Imagine this scenario: you’re a tenant who has agreed to rent a property from a landlord. However, after moving in, the house leaks and creaks, and all manner of other problems begin to crop up. Even more frustrating, the landlord, who seemed ultra-responsive when you were considering renting the house, is now nowhere to be found! The thought of solving the problem by moving seems overwhelming. Fortunately, there is another option: withholding rent. Rent withholding is a law that allows tenants to withhold part of their rent payment to make repairs if the landlord does not fix critical issues with the rental unit.
Investing in real estate can be both exhilarating and profitable for existing and aspiring property investors. But as the above rent withholding example shows, it also has its share of risks and requires ongoing investments for the life of the property. At MY SMART COUSIN, we know that great investments don’t just happen. You need the right strategy and expertise to make them work, which is why we’re here! As a Real Estate Investment Coach who focuses on Black, Brown, and women real estate investors, in particular, we offer tailored solutions in every aspect of real estate ownership. Whether you’re looking to buy a house for the price of a car, our personal favorite way to buy, or are looking to buy at a higher price point, we can take you from strategy to a targeted list of matching properties, to negotiation, financing, closing, and property management.
In this post, we’ll discuss what rent withholding is, how it works for landlords and tenants, and some common misconceptions about it. Stay tuned!
WHAT IS RENT WITHHOLDING AND WHY DOES IT HAPPEN?
Whether you’re a tenant or a landlord, chances are good that even if you haven’t heard the term ‘rent withholding’ per se, you’ve heard of cases of tenants being fully justified to pay less than the full amount of rent. But what is rent withholding exactly?
In short, rent withholding is a temporary stoppage in some or all of the rent by the tenant, typically granted in response to a critical problem with the property, such as required repairs yet to be made by the landlord to make the property habitable. When the stoppage is made by the tenant without the landlord’s agreement, that is typically referred to as rent withholding or repair-and-deduct. When the stoppage is a reduction rather than complete non-payment, and mutually agreed to by the landlord and renter, that is usually referred to as a rent abatement.
While at first blush it may sound like a landlord is at risk of having a rent stoppage occur for any and all repairs, the criteria for withholding rent is often quite strict. Rent withholding rules vary from state to state, but at their core, the damage caused cannot be due to tenant neglect or improper use of the rental unit. Further, the poor condition of the property must be severe enough to be hazardous to the health and safety of the renter and no longer livable. Examples include no running water in the house, a broken furnace causing no heat in the winter, a badly leaking roof, or dangerous wiring. Importantly, rent withholding laws don’t require that wear-and-tear or maintenance issues that don’t affect the livability of the unit to be addressed. Only serious defects are covered under the law.
WHAT IS THE PROCESS FOR REQUESTING RENT ABATEMENT?
If the landlord and tenant are in mutual agreement that the rent be totally or partially reduced for a certain period of time until the agreed repairs are made, then the landlord and renter together will submit a written request to the city housing department requesting rent abatement. The reduction request must include the following information:
· The address of the rental unit
· The dates of the rent reduction period
· The reason for the request
· The signature of the renter and landlord
Once the request is received, a housing inspector will visit the rental unit to determine if the conditions warrant a rent abatement. If so, the inspector will issue an order granting the rent abatement. The order will specify the amount of rent that is to be abated and the duration of the abatement period. Landlords and tenants are responsible for making sure that all other terms of the rental agreement, including any rent that is not reduced, are met.
WHAT STEPS SHOULD A TENANT TAKE FOR WITHHOLDING RENT?
Tenants should be aware that rent withholding can be tricky business, and should only be pursued as a last resort, and after obtaining legal counsel. Below is a high-level roadmap of steps to take when withholding rent.
Step 1 – Tell the Landlord About the Problem.
Tell your landlord, in writing, what the problem is and what you plan to do about it. For example, if there is no running water in the house due to a plumbing issue, then tell your landlord that you will withhold your rent because of the plumbing issue that occurred on X date, causing there to be no running water in the house. While most communications these days occur electronically, it is best to send a letter by certified mail. Be sure to keep a copy of the certified mail receipt and the letter itself to prove that you notified the landlord.
Step 2 – Give Your Landlord Time to Make the Repair.
Most states have laws that give landlords a reasonable amount of time to make repairs. In the case of an emergency such as a broken furnace on a winter day, only 24 hours might be allowed. For non-emergency issues such as a broken furnace in the summer, the landlord might be given 30 days or more to make the repair.
Step 3 – Collect Evidence to Prove That the Landlord Did Not Make Repairs.
You can show that the landlord did not make repairs through pictures, witnesses, or a report from a housing code inspector.
Step 4 – Withhold the Rent in an Escrow Account or, Make the Repair and Deduct the Amount from Rent.
If the landlord does not make the repairs, you can withhold the amount of the rent associated with the repair or make the repair and deduct, depending on your state’s laws.
The amount you pay for the repair must be reasonable. If your landlord sues you in court for withholding the rent, you may have to pay the landlord the amount that the court found unreasonable. Be sure to get estimates from several repair companies before choosing one. After the repair is made, send a copy of the receipt for the repair to the landlord with the next rental payment, less the cost of repairs.
Remember the repair must be to fix a serious defect that the court would determine affects your right to safe and sanitary housing. The court will not require the landlord to pay for a cosmetic repair.
WHAT SHOULD LANDLORDS AND TENANTS INCLUDE IN A RENT ABATEMENT AGREEMENT?
When tenants and landlords negotiate a rent abatement agreement, there are a few key points that should be included in order to make the agreement legally binding.
· First, the agreement should specify the amount of rent that will be abated.
· Second, the agreement should specify the timeframe over which the rent abatement will occur.
· Third, the agreement should state that the tenant will remain responsible for paying any other fees or charges associated with the rental property, such as utilities or lawn care.
· Finally, the agreement should be signed by both parties and dated. By including these key points, tenants and landlords can be sure that their rent abatement agreement is legally enforceable.
CONCLUSION
So, what is rent stoppage or rent abatement? In a nutshell, it’s when the tenant stops paying the rent, in whole or in part, due to a critical defect with the unit. If you are a tenant who is considering moving forward with either of these, make sure you familiarize yourself with the process involved and seek legal counsel.
YOU CAN ALSO READ: WHY FF&E IS A HIDDEN GOLDMINE WHEN BUYING A HOUSE!
FOLLOW US: @MYSMARTCOUSIN