Compensation for Tenants During Repair

Discussion in 'Repairs & Maintenance' started by Goosehead, 10th Sep, 2020.

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  1. Goosehead

    Goosehead Well-Known Member

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    I have a bathroom that requires a reseal as the wet seal is failing. The work will take approx 3 days from drying to having the work completed and allowing the treatment to set. I have discussed cutting the rent for the week for the tenants in compensation for the inconvenience.

    However I was thinking am I better off maintaining the rent but have the property manager write an invoice for providing bathroom facilities that equals the rent? Rather than loosing income I would be gaining a claimable expense.

    Has anyone else employed this method?
     
  2. Trainee

    Trainee Well-Known Member

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    youd pay more on management fees, which is paid from rent. How exactly is the agent providing bathroom facilities?
     
  3. wylie

    wylie Moderator Staff Member

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    Is there a second bathroom? If not, I'd assume you'd need to put them up in an hotel or provide a portable bathroom?
     
  4. bunkai

    bunkai Well-Known Member

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    Provided there was a second bathroom and thus they are not incurring additional expenses, I don't see why you would cut the rent. You are complying with the obligations of the lease.
     
  5. Goosehead

    Goosehead Well-Known Member

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    All good questions, definitely not% fully worked out yet. There is no second bathroom so it may be that I pay for a serviced apartment, or wait for them to go on a holiday etc.

    Trainee, my thoughts are for $400 rent, management of 7.7%, acc/bath = 1 wk rent and no loan for simplicity:

    Sacrificing Rent $400 x 51 - 7.7(%) = 18829.20
    Tax @32.5 = 6119.49
    Return = 12709.10

    Charging acc/providing bathroom ($400 x 52 -7.7(%)) - $400 = 18840
    @32.5 = 6123.00
    Return = 12717.10

    *rough figures + not an accountant
    It is only a matter of $8 or so in it but seems to work.Of course lending expenses, rates, water etc would all have an effect.
     
  6. wylie

    wylie Moderator Staff Member

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    This is too complicated and the bottom line is your tenants are going to expect to be able to use a bathroom they are paying for, use a portable bathroom (and probably ask for a reduced rent for having to traipse outside to use it), or ask for a reduction in rent.

    If this was me, I'd never ask a tenant to go three days without a toilet. I'd offer a portable bathroom and depending on the tenant, might also offer $100 off for the week as well. Or I'd offer to put them up for three days somewhere at my cost. But as a tenant, I'd prefer not to have to pack my things up for three days away.

    The portable bathroom would be an expense that I'd assume is claimable.
     
  7. Trainee

    Trainee Well-Known Member

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    Your calc is wrong. (400 x 52 x 0.923) - 400 = 18,798.40. The difference being exactly $30.80, which is 7.7% of $400.

    It costs you more to not reduce rent. And it's complicated. Why do it?
     
  8. Goosehead

    Goosehead Well-Known Member

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    Hey guys, I'm not saying they can't go to the toilet for three days and no I'm not going to make them head to the nearest Macca's to use there bathroom.

    Just curious to which way will reduce my costs on top of an already expensive repair.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You likely will have a cost in compensating the tenant. Whether its a reduced rent or a payment to them or for temp accomodation its all the same thing really. The agent shouldnt be paying for the defect issue in having their fee adjusted so I would quit focussing on a 7.7% saving and move on. Focus on the issue. They probably want it over quickly to avoid moving it to a tribunal who would find your approach to a few extra dollars not issue of the tenants concern. And the agent fee triviality likely covers all the extra time the agent will need to sort things anyway.
     
    Last edited: 10th Sep, 2020
  10. BunnyXiao

    BunnyXiao Well-Known Member

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    Did anyone present the tennants with a range of options they would like best ie porta loo, do it when they are on holidays, put up with the inconvenience bla bla. Way to get engagment and feel they have a say. Less likely to grump and storm off and tell a tribunal
     
    thatbum, Firefly99 and wylie like this.
  11. balwoges

    balwoges Well-Known Member

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    Maybe they have rellies/friends they can spend a couple of days with rent free, if not pay for 2/3 nights at a motel. BTW welcome to the real world of being a landlord and next time make sure you buy a property with 2 bathrooms ... :D