You have an apartment building that’s, to put it mildly, ugly.
The front porch sags, the exterior paint is peeling, the carpets are stained and worn, and the circa-1960 bathrooms have never been updated. But you have renters anyway, and they want to make improvements. Should you let them?
That’s almost exactly what happened in one Pennsylvania home. It turned out badly for the landlord who gave the month-to-month tenants a notice to vacate … after all the renovation work was complete. The court made the landlord pay more than $11,000 to reimburse the tenants for the improvements they made.
So the question remains: should you let tenants make improvements?
The answer: it depends.
Your tenant asks
Tenants often ask to make improvements to their apartment they will rent. They need to live there, after all. Common requests are to paint the walls, drill holes to hang window treatments or run cable, replace the flooring, update the light fixtures, create a garden in the yard, and change the bathroom sinks.
What you should do when your tenant asks to “improve” the apartment is to calculate how much it will cost to return the unit back to its original condition if need be. That might be necessary if the tenant’s so-called improvements make your rental less desirable. But, on the other hand, the alteration might very well be an improvement you can leave. And that will be a benefit for you and will make your current (and probably future) tenant happy.
If the security deposit will cover fixing the alteration, you might consider taking the risk and say, “Yes.” If the security deposit won’t cover the cost to return the property to its original state, or if you just don’t like the idea of what your tenant proposes, you can—to use Nancy Reagan’s famous line: “Just say no.” This is your investment we’re talking about.
But who pays?
If your tenant makes an “improvement” that devalues your property, and if they did so without your permission, they typically need to pay, and you would use that money to fix the issue. But if your tenant adds value to your house, like the Pennsylvania example above, the situation regarding who pays becomes more difficult.
One option is that you strike a deal where you pay half and they pay half. Another is that you might allow an improvement but only if they pay for all of it. Or you might decide the improvement will be a good value for your property, and you will pay for all of it.
Whatever you decide to do, it’s best if you address the issue of tenant improvements in the lease. If you haven’t done that beforehand, you can add an addendum to the lease that makes it clear who is responsible for paying for improvements or whether they can be done at all.
Here’s a sample of what I have in my lease:
Except as provided by law or as authorized by the prior written consent of Landlord, Tenant will not make any repairs or alterations to the Premises.
That guards against renters who decide to take matters into their own hands during their stay and allows for some negotiation.
For work you will do:
If Landlord is requested to make any such alterations, physical additions or improvements for Tenant, Tenant shall pay to Landlord, in addition to the cost of such work, a fee equal to 15% of the cost of such work.
That ensures you will be paid for work you do that is requested but not a habitability issue.
For work done by either party:
Any alterations, physical additions or improvements to the Leased Premises made by or installed by either party hereto shall remain upon and be surrendered with the Leased Premises and become the property of Landlord upon the expiration or earlier termination of this Lease without credit to Tenant.
This clause makes it clear that you get to keep the improvements to the property.
A clause if the alterations devalue the property:
Landlord at its option may require Tenant to remove any physical improvement or additions and/or repair any alterations in order to restore the Leased Premises to the condition existing at the time Tenant took possession (all cost of such removal and/or repairs to be borne by Tenant).
This is the clause you point to if you need to withhold all or part of the security deposit.
What if your tenant makes alterations without your permission?
As soon as you notice that your tenant altered your property without your permission, you need to act. At the very least, send a letter or email letting them know that you are aware of the change to the property and that this change is a violation of the lease.
Then let your tenant know the consequences of their action. The change might be something you like. If so, let them know that they don’t need to restore the property to the original condition but that you will not pay for the alteration since you did not approve it.
If you don’t like the change, tell your tenant to restore the property to its original condition. But if that doesn’t happen, let them know that you will do so and will deduct the money from the security deposit.
If the alteration was unacceptable and the tenant is not cooperating with you, you can choose to evict at that point for violating a lease term.
When you should consider making improvements yourself
Your rental property is an investment. You should, therefore, protect that investment by at least maintaining and repairing as necessary. It’s also a good idea to know what the competition is like in your area. Most tenants don’t stay in a rental property forever, meaning that you will probably need to re-rent at some point.
It’s good to understand what tenants expect in a rental property for your price in your area. If your rental is lacking, you might want to make upgrades to make it more desirable. Most renters, for example, like stainless steel appliances, renovated bathrooms and kitchens, and air conditioning.
The bottom line
Rental properties need improvements from time to time. The best situation is for you to be on top of maintenance, repairs, and possible renovations for your property. But if you don’t do that, or if your tenant has suggestions to improve the space, you might want to entertain your tenant’s request to make improvements. Just make sure you and your tenant completely understand the terms of the deal.
Have you let tenants make improvements? Have you ever improved your rental property?