My tenants have flooded my property but who’s problem is it?

My tenants have flooded my property but who’s problem is it?

9:30 AM, 24th July 2012, About 12 years ago 57

Text Size

I received a phone call a month or so ago to saying that my tenants have flooded my property and wanted me to pay to get the damage fixed. I suspect your response would have been the same as mine. Obviously I asked what had happened and they said they didn’t know. Apparently my tenants had been away and left relatives in the property when the problem occurred. I asked if anything was leaking and it wasn’t, nothing was blocked either. The scale of the damage was quite bad, the problem was a flood in the bathroom which had effected downstairs walls and ceilings. I didn’t need Sherlock Holmes or Miss Marple to solve this mystery, their guests had obviously let the bath overflow.

Obviously I refused to pay for the damage and I told the tenants to claim on their insurance. They don’t have any. Not my problem I say, you’d better work out what you are going to do about it. I heard nothing more so I left it. Life is never that simple though is it! This morning I received a phone call from my tenants sister …………

Hi, I’m Cherry’s sister she says, I’m just calling to let you know that Cherry will not be paying the rent this month because she’s spent up this month because of the work she’s had to get done to put your house right.

Now if you are deciding what you would do at this point, STOP, there’s a lot more to this.

tenants have flooded my propertyHave you ever purchased a property and regretted it?

About seven years ago I had this idea that every property, no matter how bad, has a value and that all properties will increase in value over the long term. I still think there’s some truth in that argument but I still wish I’d never purchased this property. It’s the roughest house in the roughest street in the roughest area. It’s a rural council estate dominated by one very large, very rough family. If you ever come to mid Norfolk and want to find this place just follow the first set of blue flashing lights you see and there’s more than a 50/50 chance you will be lead right to it. I was warned never to buy in this particular location by my brother, who has a lot of friends in the Police force, but I just couldn’t turn down what looked at the time to be the bargain of the century.

Anyhow, to cut a long story short, I got lucky and managed to let the property to a member of “the family” and this one seems to be the most decent of the lot, i.e. no criminal record and to date she’s been a good payer too.

If I kick her out there is a very good chance the property will be vandalised as soon as it’s vacant and I will never know who did it. The chances of re-letting the property to a better tenant are zero. To make things worse, this property has plummeted even further in value. The only way I might sell this property is in this market is in an auction with no reserve. I could lose a fortune! To make matters worse, I mortgaged it to 85% LTV when I purchased it as the cashflow is awesome (15% yield on what I paid for it) so I didn’t see that as an issue at the time. Cashflow now is even better than is was as it’s on a bank base rate tracker at 1.75% over base.

So, do I bite the bullett, keep the tenant and let her off the rent this month? Do I take the cost of the damage out of her rent deposit and accept that she now has no deposit? Or do I kick her out and risk losing a small fortune on lost rent, a “short sale” and potentially a load of extra issues to deal with as soon as the property is vacant? If she gets away with not paying rent this time though, the chances of there being a next time increase – experience has taught me that one.

It’s quite a dilemma I have isn’t it?

What would you do if you were me and why? Please add comments below.


Share This Article


Comments

Mark Alexander - Founder of Property118

16:47 PM, 24th July 2012, About 12 years ago

I'm super cautious Paul but thanks for asking the question. Before I even came up with the name Property118 for this website I had already started blogging. Your question is answered in my first ever set of blogs where I documented my property investment strategy. My answer to the question you have just raised is in this blog >>> http://www.property118.com/?p=896

17:05 PM, 24th July 2012, About 12 years ago

Yes just read it and I think it is still a maxim for any small business to ensure they can stay afloat when there are 'issues'.
That maxim is , cash is king....or queen.
Liquidity or access to guaranteed liquidity is a fundamental requirement of this game.
Too many people, and I am one of them are unable to or do not have the ability to achieve the ideal levels of liquidity.
Essentially one hopes to earn sufficient so that you can self- insure against problems, hoping they don't occur before you have an ideal 20%.
unfortunately if people waited for ideal situations to occur mor than half existing LL would never have entered the game.
Ideals are what the word states ideals!!
Very few little LL can afford the ideal at the outset of thier property owning journey.
Risks have to be therefore taken and fingers and everthing else crossed until one reaches that happy state of equilibrium where one has 20 % of liguid funds per property owned.
Of course once having achieved such a 20 % status the temptation would be to use those funds for some more property purchasing.
How does one stop oneself from using all those lovely dormant liquid funds for further expansion of one's property portfolio.
Easy to get rid of the sensible head and see all that lovely liquid moolah ripe to be used for further property investment.
Perhaps that is where a sensible mother might come in handy, to effectively advise, just say NO!!!?
Difficult one though eh!...isn't it!?

