I still remembered this incident despite it happening more than 2 years ago.
Back in 2017, I was handling a case where there was a water seepage leakage at the windows whenever thereʼs a heavy downpour with strong winds.
This happened at one of the condominiums at Holland area.
After assessing the problem by the management contractor, we are certain that the seal of the windows from outside had actually worn off that allowed the rainwater to seep through the windows.
However the water was contained at the window tracking and did not splash out to cause any damage to tenantʼs belongings.
A couple of days later, the repair works were arranged with both landlord and tenant informed. As told by the management, the repair works took a couple of days to rectify the seepage issue as a gondola (lift with metal ropes support from the rooftop) is required to assess from outside to replace the worn off seal.
The tenant was very upset on whole issue. It was probably their first time encountering it.
They threatened to terminate the lease citing one of the clause in the tenancy contract which is act of God.
To make things worse – despite ongoing rectifications by the developer for at least 3 months which the water seepage issue persisted – the landlord and myself were invited by the tenant for a discussion on how to go about terminating the lease.
With my advise in order to ensure rent continuity, the landlord counter proposed that the tenant can only do so if a replacement tenant is found or they can continue staying.
The tenant disagreed and felt that the landlord should let them terminate with 1 months notice given without paying any penalty .
Without any progress, we ended the discussion in a heated argument. The tenants threatened to pursue the matter.
But after a while for some reason, they gave up eventually and opted for a replacement instead.
The lesson learnt here is to stand firm against demanding tenants.
The landlord for this matter had not breached any terms in the tenancy agreement – the water did not even splash out from the windows and the tenantʼs furnitures were not even damaged.
But I do understand what the tenant had gone through as itʼs quite frustrating as the repair works somehow affect their daily routine and wasted their time.
I could see they were trying to use this as a reason to terminate the tenancy but I felt that itʼs only fair for the landlord to act out of goodwill and allow the tenant to terminate the lease if a replacement is found.
It was so much drama – just from rain splash!
Who says rental income is easy to earn?
The Trouble With Tenancy
The above story is just one of the many incidents I encountered with regards to handling tenants on behalf of my clients.
With my working experiences with a high net worth investor – I have more than my fair share of managing tenancies for landlords in the residential market. One of the challenging tasks is managing demanding and irresponsible tenants which can be sometimes stressful.
Here are some of the most common issues:
#1: Security Deposit that is held by the landlord
Itʼs not uncommon for the tenant to use the security deposit that was previously held by landlord to offset last one or two months rent payment without informing the landlord.
The landlord can never agree to this as itʼs considered a breach in the tenancy agreement.
First of all, the security deposit is there for a reason. Itʼs there to deduct any repairs or any replacement that was supposed to rectify during the term of the lease and it might not be sufficient to deduct the security deposit for the damages caused by the tenant.
Seasoned investors are aware of this and will not allow this to happen.
To avoid this, be mindful to check your bank account at all times especially the last 2 to 3 months before reaching the tenancy expiry date.
Immediately notify the tenant that you have yet receive the rent.
Itʼs advisable not to return the security deposit immediately prior to the take back of the apartment If the tenant happen to demand that the security deposit to be refunded back to them for some reasons.
This is especially if they have scheduled to leave the country on that day.
In most cases they will probably stay in their friendʼs place or in a hotel / service apartment temporarily once they hand back the apartment to the landlord which their bank account is still very alive and active .
As a landlord, you are not obligated to refund the deposit immediately as you have at least 14 days to refund. (if itʼs stated 14 days in the tenancy agreement)
(longer for some tenancies depending on what was stated in the agreement and the type of property you are leasing out).
If you see fit not to refund as you felt you need to do another inspection with your trusted contractor – then don’t refund yet.
Go through first what was highlighted during the apartment handover.
However – if you as a landlord wish to refund the deposit on the day of handover with good faith….
Perhaps for some reason that they are good tenants who really upkeep the premises during their stay. Perhaps they are also good paymasters and always paid the rent on time.
You can always initiate a pre inspection with the tenant 3 to 4 weeks prior to the tenancy expiry together with a trusted and experienced pair of eyes to inspect the place.
Go through with the tenant the things required to rectify prior to handover together with another final inspection once the rectifications are carried out.
This way expectations are made clear to the tenant on the things to rectify (if there is any) prior to the apartment handover.
An agreement can then be easily reached on both parties on the refund of the finalised security deposit.
#2: Default In Rent
I encountered a case whereby the tenant’s company HR department overlooked the rent payment for 61 days.
