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MY TENANT IS WITHHOLDING RENT BECAUSE I CANíT
AFFORD TO FIX THE ROOF, NOW WHAT?

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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 tenantís 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 "canít 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 landlordís 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.


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