October 1, 2003
I recently heard about a landlord whose rental agreement provides that his tenants pay the first $35 of any repair on the property. He was so pleased with himself: he got almost no repair requests. Before you get all excited, think “that should slow down the calls,” and start planning how to incorporate this idea into your management system, think about this.
Tenants didn’t call for repairs because they knew it was going to cost them $35 for the “privilege” of having the landlord send someone to fix anything. They didn’t call if shingles blew off the roof and the rain came pouring through the hole. They didn’t call if the electrical system shorted out (a good possibility with this landlord’s style of property management) and threatened to start a fire. And they certainly didn’t call if the natural gas line got a hole in it and threatened the lives of everyone in the building; they would just open windows and put a fan in it to blow the gas fumes out of the unit.
Just about every Landlord-Tenant law has a provision against “unconscionable clauses.” An unconscionable clause is one where the tenant “agrees to the . . . limitation of any liability arising as a result of the other party’s [landlord’s] wilful misconduct or negligence or to indemnify the other party for that liability or costs connected therewith.” (Oregon Landlord-Tenant Act at ORS 90.245(c))
Would a clause such as the one described above in a rental agreement be “unconscionable”? Probably. Landlords have a duty to maintain their premises in a manner that does not endanger the health and safety of their tenants. The “first $35” workaround almost assuredly violates the letter and spirit of the law, because it discourages tenants from exercising their right to have a safe and habitable home.
But even if it were not an illegal, unconscionable clause, how stupid to have a clause such as that in your rental agreement. Your rental properties are investments. Running your rental investments is a business. A clause such as the one above, and its sisters and brothers, do not protect your investments and do nothing to boost long-term business success.
Poorly maintained and managed properties deteriorate. Deteriorated properties won’t fetch the rent that a well-maintained property will. Deteriorated properties attract bad tenants. Deteriorated properties sell for far less than well-maintained properties do. You got into the rental property business to earn money now and in the future. Letting your investments slide into a cesspool won’t make you money.
Plus–having such clauses in a rental agreement shows lack of respect for your tenants. Landlords who have placed unconscionable clauses in their rental agreements probably have good reason for not respecting their tenants. These landlords probably rent to the first warm body who shows up with cash. These same people trash the property and never pay a dime of rent again, further debasing the property. No way a landlord can get inspired to meticulously maintain property for people such as that.
Fact is, the vast majority of tenants, in the neighborhood of 95 percent, are good ones. They pay their rent on time and take pride in their homes. They don’t like to live in ill-maintained homes.
Respect your properties and respect your tenants. Your rental agreements need to reflect both.