Podcast 334: Can a Tenant Remodel Without Permission?

Podcast Host, Andrew Schultz, goes over how to manage tenants who remodel your rental property without your permission. Are they allowed to do so and do you have to pay for the property renovation?

Also in this episode, we’ll discuss an ongoing email scam that landlords should be made aware of. Plus, we’ll chat about tenants who refuse to sign a lease until specific repairs are made.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number three 34, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about tenant three modeling without permission, rental payment, email scammers, and tenants requesting repairs before signing the lease. We’ll get to all that right after this.

Voice Over: (00:22)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:27)
Before we jump into today’s episode, don’t forget to check out the Rent Prep for Landlord’s Facebook group. We’re coming up on almost 12,000 members over there now, and it’s a great free resource that you can tie into to speak to housing providers around the country on any issue that you may be experiencing. It’s a great way to get perspectives from a lot of different people in a very short period of time. Feel free to check that out today, over at facebook.com/groups/rentprep.

Voice Over: (00:54)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (01:02)
I honestly don’t know what to say about today’s forum courtroom, other than it’s a real doozy. We’re just going to jump right into it. This one comes to us from Reddit and this was posted on the landlording subreddit. We’ll jump right in here. So the people living in my house have done some major remodeling without me knowing they redid the ceiling floor and back porch. Without me knowing I asked them why they did it without written consent. And they told me to deal with it, or they would Sue me for the cost of the remodel. Can they really do that? I’m a new landlord with less than a year of experience. I guess I should probably preface this by saying I’m not an attorney. You definitely don’t want to speak to your attorney on this one because you’ve got quite a situation on your hands.

Andrew Schultz: (01:40)
But I’ll start with the first question that you would ask them that was, can they Sue you? The answer to that question is, yeah, you can Sue anybody for any reason at any time. Are they going to win the case? Probably not. I can’t see any, any set of circumstances here where they would have much of a claim that they would be able to, to go against you. And, and successfully try that case. And when jumping into the, to the deeper issue here, there’s several problems that you’re going to be experiencing as a result of this. The first of which is going to be the liability of this entire situation. It sounds like the work is already done. But the first question that I would ask is, you know, what happens if they get injured while they’re doing this work? Because obviously they’re not properly insured or anything else that presents a big issue in and of itself.

Andrew Schultz: (02:23)
What if there were no permits pulled, which I’m certain there weren’t because you generally can’t pull permits unless you have the proper insurances. And what if the work is not done to code which I’m relatively certain, you’re going to find that whatever work they did is probably not done to code, unless there’s somebody that’s, you know, I got a contracting background or something like that that’s living in the property or that was helping on these projects. I can’t imagine that this stuff was, was done to, you know, proper code or anything like that. The next question that would pop up in my mind would be what if somebody else gets hurt as a result of this work. And then finally I would have quality concerns about the work. I’m pretty sure we kind of touched on that. And the other three points already, essentially, you’ve got a lot of issues that are all piling up here all at the same time.

Andrew Schultz: (03:06)
And you’re going to have to move, to try to resolve the issue. Our lease obviously has a clause that prohibits tenants from making changes to a property without the express written consent of the landlord. I don’t think that that clause would have done a Hill of beans here in the Cyprus situation. I think that these tenants were probably going to do whatever they wanted to do, regardless of what the lease says at this point, I guess I would just start going into next steps as to what I would do here. First step would be obviously send the lease violation, do it using whatever method you have to in your state to make sure that that lease violation sticks. Secondly, I would get the work inspected by a competent professional. Somebody who, you know, is licensed and insured and understands the code and things like that to see, you know, just how bad this actually is.

Andrew Schultz: (03:49)
You’re going to have to check for permits if the, whatever the work was that they did required permits. And, you know, you’d mentioned that they did some work on a ceiling, some flooring, a back porch. You might have some permitting issues there that need to be addressed as well. And I would move to get these guys out of the property. I mean, obviously, they have zero respect for you as the landlord, and as the property owner, it’s time for these guys to just move on. If they’re gonna, if they’re gonna make major changes to your structure, to your property, without your permission, who knows what else is going on at the property? I think I would be looking for an exit strategy on this one as soon as possible. So there you have it, hopefully, that helps at least a little bit. All I can say is best of luck to you on this one. This is going to be one of those very, very challenging situations, I think. And it’s, it’s probably gonna take you some time to resolve it, just keep fighting through it, and you will eventually get possession of your property back and you’ll be able to get it back into the hands of some tenants who will actually respect the property and treat it the way that it should be treated

Voice Over: (04:48)
Feet on the street. Real stories from real property managers.

Andrew Schultz: (04:57)
Email scams have been around basically as long as email and every once in awhile, you’ll find one. That’s just so convincing that you almost fall for it. What happens if your tenants fall for a, an email scam and accidentally send the rent to the wrong place? Well, that’s what happened to this landlord. This feet on the street comes to us via Reddit via the landlording subreddit. We’re going to jump right in here. My email suffered a third-party data breach over the summer, and I was not made aware of this exposure until recently an email was sent out mid-August to four of my tenants from an email address, claiming that I was not managing my own finances anymore. And to send future rental payments directly to an accountant’s email. Instead, two of my September payments ended up going to someone else’s email, instead of mine, the tenants never contacted me or question this email and purported to come from me.