Mark Alexander - Founder of Property118

17:28 PM, 24th July 2012, About 12 years ago

Hi Paul, "dormant liquid funds"??? NEVER! I also wrote a blog called "How I maximise the returns on my liquidity fund back in December 2010 >>>
http://www.property118.com/index.php/maximise-returns-on-liquidity/

Jonathan Clarke

17:30 PM, 24th July 2012, About 12 years ago

Hi Mark Shout scream and hollow inside about how unfair it is yes .
But then take the emotion out of it and pick up your calculator. The calculator is your friendIts 15% yield!!!! Dont you dare sell it will say. The calculator speaks the truth. £575 it will cost you Thats only £1.57 a day for a year. You can handle that. Your yield is now down to about 14% for one year only. Keep it!!!
Youve had a bad day at the office so put it down as sunk costs erase it from your memory and go and enjoy a beer and chill. You may have 20 bad days like this a year but remember the 345 good ones when it all goes to plan. Dont waste too much of your time worrying about the ethics morals of it all. It sucks yes but business is not always a fair and level playing field. Its a team game though. Your other properties will rally around and support you in this time of need. Play the long game. Mines a Budweiser please.....

Mark Alexander - Founder of Property118

17:42 PM, 24th July 2012, About 12 years ago

I'm not ready to give up on recovering the money yet Jonathan but rest assured I will not be kicking the tenant out or selling up based on one set back. The Budweiser is a great idea, yours is getting warm though so if it's OK with you I'll drink it when I've finished mine if you don't get here in time. Cheers mate! LOL

17:42 PM, 24th July 2012, About 12 years ago

Yeah, here, here, sometimes one can get wrapped up in detail when one should really not be too concerned if you can resource the big picture.
It is damn irritating though but you're right Johnathan you cand spend more than the losees down the pub over a year.
Relatively peanuts as you correctly state.
Just nobody likes somebody getting one over on them!!
But I am sure in Mark's case the swings and roundabouts will counter eachother so that he can ultimately enjoy a nice pint down the local without being wound up about it.
Easy to say as I feel the same indignation as Mark but Johnathan you are correct.
We need to step back and not take things so personal.
After all, it's only business!!

Industry Observer

17:47 PM, 24th July 2012, About 12 years ago

Mark - am I now a Disqus devotee?!!
Tenants "claim" to have spent £575 Mark? Just ask for the invoices for the work and materials then. While at it ask for a written statement from their contractor that it was a definite failure in the system which caused the problem - and thus made it your liabiity under 1985 Act s11
The tenant may not object to the deposit being used, but remember they originally said it was not their fault or cost. Odds are they are thinking they spent this money and will recoup it from missing the month's rent. Stands to reason soon as you try to use the deposit to cover that month they will object. Real can of worms here to as you will be claiming it is purte rent arrears but they'll spin a vastly different story linking it to repairs and your failure to repair.
And no matter what the tenant will or will not allow, what will the Scheme Rules allow - and the Law of course.
Your client account Mark - describe it to me, how it is so designated and what the bank does to so designate it. As there are specifics needed beyond the cheque book and statement saying CLIENT ACCOUNT on them - that doesn't count for anything (well a very small hill of beans then!!) and you have to go much further to have a true client account. Email me separately if you prefer
Mind even then you can still disappear with the money in it.

Joe Bloggs

17:53 PM, 24th July 2012, About 12 years ago

with hindsight your mistake was ceding control of the repairs to the tenant without agreeing any ground rules.

Mark Alexander - Founder of Property118

18:12 PM, 24th July 2012, About 12 years ago

"Disqus devotee" hey? Well that is a turnaround 🙂

I'm drafting an email to my brother as he took the call and he will forward it to the tenants. I may even publish it here and also their response (names and other identifiers removed for obvious reasons of course). I will also publish the response.

Just to explain, my brother "manages" all of the properties in the "Alexander Family Partnership". What I mean by that is that he's the first pointy of contact for tenant liaison. We all like it that way as we can put distance between ourselves and our tenants when required, my brother is also a VERY good mediator.

I would bet a £1 to a penny that my tenants will not have used contractors certainly not the type that issue invoices and provide receipts anyway. I reckon I've got a better than 50/50 chance of making them see reason and go along with my suggestion though. They may not be the sharpest tools in the box, they may be a rough family but they do respond well to polite reasoning.

Regarding the "clients account", I totally take your point. Like all landlords using an insurance backed scheme I could simply withdraw the money and do a runner regardless of what the account constitution might be. Do bear in mind though, iAmALandlord, NOT a letting agent. I prefer the insurance backed route as I feel as though I'm in control. It may well be that it's a false economy and I ought to go with the custodial scheme but I'm in good company of 10's of thousands of other landlords with this train of thought. If my properties were in Scotland of course I'd have no choice but use the custodial route if I wanted to take deposits.

Mark Alexander - Founder of Property118

18:36 PM, 24th July 2012, About 12 years ago

Oh I do love my tenants. Totally unrelated story, not worthy of an article of its own at this point, but I thought I'd mention it. The men in shiny suits will never teach a landlord what to do in this situation. Extract from an email from a tenant (received just minutes ago).

"I'm having trouble with something creating tunnels in the garden (both the front and rear) and damaging the grass which I think it's a Mole animal, I remember these holes were existed in the garden at the beginning of our tenancy. My adjacent neighbor advised me to remove it as it might affect on the underground gas pipes. So I want you please to help to get rid of whatever is harming the garden. Please give me a call before coming to make sure I am at home."

I might have to put the rent up if he's got an extra tenant living there! And whose going to pay the referencing fees? LOL

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now