I don’t know a single landlord that enjoys getting a call from a tenant telling them that something needs to be fixed.
Not only does it hurt the bottom line, it requires effort to handle it (even if you hire someone) and you always wonder whether the tenant was at fault for breaking the item, which can lead to a stressful dispute.
It’s for this reason that many landlords choose to charge a deductible for repair requests. In other words, they charge the tenant a certain amount for any repair request they make, which the landlord pockets. If the repair costs more than the deductible, then the landlord generally covers the difference.
But are such deductibles allowed?
That’s what we are going to answer in this article. We’ll also cover the legal landscape around who is required to pay for repairs and how that plays into this question. I’ll also cover some of the benefits and risks of using a repair deductible in your landlording business and some alternatives you can use that may be better.
If you have don’t have the time to read through it all, here’s a short answer to the question:
A landlord may charge a repair deductible to a tenant, but must comply with state and local laws when doing so. If applicable laws require a landlord to make a repair (usually repairs needed to bring a home up to code or address habitability issues), then the landlord may not charge the tenant for such repair, including any deductible.
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What Is a Repair Deductible?
A repair deductible is a designated amount that a landlord will charge for a repair request. So if the toilet breaks and the landlord asks for it to be fixed, the tenant must pay the repair deductible (which may vary, but in my experience typically ranges between $50 to $200).
If the toilet repair costs more than the deductible the landlord covers the rest. It basically forces the tenant to have some skin in the game when it comes to requesting repairs.
These details of the repair deductible are usually laid out in the lease, including the amount of the deductible, and when it applies.
What Are the Pros and Cons of a Repair Deductible?
As mentioned earlier, a lot of landlords like this deductible concept, but it comes with drawbacks too.
Here are the pros and cons of a repair deductible:
Pros:
- It discourages frequent and minor requests
- It saves money in the short term
- It makes property management much easier
Cons:
- It may be prohibited under law if not carefully implemented
- It may cause tenants to not report issues that may be minor now, but which can turn into major expenses if left unchecked
- It may upset tenants and cause them to leave if things continue to break and they have to live with it because they do not want to pay the deductible
Can a Landlord Charge a Deductible For a Repair?
Ok, so here’s the heart of the issue.
A landlord cannot charge a tenant for repairs which the landlord is legally required to perform. Under most state and local laws, this includes repairs that are necessary to maintain the habitability of the premises.
Now different states may have different standards for what is covered under habitability, but here is a pretty good general list provided by Investopedia:
- Provide drinkable water
- Provide hot water
- Provide heat during cold weather
- Provide working electrical systems
- Provide adequate ventilation systems
- Ensure smoke detectors are in working order
- Provide working bathroom and toilet
- Provide sanitary premises, including the removal of insect or rodent infestation
- Protection from criminal harm in the form of locks and window guards
- Up-to-date conformity to building codes
Again, I would highlight that some states do not always place the burden on the landlord for some of these items. For example, in Virginia, the tenant is responsible for keeping their dwelling free of pests, such as insects and rodents. Source.
In fact, as a general matter, if the condition is caused by the tenant, then the financial burden of fixing it falls on the tenant.
So what does this mean – what’s the upshot?
Essentially, even if the landlord and tenant have agreed in the lease to have a repair deductible, it should not apply to repairs that the landlord is required to perform under law.
So for repairs that are minor and not required to be fixed by the landlord, a repair deductible may be fine. Similarly, a repair deductible can work for repairs that are needed because of a tenant’s negligence (but why you wouldn’t just ask them to pay the whole charge is beyond me).
So it makes sense to research the law in your area to make sure that you are not violating it though your repair deductible.
For your convenience, here’s our 50 state reference table (including D.C.) that will link you to the official landlord tenant laws of your state.
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What Are Alternatives to a Repair Deductible?
Using repair deductibles can be fine if done correctly, but they definitely come with risks. Here are some alternatives you can consider that may work better for you.
Property Management
If you dread getting calls from your tenants about repairs, you can simply outsource that function to a property management company. Now I know they can get pricy, but they do take away a lot of the stress that comes from constant tenant interaction and disputes.
Not a bad option if your biggest pain point is dealing with tenants. Plus they basically take care of all other aspects of managing your property, so that’s a pretty big deal for most landlords.
Home Warranty
Another option is to get a home warranty for your rentals. They won’t cost as much as a property management company and you can basically be covered for repair or replacement of most of the bigger ticket items in your rental.
You will need to pay a deductible to the insurance company and there may be hassles in getting coverage or a prompt response, but not a bad option if you want to contain repairs costs.
Crack Team of Handymen and Techs
This is the option I use.
If you have a reliable and competent team of people who can handle any repair or maintenance task and will do it at a fair price, I think that’s the best way to address the inevitable repair requests that will come your way.
Sure, you have to field the initial call from the tenant, but after that it’s simple. All you have to do is call the right tech and have them coordinate with your tenant to resolve the issue.
Make sure you send enough business their way to keep them happy, but also have some redundancy so that if one of them isn’t performing or starts to overcharge, you have a fall back option ready to go.
Extended Appliance Warranties
If you don’t want to shell out for a full home warranty, an extended appliance warranty can be a decent backstop. Whenever I buy new appliances I opt for the longest warranty they offer so I don’t have to worry about repairs for many years to come.
Maybe I am overpaying for this insurance, but I just like the peace of mind that comes with it.
Conclusion
So there you have it – a clear answer to whether a landlord can charge a repair deductible, the situations when it is allowed and some alternatives to using that option.