Worst he was serving his reservist at that point of time when he was informed of this issue.
There was an overlook to create a standing instruction with the bank.
The landlord was very unhappy about this issue as this was not the first time that the tenant had defaulted in rent.
As mentioned in my previous blog post, please do not assume that the tenant will pay the rent on time every month.
Even corporate tenants can also make mistakes.
We had to enforce the clause indicated in the main agreement which states unless indicated otherwise, ‘ In the event the rent remaining unpaid seven (a) days after becoming payable (whether formally demanded or not), it shall be lawful for the Landlord to claim interest at ten percent (10%) per annum on the amount unpaid calculated from after the date due to the date of actual payment. ‘
The calculation of the penalty interest that the tenant will be imposed are calculated as below:
- Rent was $2,800 per month for the above mentioned case:
- Per annum rent is 12months * $2,800 = $33,600
- So per day rent is $33,600 / 365 days = $92.05
- 10% interest per day 0.1 * $92.05 = $9.21
- Therefore 2 months (assuming 31 days for 1 month and 30 days for the other) interest of the unpaid rent will be 61 days * $9.21= $561.81
#3: Not Servicing the Aircon Regularly
Usually, it is clearly stated in the tenancy agreement that the aircon has to be serviced 4 times per year .
In order to prevent misunderstandings, landlords or their representatives should encourage the tenant to take up the landlord’s preferred aircon contractor prior to the start of the lease.
This ensures the contractor is able to feedback any cleaning status to the landlord with reports.
Of course – the tenant can refuse to do so especially if they already stayed here for a long period of time and probably have their own preferred contractor.
Sometimes, thereʼs a lack of sufficient servicing reports (1 year – 4 times servicing or 2 years – 8 times servicing ).
For some reason – that tenant had misplaced one of the servicing records – the servicing record can be retrieved from their contractors depending on the contractor that they used.
As a landlord, you have every right to charge the servicing per aircon unit $30 (current market price) * no. of units * no. of servicing to make up the shortfall and deduct from the security deposit if necessary.
There was an incident I experienced was that the aircon in the apartment was reported leaking non stop when itʼs turned on.
It was later diagnosed by the aircon servicing guy that the aircon was stuck with dirt gel.
For such cases, the tenant will have to bear cost to clear the chokage as the aircon is not considered faulty and the chokage is likely due to the usage by the tenant.
He had initially disagreed and felt that the landlord should take the responsibility to clear off the choke but he eventually agreed to do it after explaining the facts to him.
Do take note for such aircon leaking cases to happen, there could be a number of possibilities even with proof of servicing records.
- The tenant engaged a aircon contractor whom probably charge cheaper did not do a good job in servicing the aircons .
- The aircon was also heavily utilised by the tenant – sometimes it was turned on 24 hours a day even though they were out working.
- Aircon systems with aging outlet water pipe that are old and worn off will also result in frequent chokage from time to time if one of the above scenarios happens.
Hence for such cases, itʼs always advisable for the landlords to carry out a one-time chemical washing prior to handover to the tenant at the start of the lease.
Not stating clearly on the aircon clauses in the tenancy agreement will also in result in arguments in the future.
It is also advisable to add the topping up of gas and chemical wash into the aircon servicing clause in the agreement if necessary especially when the aircon systems are aging.
I think itʼs only fair with the repair / replacement cost be borned by the landlord, the tenant should also play a part in taking care of the aircons since they are the ones who will be utilizing it.
Rental income is easy to earn – only if you know how to manage your tenancy well.
It is not really passive income if you were to ask me. LOL.
My advice is simple – engage an experienced realtor to manage the tenancy for you.
Even property agents who own investment properties – they themselves engage property agents to manage their tenants for them!
Why? Because of emotions.
With a 3rd-party around to represent you – it allows to keep you at arms length with the tenant.
This is especially so as some landlords of mine by nature do not like confrontation or rejecting people.
Therefore when the problem arises, the agent is there to assist you to solve the issues with the tenant.
They have the experience of managing tenants especially those who focuses mainly on doing rental deals.
With their expertise, they should be able to advise you on process on tenancy issues, timeline and things to look out for when problems arises between the landlord and the tenant.
For myself, I have a trusted list of contractors, handyman and appliances / furniture suppliers as I dealt with them with far greater frequency than most landlords.
If you issues or questions regarding tenancy agreements or looking to find out more about investment properties – I invite you to contact me for a no-obligation discussion. It is just an exchange of a few messages to help you get better clarity.