This guest post from Avery is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.
From time to time, stories on Get Rich Slowly talk about rental properties, usually from the perspective of a small-time landlord, and inevitably, there are comments about troublesome tenants. But there are always three sides to every story: the landlord's, the tenant's, and the truth. I was that pain-in-the-ass tenant, and this is my story.
I've been a renter ever since I left college. It's been a mix of traditional apartments with corporate landlords, to renting rooms from home-owners. I even once rented half of a duplex from a mom-and-pop landlord, and this was an experience I'll never forget.
Setting the stage
Back in 2004, I was looking for a two-bedroom apartment with a friend of mine. He was a few years older than me, and always paid cash for everything. As such, he had no credit. Literally none. It was a challenge getting approved for apartments — I didn't make enough money to support the application on my own, but to consider his income, they would also need to run his credit. But, with no credit, there was a huge problem.
We ended up renting the back half of a duplex that he found on Craigslist. The landlord had no problem with having no credit, and we only had to put down 1/3 of the monthly rent for a deposit. This was the first time I had rented from a small time landlord where the landlord didn't live in the house. The landlord lived and worked about 20 miles away. But Los Angeles being what it is, 20 miles can be close to an hour in traffic. This guy didn't have a property manager, so he expected us to help with small repairs. My roommate was a bit of a handy man so he didn't mind. He kept the cable and internet in his name, which was a real chore when things didn't work. He didn't follow up on repairs that were supposed to be made.
But one day, both the oven and the air conditioner broke. Mind you, we lived in a part of L.A. where it can get to 120F during the day. Air conditioning in parts of the country is as important as heat in the northern parts. I worked midnights, so I slept during the hottest parts of the day. It was imperative that I have functioning A/C. The landlord made some efforts to make the repairs, but the repairs didn't work or there was difficulty getting them done. One of the challenges was having someone present to let the repairmen in. They wouldn't come in without someone present. I was home, but I was sleeping. The time he would schedule people to come were the equivalent of a normal person's 1am-4am, which didn't work for me.
Why was this a big deal? I've rented for my entire adult life. When repairs need to be made, I pick up the phone and make one call. That's it. That's one of the biggest benefits of renting — not having to worry about home repairs. So, to me, going through the inconvenience of getting the stuff fixed was his problem, not mine. We were paying $1700 per month for this rental, so it's not as if we were getting a “deal” in exchange for repairs. Besides, if that was the expectation, it should have been in the lease.
After a few weeks of not getting satisfactory repairs, I decided to explore my options. Los Angeles is a rent-controlled city, and I somehow managed to find the rent control laws. It just so happened that as a duplex, the laws applied to the unit. (They don't apply to single family houses.)
One of the laws required that the landlord have a rental certificate, and without it, he legally could not collect rent. I made a phone call to the housing department, and they confirmed that there was no certificate on file. Wow! I could withhold the rent until the repairs were made. There was some fine print stating that once the certificate was obtained, then he could get back rent.
However, I found out from the building department that although the place was a duplex, it was only zoned for single family. The building plans showed only a single family residence. In order to get a rental certificate, the place must be zoned properly. Because it wasn't, it was ineligible for a rental certificate, so the landlord could never legally collect rent. I was living in an illegal apartment! I also found out that if the housing department was properly notified, the landlord would be forced to relocate us and pay $7,000 for the efforts.
After I learned all of this, I held my cards close to my vest. I didn't tell him what I knew. I notified my landlord in writing that the repairs had not been made after several attempts, and that I could not be expected to be awake during their visits. If the repairmen woke me up accidentally, that's fine, but I was not going to supervise them. I also informed him that I would deduct 45% of the rent for each day that the repairs weren't made, and that I would pay the remainder only when the repairs were made. At worst, he'd be out a few hundred that he'd get in a week or two. I asked the landlord to respond only in writing, but he never did. He did respond with a three-day “pay or quit” notice that is required before going to court. He never made satisfactory repairs.
According to the housing department, the only way I could defend an eviction was by proving that the unit was in fact illegal. To do so, I would have to call the building and safety department and have them shut down the unit, which I did. The landlord filed the eviction papers with the court, but never served them to me. I couldn't figure that one out. I don't know what my landlord knew about the unit. What I do know is that once building and safety shut the unit down, it took my landlord at least five months before he could rent the unit out again. I feel bad about that, because I didn't intend for him to lose that much rent. I figured I'd save a few hundred at most, and just make him do what he was supposed to.
So, yes, I was the pain-in-the-ass tenant. I didn't set out to be that way, and I didn't intend to cause my landlord much financial strife. I'm actually sorry he lost that much rent. But, quite frankly, my landlord screwed up every chance he got.
Lessons for landlords
My story also serves as a lesson to landlords, and I can summarize it as follows:
- If you have tenants who pay their rent on time and don't cause trouble with the neighbors, keep them happy. As a small-time landlord, any tenant who is a royal pain can cost you big time. You don't have the volume like the big boys to play things by the numbers.
- Get a good property manager, learn to be responsive, or work it out in writing with your tenants how repairs are going to be made. Me? I'd rented from enough commercial outfits where I just assumed that one phone call takes care of the problem. When I'm renting at market rates, I'm not expecting to do any more than that. Definitely not when I work midnights and need to sleep during the day. I'm paying you for the hassle of not having to deal with that myself. If you want me to, then you better knock something off the rent and make it worth my trouble. I don't care that you're a single person with a “real” job and might not have time for that.
- Know your properties. I lived in a duplex, but the city planning office thought it was single family. That can cause you problems if your tenants want to make your life difficult.
- Know the rules where you play. This is doubly true in a rent controlled area. In L.A., single-family housing units are exempt from the rent-control rules, but he had a duplex, period. As such, the property fell under the city's housing office, legal dwelling or not. And L.A. is very unkind to landlords who have illegal units.
- Get good legal representation. My landlord had a lawyer, and he wasn't worth what she paid him. He couldn't even write up a proper pre-eviction notice, as required by California law. He ended up losing $13,000 in rent, paying some court fees, paying his lawyer, and making structural changes to bring the unit back into compliance. Oh, and although he filed the papers to evict me, he never served them. (How'd I know? The courts mail you an FYI.) Never figured that one out.
Like I said above, I'm sorry he lost that much rent. I figured he'd make the repairs and be out a few hundred dollars. But, he sort of left me in a pickle when he attempted to evict me, and I had to defend myself. In California, you cannot evict someone for non-payment of rent when you legally cannot collect said rent. However, I did have to prove it. I put a lot of time into covering my butt. Too much time. In the future, it would have been better to just be straight about the whole thing. I think I won, but I now think it was more trouble than it was worth.
One thing that I do want to throw out for general discussion: We have laws. When is unethical or morally wrong to take advantage of said laws? I can see in some cases where people take advantage of something that clearly violates the spirit of the law, but how about here? The law clearly prohibits exactly what the landlord was doing. What I did wasn't in violation of the spirit, and I had case law after case law to back myself up. (I'm not going to risk an eviction without knowing where I stand.) Can two parties agree to break the law? If so, must one or both parties be aware of it?