Hiring Tenants To Do Repairs/Maintenance in Lieu of Rent by Peter Mark Heintzelman, Esq. (Copyrighted 1999 - all rights reserved) Landlords seem often tempted to "hire" tenants to do repairs and maintain premises: generally, a bad idea. Sure, it works for some of you, and some of your "handiman tenants" can fulfill this role with you successfully. From my office chair, however, I have seen way too many cases where landlords get into more legal trouble than not from engaging in such practices. Did you realize than when you "trade rent for tenant's repairs", that it creates a taxable event: bartering away rent in return for repairs actually triggers obligations upon both landlord and tenant alike to report on income tax returns the value of such barter! So, as you can see, it creates more of an issue than just a private transaction between private parties. It's a rare month in Housing Court, during eviction hearings, that we don't see the scenario of trading rent for repairs play out; often and most often disfavorably to landlords (big surprise). Tenants often testify that the rents were waived by the landlords in return for wallpapering, painting, snow removal, lawn mowing, and other maintenance the tenants claim to have done. Landlords testify that they may have made such an agreement, but that the tenant's work was of unworkmanlike quality or not performed properly, or not of value equal to the rent obligations for which the barter was intended. Evidence of any written agreement confirming the parties' agreement never seems to surface; probably because landlords "never expected this to happen." Sound familiar? Its a repetitive problem, or should I respectfully suggest, a repetitive error. How best to protect yourself from the plague of these issues coming back to haunt you in Housing Court: Just Don't Do It! Such cases "weave a tangled web", that too often causes undesirable results, not to mention bad blood between the parties, and stress to all. For those of you who can't avoid such arrangements, consider the following: 1) Reduce such agreements in writing, to be signed by both parties, and be careful to be specific about what the tenant's obligations are to obtain a credit toward their rent obligations; 2) Photograph conditions, both before and after tenant work/repairs are done; once again, pictures are worth a thousand words; 3) Require in the written agreement that tenants document their efforts, by submitting material receipts and accounting in writing for their time to you; 4) Be especially careful not to hire tenants to do work which requires a license to perform, or permits to be pulled; 5) Check with your insurer to verify the insurance risks and obligations you may have, such as worker's comp coverage and general liability risks; 6) Check with your tax advisor as to how to report the value of the "exchange". Get the picture? Its often a nightmare. It may be less problematic if you keep the rent obligations and tenant reimbursement for maintenance/repairs separate from each other: in otherwords, have the tenant pay the full amount of rent. Separately pay the tenant for repairs/maintenance. Its cleaner, and less troublesome should the relationship deteriorate requiring legal action in court. The best remedy of all, is just don't do it. Hire someone else to do the repairs/maintenance. |
