There are few things more frustrating than inspecting a rental unit following a tenant move-out, only to find the home completely trashed. Some units may have holes punched through doors and walls, while others may be so dirty they need professional cleaning. It can get so bad you might even need to think about remodeling!
Unfortunately, dealing with damaged rental units is just part of being a real estate investor. Thankfully, there are many ways to ensure these circumstances don’t impact your real estate investing business.
In some cases, requiring security deposits up-front can help ensure your interests as an investor are looked out for. In others, working to recoup expenses after a tenant moves out can be more challenging, but is often still possible. Both may be necessary in certain circumstances.
Proactively addressing tenant damage
The best way to protect yourself from unruly tenants is by requiring a high security deposit prior to move-in. A typical security deposit is equivalent to one-month’s rent. In some cases, however, you may want to consider asking for a higher deposit. If the renter in question has a low credit score, or has a checkered rental history, asking for a higher deposit up-front could save you from trying to recoup damages later on down the road.
Include a damage clause in your lease
Another way to address tenant damage proactively is by laying out the terms associated with property damage very clearly and explicitly in your lease. It may even be helpful to include repair costs associated with specific types of damages. This ensures tenants know exactly what they’ll be expected to pay for when they move out, provided they caused any damage.
Establish a primary leaseholder
You should also know exactly who will be responsible for paying damages upon move-out. If there’s more than one person on the lease, establish a primary leaseholder to pay out all associated damages following the end of the lease term.
Be aware of damage caused by pets
Many types of damage, particularly those caused to floors, are the result of pets. If you don’t want to tear out your carpeting or resurface your hardwood floors after every tenant move-out, consider adding a no pet clause to your lease. Alternatively, you might want to charge a significantly higher security deposit for prospective renters with pets.
Screening tenants before move-in
Screening tenants effectively is another way you can proactively prevent tenant damage from occurring at your rental property. Be sure to call the tenants’ past landlords, and ask about the condition they left their last rental units in. Be wary of renting to anyone who has damaged units in the past, or consider asking them to pay a higher rental fee.
Recouping damage expenses
Unfortunately, it just isn’t possible for landlords to screen every renter who may damage a unit. If you do end up renting to someone who damages your rental unit far beyond the amount you charged as a security deposit, you’ll have to consider whether the amount of money you’re trying to reclaim is worth the time and effort.
The first thing you should do when attempting to recoup damages is simply send a bill to the tenant in question. If you plan on taking the damages to court, you’ll have to demonstrate you went through a “good-faith effort,” to recoup the damages first. This means having a record of communication with the tenant, as well as quotes from reputable companies for services needed to restore the unit.
If the tenant is unwilling to pay for the damages, your next step should be to attempt to get your insurance company to cover at least some of the damages. Call your broker to discuss your coverage, and determine if any of the policies you currently hold will help you pay for the tenant’s damages.
Preparing for small claims court
While the process of recovering tenant damages may vary slightly from province to province, they all follow basically the same course of action.
In Ontario, for instance, claims amounting to $25,000 or less are subject to the Ontario Small Claims Court. Some claims slightly higher than $25,000, but not significantly so, may also be considered part of a small claim. To recoup your expenses, you’ll have to effectively sue your tenant in the Ontario Small Claims Court.
It’s not necessary to hire a lawyer when bringing your case before a small claims court. It is more likely, however, someone with previous experience in the small claims court system will win their claim.
During a small claims court proceeding, the plaintiff and the defendant will each state their case in plain English or French – the court is designed to be accessible, and a knowledge of “legalese” is unnecessary.
After stating your case, a judge will either award damages, or side with the defendant, your former tenant. The strength of the case you build is largely dependent on your ability to provide documentation establishing the relationship you expected to have with your tenant, and the ways in which they violated the relationship.
Prepare several documents before attending small claims court. Bring a signed copy of the lease the tenant agreed to, a copy of the tenant’s identification, any orders affecting the unit issued by a governmental body during the tenant’s stay and a move-out report, detailing the damage caused and the costs incurred. The move-out report should include photographic evidence, as well as quotes from local suppliers and contractors outlining the precise expenses you’ll have to pay to repair the unit.
Fighting back against destructive tenants
Recouping damages caused by an irresponsible tenant is a frustrating, often futile task. In some circumstances, you may be better off chalking up the loss, rather than focusing your valuable time on pursuing a tenant through the small claims court system.
If the amount of damages caused are significant and extensive, the law does provide some limited legal protections for real estate investors to take advantage of. Know your rights and how to fight back, so you’re protected against the chaos of a destructive tenant.