Larry bought his first rental property in 1987. It was a three-family. He and his wife lived on the first floor and he rented out the other two units. Barely having enough money to purchase the property, Larry opted not to hire an attorney before renting the units. He also decided that a lease was not necessary. While he and his wife did not think an upfront payment of first and last month’s rent was necessary, they both agreed it would be smart to get a security deposit to protect them against tenant damage.
When Larry’s kids were born, he and his wife moved out, bought their own house and rented the first-floor unit. Larry’s life was good. He was receiving $1,500 from each tenant and the rent checks were always paid on time. After about a year, his investment was finally starting to pay off. Then, right before Christmas the third-floor tenant called to say that the Christmas lights to the tree he’d put on his porch wouldn’t work using the porch’s outlet and he didn’t know why because the lights worked when he plugged them into an indoor outlet. So, he went into the basement, inspected the electrical breaker box for his unit and discovered that all of the breakers were in the “on” position. Larry assured the tenant not to worry. He’d call and have an electrician come out on Monday.
When Monday arrived, Larry did not hear from the third-floor tenant. Instead, it was the first-floor tenant calling. She’d told him she’d been down in the basement this morning getting laundry out of the coin operated, washer and dryer when she’d had an “interesting” conversation with a man claiming to be Larry’s electrician. It seems the electrician informed her that “there was a cross metering issue” and it seemed that the electricity on the third-floor porch, the electricity for the common area front porch and the entire basement were wired to her electrical breaker box. She wanted to know why she was paying for the electricity for areas used by all the tenants. Irate, she threatened to call an attorney. Frantic, Larry went over to speak directly with his tenant. He’d hoped that when they spoke face to face, he could “work something out” and “smooth it over.” There was no reason to get an attorney involved, he thought.
Larry’s knock on the door was greeted by loud barking and the sound of a dog’s claws scurrying across the hardwood floors in the hallway leading to the front door. Larry knew that hallway well. He’d sanded and varnished that floor himself. When he and his wife lived there, he considered that beautiful hallway to be the centerpiece of their home.
When the door opened, the tenant and a large, black dog greeted him. Visibly angry to see him, Larry’s tenant began to go on and on about how she didn’t make much money and always thought her electricity and heat bills were “just too high” and now that she found out why, she was so upset. Larry took a deep breath and tried to address her concerns. However, his focus was drawn to what this large dog had done to his beautiful, hard wood floors. Noticing his gaze, she abruptly asked what he was looking it. Larry gently mentioned that he hadn’t known she had a dog. She told him she’d “had it for a while” and because Larry had never said anything about it when he would come over to shovel the walkways or cut the lawn, she didn’t consider it a problem. She then asked if he was somehow suggesting that she’d have to “get rid of it.” Suddenly, she was screaming at him about the dog and how much she loved her dog and that she “knew what he was doing.” “You’re just trying to keep me quiet about this “cross-metering thing!”
Larry tried to calm his tenant down, telling her that there was no need for her to get rid of her dog. Moreover, she told him there was no need to get an attorney involved. He asked her to send him copies of her heat and electricity bills and he’d “make it all right.” Much to his surprise, she never did call an attorney. However, it cost Larry and his wife more than $5,800 to “make it right.” He was furious. Not only did he have to pay that blabber mouth, electrician to re-wire the breaker box, he had to pay his tenant nearly three thousand dollars. The one consolation he had was that he had her $1,500 security deposit.
Larry called me years later about collecting the security deposit from his tenant. He told me the story. Because there are strict laws about tenant security deposits and Larry had not followed those laws, I had to inform him that he would have to return the deposit immediately or risk being forced to pay damages to his tenant: three times the amount of the security deposit plus attorney fees. Larry just shook his head. While Larry was pretty upset, I explained to him that he actually got off pretty lightly. Had his tenant called an attorney about the “cross-metering issue,” Larry likely would have paid thousands more in damages and been forced to pay his tenant’s attorney fees. Additionally, had he asked her to get rid of her unauthorized dog, he may have faced additional legal consequences for “retaliating” against her.