Landlord & Maintenance

July 22nd, 2010 · 15 Comments · Property Management, Rental Property, Tenant Resources

This morning in landlord news there are a bunch of tenants complaining about the maintenance in their buildings and houses they rent. This is not a surprise to me. There’s a few reasons why tenants complain about maintenance. There’s also a few more for neglecting maintenance in the first place. In my inimitable style, I’ll tell you what they are.

Tenant Complaints

  • The first reason tenants complain is because they have a legitimate concern. Something’s broken and need to be fixed
  • The second reason tenants complain is that they can’t pay the rent. Almost every tenant that I have seen at the Landlord & Tenant Board has claimed that the apartment they live in is deficient in some way. In most buildings there is a process, such as filling out a form, to get your maintenance done. Usually in these cases no such complaint has ever been filled out. The reason tenants complain in this way is the same psychological reason that your friend will pick a fight with you and fail to repay the money you lent him.
  • The third reason some tenants complain is because they feel like they are entitled to something they aren’t entitled to. A while back there was a rash of tenants complaining about the AC not being turned on during unseasonably hot weather. This was before the 1st of June. In Canada the HEAT must be turned on until June 1st according to the law. The same day this story hit the news in Toronto, it was snowing in Calgary. Building heating and cooling systems are not like your window AC. They’re huge machines and take days to turn on. Then there was the tenants who don’t even have AC in their building complaining. I’m sorry you’re hot but you don’t pay for AC. Your rent price doesn’t reflect the cost of utilities to provide you with AC. Go pay more for a place that does or shut up.

Some tenants have a huge disconnect between what they pay for and what they are entitled to. Your landlord cannot pay for the same services for a $650 apartment as a nice $1500 per month new condo. Get a grip already!

Some landlords don’t do the maintenance that’s required.  Here’s why.

  • They paid too much money for the property and they just don’t have the income to do so. It’s incredibly expensive to keep up a building and small investors are being deluded into thinking that they will make money just buying a property due to appreciation. Even if it works out and the property appreciates in value, the landlord can’t spend that money unless they refinance and if they do they have an extra monthly payment. The proper safeguards need to be built in during the purchase process. Cap rate calculations need to include a vacancy, property management and maintenance percentage. In Toronto that’s about 22% of the gross income.
  • Rents are too low. Good guy landlords don’t give their annual rent increases. Their expenses have increased every year. They don’t have the money either. I was just emailed a listing where one tenant is paying $575 per month for a one bedroom. That’s the same rent as when they moved in 18 years ago! As much as tenants hate rent increases, landlords need them to keep up with their expenses. This year in Ontario, landlords are getting a .008 increase (less than one percent) The electricity cost alone has gone up 25% this year.
  • Too cheap! Landlords are incredibly cheap when it comes to staff and contractors. Some of them just won’t do the work until they find someone with “reasonable” prices. Their idea of a reasonable price doesn’t reflect reality. Instead of hiring decent contractors who have WSIB and insurance they hire contractors who can’t add. They’ll hire illegal immigrants, unlicensed contractors and the cheapest possible labour. If they can’t find someone who will do the work for free or even for less than free after expenses, they just don’t do the work.
  • They don’t know about it. Some tenants don’t complain. One tenant of mine called me one time and left a message that he had a little leak. It was stated in as mild a manner as possible. I scheduled him for an inspection a few weeks later. When I got there there were buckets all over the living room and plastic draped over everything. The flat roof over his unit had failed under the deck. It had been going on for months before he called. Another tenant I had never even mentioned that she had the worst case of cockroaches ever. It was disgusting. I only found out when she moved. Another case like this was discovered when a maintenance man went to check up on a stove complaint. The maintenance guy opened the top of the stove and about a hundred cockroaches came out. A unit like this will infect every single apartment around. Their neighbours complain and we’ll spray them. Meanwhile the source goes unabated.
  • They don’t care. These landlords are just psychopaths. I’ve met a few.
  • They spent the money. When the building was young it was relatively cheap to maintain. The building is 20 years old now and things like kitchens, baths, building envelopes and boilers are reaching the end of their natural life. They didn’t keep enough dough and now they are hurting. Condos have also made this mistake. If you see an older building with $700 plus maintenance fees and no amenities, this is the problem.

I have found that the best maintained places are small investor owned and the owner does most of the work himself. They take real pride in their place. A tenant can get real value there. God help the tenant that starts to not take care of this place. The hounds of Hades are calm and kind compared to this kind of landlord when their place is being neglected.

If you’re a tenant you can expect to pay for good service and maintenance, after all your landlord has to! Nothing is free for them. The plumber, carpenter, painter, advertising, property taxes all have to be paid by your rent. These days many small investors have been sucked into buying income properties that don’t pay. They’re banking on appreciation. They are in fact subsidizing the rental market. One of the guys I do property management for pays about $100 per month per suite. He has three. Any repairs or maintenance also come directly out of his pocket.

