Protect Yourself From Diminished Value

Suppose you are going to court to evict a non-paying tenant. This should be a no brainer. But in this case, the tenant had a countersuit, claiming the house needs repairs. Watch out!

We had a recent case like this. This was an older house and did need some things done to it. But the condition of the house was acceptable to the tenant upon move-in, as was so indicated on the inventory. Four months after move-in, the tenant stopped paying rent. He did not have a job, and had no money. We sent him the demand for possession and he wrote a letter back suggesting that we apply his security deposit to the rent, which we will never do. Also, in his letter he listed some dozen maintenance issues. Most of them were either false or gross exaggerations. Clearly, he was trying to mitigate the fact that he was in breach of contract for nonpayment of rent. This overused tactic seldom works, and most judges see through it. Nevertheless, in good faith, we attempted to address some of the legitimate issues. He made it difficult for the vendor to access the property, so we got very little accomplished before the court date.

In court everything looked like it was going our way, the line of questioning that judge took seemed right along the lines I would have expected. In the tenant's counter-suite he moved for consideration for the value of stolen personal property. The judge denied that motion because there was no evidence submitted and the judge did not think the landlord was liable for the tenant's stolen property anyway. Everything seemed in place for a judgment for the plaintiff. Surprisingly, while we did get the writ of possession, we did not get a money judgment for the back rent. The judge determined the condition of the property to have diminished the value of the rent. How he decided how much that amount should be is beyond my understanding.

I think I could have argued this defense if I had perceived the direction that the judge was taking. But I did not. It was not until after he gave his judgment that I realized what he was thinking. He gave no indication whatsoever in his questioning, and the tenant did not move for this defense.

So what's the lesson learned? As a landlord, if a counter-suite is made concerning maintenance and repairs, do not assume that the judge is with you on it, make your case for why there is no case for a claim of diminished value, even if this is not asserted as an affirmative defense by the tenant. If the judge does not think your argument is relevant, he will stop you before you get too long-winded. But the lesson I learned is to never leave a question of diminished value on the table ever again.

Dan Wilhelm ABR, ABRM, CRB, RMP, EcoBroker®

For property management or real estate investment help in the Atlanta Metro area, visit our web site at http://www.3OptionsRealty.com/atlanta-property-management or call us at (678) 397-1282.

NOTE: Dan is a professional Property Manager operating in the Atlanta market as well as an investor owning homes in many cities in Georgia including Marietta, Woodstock, Lawrenceville, Alpharetta, Roswell, Johns Creek, and Cumming Georgia.