what I have gathered here in the forums, this may not be a great idea. The tenant may not perform the work and he will continue to pay a reduced rate. Furthermore, I may be exposing myself to a whole lot of liability since I would be providing the equipment.
2. List the monthly rent on the new lease at the reduced rate for the tenant performing the work but specify on the lease that the tenant is responsible for lawn care and snow removal.
This seems to be a more formal agreement as the terms of the lease then specify that this tenant is responsible for those two items. The leases for all other tenants would note that the landlord is responsible for lawncare and snow removal. If the tenant did not perform the work then he would be in violation of the lease and I could threaten with eviction. Or, I could hire the work out and send him the bill; however, the likelihood of him paying would be slim.
If I provided the equipment, then I may still be exposed to all the same liability problems.
3. Set the rent at the regular rate and then draw up a contract and pay him to perform the lawncare and snow removal duties; effectively, reducing his rent.
This seems like a better option than those mentioned above as it would keep things separated. If he failed to perform the duties, then I could decide not to use his services and hire someone else. He would then still be "locked-in" to paying the regular rent rate.
If I provided the equipment, then I may still be exposed to all the same liability problems.
4. Hire an outside company to perform these duties.
This would be the "cleanest" solution. However, this tenant would likely have a difficult time paying the regular rent rate. In addition, the grass cutting and snow removal will likely cost me quite a bit more than the $600 that the tenant was receiving via a rent reduction.
I currently have two apartments that I have gutted to the studs and that I am renovating. As I stated, the previous owner did little upkeep to the building and these two apartments had tenants who destroyed them. I knew this going into the purchase and I already had plans to renovate each apartment as it became vacant. This would allow me to bring in higher rents and attract a different class of tenant. Therefore, I am trying to save money where I can and would like to avoid losing a tenant at the moment. Once the apartments are renovated, rents are more inline with the current market, and I am bringing in more cash then I should be able to absorb the cost of paying an 3rd party business to handle these the grass cutting / snow removal.
If I opt to have the tenant continue to cut the grass and snow removal, I have kicked around the idea of selling the equipment (even for $1) to the tenant. That way the equipment is his and he is responsible for maintaining it. I would think that this would then remove me of any liability associated with the equipment itself.
However, I still have the concern of the tenant not having any liability insurance himself. What happens if he gets hurt doing the work? What happens if he damages my property or another tenants property while doing this work? What happens if someone slips and falls because he didn't clear the sidewalk or entryway of snow / ice? On the other hand, I would likely have these types of concerns / problems if I hired a neighborhood kid to perform these tasks as well.
I would love to hear your thoughts!