In short tenants need to be prepared to pay extra for great well maintained apartments and landlords need to be prepared to spend the money on needed maintenance. Complaining about your greedy landlord is not always correct. Your landlord is not prepared to take on a second job to pay for a brand new kitchen for you when you don’t want to pay a cent extra! I fear that the problem is only going to get worse as more small landlords feel the pinch of no appreciation coupled with increases in interest rates.

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15 Comments so far ↓

  • Mortgage 101

    Landlord & Maintenance…

    I found your entry interesting do I’ve added a Trackback to it on my weblog :)…

  • jesse

    So when you say expenses are 22% of gross revenue, are you including loaded property management fees, maintenance fees and upkeep, taxes, vacancy contingency, and CCA? Anything else?

    I thought loaded property management was around 10% of rent. It seems adding in the rest of the above expenses would come out more than 22%, or are rents in Toronto really that high?!?

    Love the blog; your site is one of the few I know about that actually gets into the dirty realities of property investment. Keep it up!

    • Rachelle

      First of all Jesse thanks for being my angel linker πŸ™‚ First you linked me from your blog. When you commented on Garth’s blog I got like 300 hits, huge for someone starting out. Thanks. I tried to email you at the langley email on your blog and it wouldn’t go through πŸ™ Bloggers are the coolest.

      When I count about 22%, I’m allowing 8% for property management, 5% for vacancy and 10% for maintenance of the building and replacement of capital elements. The 10% for maintenance is very light if you are starting with an older building with deferred maintenance. All expenses are apart from that. Without these amounts in place there’s just no breathing room how are investors going to pay for stuff? Lots of them don’t even know it. Saying something is an investment doesn’t make it true!

      And don’t get me started on the real estate agents these days… the ICX.ca has a very nice form with every single one of those blanks to fill in. I have not seen one allowance for any of these items on a MLS listing in years. I’d have a heart attack if I did see it.

      If you want I can send you a spreadsheet where you fill in the blanks and it tells you what the price you should pay is, depending on the return you want. It’s awesome. Thanks Greg!

  • jesse

    Rachelle, that spreadsheet would certainly be interesting; I obtained access to one already but I certainly would like to compare the methods of the two. I’ve included my “real” email address to this comment.

    It aligns well with an ongoing post series I am in the middle of, on basic property investing maths for dummies like me. πŸ˜‰

  • jesse

    Rachelle, so as a building ages, I assume you start provisioning for higher expenses? I would also assume the rent would fall vis a vis newer vintage units, which would start crimping yield on both sides of the ledger.

    • Rachelle

      That’s right Jesse. Furthermore if you consider Toronto for instance the existing corporate landlords have been trained under rent control. The only way to increase profit under rent control legislation is to pare down maintenance expenses. This is still the reflex method in buildings.

      If you consider that the things that make up a suites attractiveness could be changed to compete with rental condos. As far as I am concerned the competition for rental buildings are condos. Our old apartments are huge. Throw in a new kitchen, decent bathroom, dishwasher, laundry and you have a living space twice the size of new condos.

      In one building I worked in we ripped out the old kitchens and baths on the top two floors and put in “penthouse suites” even without dishwashers and laundry they were renting for $1200 per month about $400 more than our regular apartments. I suggested to the owner that he continue the idea on other floors. Not every one is willing to live on the top floor of the building. He was completely unwilling to attempt this.

      He was also unwilling to replace all the 30 year old stoves claiming they were just a box with elements. Even when I did an evaluation that proved that he would save money by doing it, he still didn’t want to. The staff time to repair these obsolete stoves was unbelievable.

      If you’re a smart landlord you’ll be replacing these items because they are at the end of their natural life. 30 year old original kitchens are held together with spit and sticky tape. They’re ugly and out of date. At some point you have to bite the bullet. These guys can’t though because “saving money” is a pathological problem for them.

  • QD

    I’d love to get a copy of that spreadsheet as well πŸ™‚

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  • Rick Hyne

    LOL – Thanks for the morning laugh. I operate commercial property and your right on the money with the self entitlement topic.
    During a recent rent increase I offered a tenant a HVAC system for their store. They felt it was un-necessary and didn’t want that much of an increase in rent. Now they are complaining because I should have installed the unit for the same price they are paying now

    Others will also negotiate for lower rent on an as is basis then complain about the noise, the paint job or anything else they think they should be entitled to.

  • emily

    I have a question I haven’t been able to find the answer to. Is there a provision in Ontario rental law for Landlords to repaint or reimburse for paint on long term tenants?

    I’m an almost 7 year tenant of a house. It was freshly painted when we moved in but a couple of rooms need a freshen up. Can I legally ask my landlord to help with the expense?

    Thank you

    • Rachelle

      Hi Emily,

      This is considered wear and tear and the landlord is not responsible to repaint. However if you have a good relationship, it doesn’t hurt to ask.

  • diving Costa Rica

    Thanks for sharing your thoughts about landlords. Regards