The warranty
of habitability has become nearly
universal in the United States. It
requires that the basics, such as
the roof, be sound. Where it is
breached, the tenant’s obligation to
pay rent is suspended, and he may
withhold the rent until necessary
corrections are made. In most
states, the attempt to collect the
rent before the offending condition
is repaired will result in financial
penalties against the landlord. In
some states, the failure to make
repairs can be prosecuted in a quasi
criminal proceeding, as a public
nuisance may be. In some states, the
property may be taken into
receivership by the state, the
repairs accomplished, and if not
paid by the landlord, the property
auctioned.
In view of
the foregoing, the landlord will do
well to clearly define what he means
by "can’t afford." If by this is
meant that he would rather do
something else with the money or not
pay the cost of a loan, then the
mind set needs to change promptly.
If it is true, however, that the
money is not available and cannot be
raised under any circumstances, then
a reality check is in order.
It is the
latter circumstance which fits the
premise of the question. If there is
no money to do maintenance that
means that the landlord is in over
his head. The landlord may refinance
the existing mortgage, obtain
secondary financing, borrow money
from another source or consider an
immediate sale of the rental
property. The roof problem will not
age gracefully, like wine. It will
only get worse, eventually rent from
all the tenants will cease, and the
property will go into foreclosure.
In any event, as the problem
worsens, the proceeds which can be
expected from a refinance or sale
will only decrease. If seizure is
within the law of the landlord’s
state, refinance or sale will become
impossible.
Another
possibility is to find someone
willing to share the negative cash
flow (the only way to be unable to
"afford" necessary maintenance is if
the cost of ownership of the
building is more than the income).
If there is some hope that better
management will result in a profit
at some point, sale of a percentage
interest in the property may be
possible.
The sooner
the problem is solved the better. If
a forced sale is the only solution,
a financial loss may result, but it
will only become heavier as time
goes on.
Do You Need
Some More Help or Have a Question?
Yes. I have another question. Please
take me to one of your experts now.
What did you
think of this article or do you have
anything to add?
Your comments and suggestions for
future topics and articles would be
greatly appreciated.
Back
To Alphabetical
Back
To Category