Andrew Schultz: (05:44)
The email was well-written, but the email address given looks like a personal email, not a professional accountants. The email mentioned to reach out in the event of any questions or concerns, and then his contact information was given not mine. It would seem there were quite a few red flags, at least enough to have a suspicion. My, at least clearly States that payments are to be made to my email address, but they also indicated that notices will be sent via my email. So before we jump into deep here, I want to mention that they’re talking about sending a payment to an email address. I assume that they’re using one of the electronic payment methods such as Zelle, or hopefully not PayPal. I think we’ve talked about this on the show before, but never use PayPal to accept a rent payment because they can and will lock your account.

Andrew Schultz: (06:25)
And you might wind up with thousands of dollars that you just can’t access until PayPal decides to unlock your account, which could take months. I know people who have taken extensive periods of time to get money released from PayPal, do not use PayPal to accept rent funds. But it sounds like they’re probably using one of the electronic payment methods, you know, Ezell a PayPal. I can’t think of all the other ones that are out there, you know, a cash app, something like that. So essentially this is kind of like a two-part question. And I think the two parts of the question are whose fault is this? And what do you do next? And I would have to say that the tenant is not at blame here. And this one, I would, I would go so far as to say that this one does fall back to the landlord.

Andrew Schultz: (07:02)
Obviously, the landlord didn’t intend to have their email account hacked, but it was hacked. It was compromised. And as a result, this landlord lost some revenue. The tenant may be able to do something to get the payments that they made reversed. I would say there’s probably a 50 50 shot of that. And it really depends on what payment app you’re using. I know some of them, once the payment is made, it’s just gone and you can never, you can never resend that payment or get it reversed or anything like that. So it’s probably going to depend on what app they used as to whether or not they can try to get a refund that way. The other thing I would mention is that you definitely need to follow up with the police department to see if they can try to track this down. They probably are gonna run into a dead end.

Andrew Schultz: (07:42)
If it’s a smaller local police department, they’re certainly not going to have the resources to handle something like this. And I don’t know of a lot of, a lot of successful investigations when it comes to these types of scams, but definitely, you know, definitely feed it to the police department so that they can take a report. You may need that report down the road for some reason. And that some reason, maybe something like a cyber theft protection policy, I know here in our office, we actually carry a cyber insurance policy as part of our, I can’t remember if it’s our general liability or errors and omissions insurance policy, but we added a cyber insurance policy or a rider, one of the two along with that. And that basically protects us in the event that one of our staff members is hacked or, you know, a fishing type of a, an attack, like what this would be something along those lines that helps to protect us.

Andrew Schultz: (08:32)
And it also protects our data so that anything that we have that’s in the cloud, if that gets compromised, we’ve got some coverage there as well. So, you know, if you’re a smaller landlord, I’m not sure what a cyber theft protection policy would be. Or if you could even get one, you would probably would want to start by talking to your general liability insurance company and go from there. But that might be something to consider down the road just on the off chance that this ever happens. Again, sometimes an ounce of prevention is worth a pound of cure, and this is kind of one of those sets of circumstances. So as far as a recommendation as to how to prevent something like this from happening in the future, I would say stop accepting email payments. You get into a software package like a cozy or something like that, where a tenant can log into a portal, that’s branded with your contact info and they can make a payment via ACH, you know, routing number and account number or a, you know, a debit or a credit card or whatever the case may be, but have them logging in through a portal so that they know, okay, I’m logging in to the same place every time to make my rental payment.

Andrew Schultz: (09:30)
And that, that would probably be a little bit more secure than the current option that you’re exercising right now. So that would be my recommendation. The other thing about having a piece of software like that is it will make you a lot more organized if you use it properly. We did talk about that. A couple of episodes back in episode three 31, I believe so. Be sure to check that out as well,

Voice Over: (09:48)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (09:56)
Have you ever had an applicant that starts getting picky about the condition of a premises before they’ve even signed the lease? That’s what this landlord is experiencing. And we’re going to talk about it a little bit here in today’s water cooler wisdom. My condo is on the market to be leased out. My realtor has been talking to a potential tenant. The tenant was sent the lease a week ago and said he would sign it the same day. But as of today, he has not yet signed the lease. He liked the place, but he wanted the holes in the walls to be filled the walls, to be freshly painted new blinds, put up on the windows, and a deep cleaning. These were all reasonable requests, which I likely would have had to get fixed. Anyway, I completed these requests. However, my bathroom shower tile is black and a few of the tiles have a white stain on them.

