Legal issues with tenant and Mold

General Real Estate Investing
1

I apologize for the long post but I’ll try to provide as much info in the least amount of words.

I completed rehabbing a 2 br, 2 bth, SFH w/basement last October, 2007. Based on the slumping real estate sales market, I decided to put the house up for rent. While it was listed for rent, I discovered a moisture issue in the basement I thought was originally fixed during rehab, had come up again in the utility area and slowly made its way into the finished area. Based on the time of year and the fact that no major leaking or flooding had been witnessed, I decided to address the issue after the winter in the spring of 2008. Of course, I not only had a dehumidifier running out in the open, in the middle of the basement, I disclosed the issue to all potential renters who looked at the property. I expressed to each and every one, I am aware there is a moisture issue, but the extent and severity is unknown and it will be addressed during the spring of 2008. As such, I was only offering short-term leases, 6 months at most.

I found a tenant who was informed of the moisture issue and agreed to a 6 month lease. He reviewed, proposed changes, and ultimately signed a lease agreement. Among the many provisions in the agreement was the topic of the security deposit, what would cause the tenant to forfeit it, and when it will be returned (or deducted from) after completion of the lease agreement.

Recently, there has been terribly snowy, rainy, cold weather in the Northern portion of Illinois and it has been discovered that the moisture issue has worsened. In order for him to move on and for me to address the issue a.s.a.p., the tenant and I mutually agreed to terminate the lease agreement 2 months early. When I informed him I plan on meeting him on the lease termination date to pick up keys, he asked about the deposit. I then informed him I wouldn’t be able to walk through the house on the same day we meet, so please give me time to do so and I’ll let him know if there are any deductions and so forth, within 30 days, as outlined in our lease agreement (as well as Illinois state laws I believe).

This is when my tenant proceeded to send me several text messages, in a threatening manner, stating it would “be in everyone’s best interest” if I brought the entire security deposit the day I get the keys from him. He then proceeded to tell me it was his right to call a village inspector, have him/her inspect the house for mold, and if there is any found, the house would be red-tagged and I would be responsible for his lodging for the duration of the lease or until the mold issue is remedied. I have several questions about my tenant’s attempt to “extort” money from me:

  1. It was my understanding that if a tenant had an issue or repair they wanted addressed, they needed to inform me in writing, including a reasonable amount of time for the issues or repairs to be addressed. If this is true, then the only notification I have of any mold in the house is his text message. Wouldn’t a mold inspection have to be done by a professional, and the findings be attached to his written request to remedy any issues?

  2. If I call him on his threats and he does decide to get a mold inspection, who pays for it?

  3. There are 2 br and 1 bth upstairs while the other bathroom is in the finished portion of the basement. If mold is found in the basement, and it is deemed a health risk making it uninhabitable, does that mean the whole house is uninhabitable? What I’m getting at is, the 2 br’s and other bathroom are upstairs while the basement is enclosed. Would I have to provide lodging if just the basement contains mold and it isn’t severe enough to make the entire house uninhabitable?

  4. Lastly, the tenant has a friend living with him, which we agreed to in the lease agreement. However, his friend is listed in the lease agreement but not as a tenant, only as a person using the dwelling as living quarters. If I do have to provide lodging because of mold repairs, does that apply to the friend? Or only the individual listed as a tenant in the lease agreement?

I apologize for the long post and I realize it is only my side of the story. But I am seeking to remedy this situation in the most proper, legal manner, and everything I’ve posted is true and factual as I remember them.

Thank you very much to all who respond.

BPP

2

It is a bluff. You two have already agreed to terminate the lease. Tell him you will comply with the law.

3

I’ve been thru this kind of situation myself.

First off, all mold is not “toxic” mold that we have all heard horror stories about. Water in basement area is not unusual.

In my case the tenant threaten to sue over bathroom mold. I hired an inspector and $650 later we found out that the level of mold spores in the areas was LOWER than outdoors. (Never mind the dog feces ground into the carpet…yuk!).

So to answer your question, yes, the tenant would need to demand repairs in writing (I think this is pretty std across the country). Nothing is going to stop this guy from call the town inspector, but I doubt that the building inspector is going to run out to look at your property and it would seem highly unlikely to get red-tagged. My first phone call would be to a company like Serv-Pro or similar (water remediation guy) and/or a general contractor who has a good knowledge of foundation/basement water issues. These guys probably can accurately advise you what local building officials might do and might even be willing to call on your behalf and get advise on the situation (I have had this happen in several cases with very positive result). The idea here is the best defense is offense; granted I would not openly rush to invite the guy over, but you get the idea.

If this guy gets a mold inspection, it would be on his nickel.

Also, I would check your state laws. I know is VA (for example) where I have some properties I can terminate a lease on 45 days notice if signifcant repairs are requested that makes it necessaryfor tenants to move.

Do you have this mutual agreement to terminate in writing? I would just proceed as planned. The flip side is if you think the damage to his unit might be minial then maybe you just give him the security deposit and make him go away. Go ahead and let him “win”; at the end of the day, its all about the money and hassle that might be incurred by dragging this out. If you go that route, make sure you get a signed receipt for those funds.

No easy answers.

Good luck.

4

Thank you BLL and aak5454 for your replies. To answer aak5454’s question about having the agreement to terminate in writing…depends how you look at it. The tenant is 21 and prefers text messaging as a primary means of communication. So via several text messages, we’ve agreed to terminate the lease. Maybe someone could shed some light on the validity of text messages in regards to “documentation”.

I do think he is bluffing but as aak5454 brought up, do I want to call the tenant on his bluff and deal witht the ensuing issues? If I can get definitive answers to my questions above, I believe I’ll have enough to be prepared to do so.

Or is it safest to let the tenant “win”, give him his deposit and never see him again?

I want to take another day or two to decide. Any other opinions would be greatly appreciated.

5

I agree with BLL. You mutually agreed to terminate the lease prior to expiration. I think your agreement implies that you will release the tenant from liability for rent due for the rest of the rental term. However, the tenant is still responsible for the cost of fixing damage due to tenant abuse.

Take time to document the repairs needed and to correct tenant damage beyond normal wear and tear. Make the repairs, get invoices and paid receipts, then make appropriate deductions from the security deposit.

Since this tenant has made retaliatory threats if the security deposit is not returned on the day of departure, you probably should consult your attorney. At least, give him/her a heads up that your tenant may be considering a lawsuit. Make sure your attorney advises you on the procedures for returning the security deposit and the appropriate deductions you can withhold and still be in full compliance with your landlord/tenant law.

One state where I have investment property also requires interest to accrue on security deposits held six months or more. If your state has a similar requirement, then you must also include accrued interest in the security deposit accounting.