How Do Tenant Improvements Work
As you step into your rental property, you’ve noticed there have been a few changes made to the property by the tenant. Two of the rooms have been repainted. New shutters were added to the exterior. Those cracks in the concrete steps have been repaired. Landlords have two options when they discover improvements: they can accept them and the potentially added value they provide or reject them if unauthorized changes are forbidden due to the lease. If rejected, changing the property back to its original condition can often be charged against the security deposit.
Tenants Do Not Get to Charge For Value
Improvements made by a tenant can often be written off as a tax expense for them because they did the work. Landlords cannot take any tax deductions from accepted improvements and may wind up having an increased tax burden if the improvements increase the value of the property. This is often why landlords attempt to reject improvements that are made. Tenants have a case to fight against improvement rejection for a number of common reasons.
1. The paint they used was the same color that was already in the home or room that was improved.
2. Flooring needed to be repaired anyway and they just did it without notification.
3. There was a safety concern in the home that the tenants resolved on their own. If you have white walls in your home and the tenant paints them red, then that could be an improvement that would possibly be rejected.
If the white walls are still white, but with a new layer of paint, then the improvement must generally be accepted.
Tenants Have No Right to Claim Value
The issue that landlords face is that some tenants expect to be compensated for their work when they move out. They use the improvements as a bargaining chip to have their full security deposit returned. This isn’t necessary in a vast majority of cases. A tenant may have spent $1,000 giving a property new paint, but if they left the property without cleaning it properly, then landlords have the right to charge for that service. Tenants cannot sue a landlord for the value of the improvements if they were taken on voluntarily and there wasn’t a health or safety issue that required the repair. Even cracks in concrete steps won’t qualify unless it was a health or safety issue. Tenant improvements are generally one of those things that are nice to see. As long as the property hasn’t been altered dramatically, it is generally a best practice to accept them and prepare the property for a new tenant.