Wednesday, February 16, 2011

Leakage update

Last month I reported on a problem I was having with one of my properties . This saga shows little sign of coming to an end and every indication of ending up with a vacant unit and a law suit.


1.denying that the leak had anything to do with them (in spite of having an unambiguous letter from the Buildings Department confirming that their pipe was the only source of the leak);

2. alleging that the pipe leaked because of damage done when my contractor redecorated (the contractor never went into the ceiling spaces and the leak did not materialise until 8-9 months after the work was done);

3. that the leak would not have happened if they had been given prompt access to do the repairs as soon as the leak had occurred (I'm not sure how they expected to be told that there was a leak before it happened or why it is my fault that they refused to accept responsibility or do anything for months after they were notified);

4. alleging that the renovations which I did were illegal (not true (and the Buildings Department have been in the property three times since the work was done) and, even if true, totally irrelevant),

the owner of the upstairs unit eventually did repair their leaky pipe. Or did they? It just kept on leaking but in smaller volumes. Once again they denied that the leak had anything to do with them and, once again, the Buildings Department has inspected, tested and orally confirmed that the leak is solely due to the upstairs unit but I will have to wait three weeks for the written confirmation. The owners of the upstairs unit have been told but are back into denial mode again. Unfortunately, I cannot legally do the repair myself and the nature of the leak prevents me from simply running my own pipe to catch the water and divert it into a drain.

Understandably my tenants are getting rather frustrated with this process (and I do not blame them). They have asked for compensation. My lawyers have confirmed that legally they are not entitled to either compensation from me or to break the lease. Likewise, I have no legal right to recover any voluntary payment from the offending neighbour. I can only recover actual losses which I have incurred such as the cost of repairs. They have been told that they will be sued to recover the damages which they continue to deny have anything to do with them.

That said, my tenants' lease will soon be entering the break period where they have a right to terminate on giving two months notice. I do not particularly want to have a vacancy and have to pay the agent to find me another tenant. I also sympathise with the tenants - a lot.

Accordingly, I intend to offer the tenant a reduction in the monthly rent for part of the balance of the term. The amount and duration of the reduction is still under consideration. This gives them an incentive to remain and avoids a situation where I pay a lump sum and then have them walk anyway. It is also more tax efficient in that a reduced rental income reduces my taxable income whereas the payment of a lump sum on a voluntary basis is not tax deductible.

Hopefully this will avoid a vacancy.

I will demand that the owners of the upstairs unit compensate me for whatever I pay the tenant, but realise that when the time comes to sue them, I will have to drop that part of the claim.

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