Andrew Schultz: (10:36)
I’ve hired a professional cleaning company to try to get these stains out. And I myself have even tried using acid, but the stains won’t budge, the tenant said, he’s not signing the lease until the bathroom is fixed. Should I tell this guy to take a hike if you want my honest opinion? Yeah. I would tell him to take a hike and I would do so for a few different reasons. The first reason is you are offering an apartment for rent and you’re offering that apartment basically in the condition that it was found at MoveOn. As a matter of fact, our lease actually specifies that the tenant is accepting the condition of the premises at the time that they move in. And we do a move-in inspection sheet with the tenant as well, where we do give them, I believe it’s five or seven days to notify us of any additional damages that may not have been listed on their move and condition sheet, just because we know people find stuff as they’re moving into places it’s very common for that to happen.

Andrew Schultz: (11:26)
And that’s why we give people that little bit of extra time to find and uncover additional damages as they’re doing a move in, but you’re renting the place as is, you know, a, hotel’s not going to be brand new every single time somebody walks in and stays for a night and the tenant can expect that your place is going to be brand new unless you’re selling new build or renting new build construction. You know, they can’t expect that it’s going to be brand new. Everything is going to be crystal clear and picture-perfect. The second they walk through the door, obviously, I haven’t seen pictures of this bathroom, but it doesn’t sound to me from this description as though it is like a huge concern. It sounds to me like it’s maybe a couple of tiles or something like that. It doesn’t sound like this is a, you know, structurally concerning or anything more than just a couple of discolored tiles that, yeah, maybe it’s not the best physical presentation, but it’s definitely not something that’s detracting from the value of the apartment by the sounds of things.

Andrew Schultz: (12:20)
So that’s where I would be at on that. I would probably tell this guy to take a hike and start looking for another tenant. So in the future, there are a few things that you could do to protect yourself or prevent something like this from happening. The first thing I would do two would be, you know, if you’re marketing vacant apartment for rent, try to be as close to 100% done as possible when you list that apartment for rent. And I say that for a couple reasons, number one, your marketing materials are gonna be better when everything is the way that it’s going to be when the tenant moves in. And the other thing is that way, the tenant knows exactly what they’re walking in and to before they come out to take a look at the place, you don’t have to answer these little questions about, can you fix the holes in the wall?

Andrew Schultz: (12:58)
Can you paint the walls thing like that? The other thing that we do is when we send someone a lease, once their application is approved, they have three days, three days to sign that, lease to get it back to us, and to get their security deposit sent to us in certified funds. If they haven’t done that within three days, we move onto the next applicant and they basically lose our opportunity to take possession of that apartment by, by signing the lease and putting in their deposit. So that would be what I would recommend is don’t give people an extended period of time to, you know, make it the decision to sign the lease or not sign the lease. Have the apartment is close to a hundred percent ready as possible when you go to market the apartment. Obviously, I understand that’s not possible in all circumstances when you’re showing an occupied place or something like that, a little bit different set of circumstances there.

Andrew Schultz: (13:44)
And finally, I would work on controlling the situation a little bit better, give them a defined timeframe that they have to sign the lease and get the security deposit into you. If, and if they haven’t done that within the timeframe that you specified, I would move on to the next possible applicant. I wouldn’t spend a lot of time on any one individual applicant because it’s just lengthening the amount of time that you spend on market. And obviously, that’s not good for your bottom line. So your goal is to get that tenant signed and secured as quickly as possible. Obviously, make sure that you’re doing everything you need to do when it comes to screening a tenant. And if you’re not sure what exactly you should be doing when it comes to tenant screening, obviously you can tie into a ton of great resources over at rentprep.com. They have some guides, that’ll show you how to screen tenants from beginning to end, as well as offering a ton of great options when it comes to credit and background check options for your tenant screening needs.

Andrew Schultz: (14:30)
So be sure to check them out today, over at rentprep.com. So that pretty much wraps things up for this week’s episode of the Rent Prep Landlords podcast. Thank you all so much for listening. We truly do appreciate it. You can help us to grow by sharing this with just one person who you think would benefit from this information. Maybe it’s somebody who’s just getting into the industry or somebody who is looking to learn something new about the industry. We try to do as much as we can to help educate landlords throughout the country. And that is the best way that you can help us out is just by sharing this with somebody who you think would benefit. If you’re looking to get in contact with me, I can be reached over at ownbuffalo.com. There is a contact form over there, as well as the option to grab a free 30-minute phone consultation.

Andrew Schultz: (15:12)
I also have a second show over at facebook.com/buffalo foreclosed homes. That’s the ASCA property manager show, and that runs live every Wednesday morning at 10:00 AM Eastern. You can also find replays of that on our Facebook page and our YouTube page as well. If you’re looking for top tier tenant screening services, as always, don’t forget to check out the resources over at rentprep.com as well as therentprep.com. Facebook group, over at facebook.com/groups/rentprep. We’re really proud of that group. It’s a very well-curated group, and we try to keep a lot of the spam and nonsense out of it. And we’re really looking to get to that 12,000 member Mark. So please do us a favor head on over to facebook.com/groups/rentprep, and feel free to join today. Don’t forget that new episodes of the podcast drop every Thursday morning. Feel free to tune in next week for an all-new episode that you won’t want to miss for rent prep.com. I’m Andrew Schultz with ownedbuffalo.com and we’ll talk to you next week.