If you gather a group of investor-landlords in the same room, there’s usually no shortage of stories about disaster renters. In fact, the prime reason given even by thrifty owners for ultimately hiring a rental management firm is the constant battle with problem tenants – especially those who enjoy telephoning their concerns in the middle of the night.
But some landlords can be a pain, too. Some have crossed the line from forgetful to clueless. At the top of the list is an absentee gentleman who enabled a typical living arrangement to evolve into an economic and legal wonderland
In July of 2000, Fred Wallace signed a one-year rental agreement with a landlord for an older, single-family cottage nestled on a country lane. The house, on a quarter acre, needed work but was more than adequate for Fred and his wife. The first year passed with no real rental problems and the couple made sure the monthly rent was paid on time.
When the agreement had expired, Fred and his wife had found no other place more suitable to live. Yet, some repairs needed to be done to the old house before Fred would write his next monthly rent check. Doors needed planing, broken windows were taped together. These deficiencies, and others, allowed the cold winter wind easy access to the entire home.
“I thought that if we could come to some agreement on how these things would be handled, we’d stay,” Fred said. “I was happy to do most of the work myself if we could adjust the rent a bit. Well, when I approached the property management company about it, they said it would take at least a month to contact the owner because of his location and his profession. I thought that was a little ridiculous.”
A month turned into a year and one year quickly became 16. Fred did not pay another dollar in rent and continued to wonder when and if the landlord would contact him about the status of the property and rental account.
“I just didn’t know if the landlord could collect any rent at all,” Fred said. “As far as I was concerned, the rental agreement expired after the first year. I fulfilled the obligations and there hasn’t been any contract since then.”
Attorneys checked in to say the statute of limitations on written contracts is six years while the statute of limitations on verbal contracts is three years. They also advised another look at the language of the initial agreement. If there were any reference to a renewal, it would probably change the picture. In addition, the attorneys ruled out ownership via adverse possession because of similar cases in other states.
The attorneys indicated that the agreement between the owner and the property management firm also should be scrutinized because the owner seemingly employed the firm to render a service. Despite Fred’s plea for an agreement on how the repairs should be handled, the property management firm did not collect and deposit funds.
What did not change is Fred’s fondness for the house. In addition to the usual repairs, he made several improvements to make his now-growing family more comfortable. He converted the small attic into a bedroom-loft area for his two young boys.
“I’ve always taken care of my things and other people’s property,” Fred said. “Just because I have not been the actual owner hasn’t really made that much of a difference in the day-to-day maintenance and routine. We began to wonder about the long-term down the road. Although we’d like to have more space and major upgrades, I haven’t really felt that I could take those steps.”
One attorney said if the landlord showed up on his doorstep and demanded 16 years of back rent, it’s difficult to say exactly what a court would do. According to the attorney, a court could say there was an implied holdover tenancy even though the actual agreement terminated after one year. In that case, Fred might owe a ton of back rent. At $498 a month, Fred’s 16-year bill could come to a whopping $95,616.
Last summer, a representative from the owner showed up at Fred’s house. The owner, an elderly gentleman who had relocated to England years ago, had considerable other assets and simply had forgotten about the little cottage after misplacing the correspondence from the management company hired to collect the rent.
“Neither side really wanted to file a lawsuit,” Fred said. “There were obvious costs, plus the unknowns. So we started talking about what settlement might be possible. They talked rent and appreciation and I mentioned upkeep and improvements …”
The owner and Fred negotiated a purchase price of $313,000 – far below market value. How did the two parties arrive at such a figure?
“I really don’t know,” Fred said. “Maybe they had some statement from 2000 that said the place was worth $118,000 and then they added on $95,000 in back rent.’’
Follow real estate agent and basketball coach Ernie Creekmore as he attempts to solve another murder – this time a “helicopter” parent constantly prodding his star athlete son. Tom Kelly’s “Hovering Above a Homicide” is now in print and E-book form. Get a signed copy at TomKelly.com or purchase at bookstores everywhere and online.