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Old 09-26-2011, 07:51 PM
 
Location: Simmering in DFW
6,836 posts, read 9,618,562 times
Reputation: 6518
Default How to handle this lease situation

I am acquiring a new investment house that I will lease out when some minor renovations are completed. This is a 1400 sq ft 3 bedroom, 2 bath house built in 1954. There is a detached garage behind the house that has been converted into an apartment; about 400 sq ft. It has a bedroom, a living room and a full bath. In one corner is plumbing for a kitchen area to be installed. The central heat and a/c unit that was installed has been stolen.

I am considering not replacing the heater/air conditioner and not installing the kitchen because I don't want the people who lease the house to secretly rent the garage out (thereby becoming the landlords themselves). However the workmanship is nicely done; the bathroom is very nice and the flooring is a good tile so I don't want to change it back. It would make a great home office or mother-in-law suite. Some day when I go to sell the house, it would be an asset to the property.

I can't rent it out to a separate tenant because it would be an illegal apartment. Therefore I am thinking of just leaving it "as is" and making it available to the tenants for their use (they'd have to use their own space heater and a window a/c -- this is in Texas so a small space heater would be sufficient) with strong stipulations on the lease that they cannot permit anyone to reside there.

My husband thinks I should secure it and not allow tenants to use it.

What do you think?
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Old 09-26-2011, 08:21 PM
 
Location: St Thomas, US Virgin Islands
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I'm inclined to agree with your husband. I think the liability involved in allowing tenants in the main property to use it is high risk and not worth it.
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Old 09-26-2011, 09:42 PM
 
Location: Seaford, Delaware
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You could install a wall/window heat cool unit and rent it as part of the house and call it an office/studio/guest rooms. Stipulate use in the lease that it cannot be occupied as an apartment. Inspections would be required to be sure. Also seal off the kitchen connections by putting in cabinets and counters that will not allow anyone to know a kitchen connection is there. Call it office space.
That could increase the rental value.
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Old 09-27-2011, 03:42 PM
 
Location: NYC
1,216 posts, read 1,080,523 times
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I agree with your husband. Lock it up. If a tenant used it as office space there's always the chance that they'd have 'customers or clients' come over, and I don't know how that would affect your insurance as far as liability. What happens if a customer falls down the stairs? You'll get sued, not the tenant.
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Old 09-27-2011, 04:34 PM
 
Location: Southern California
3,116 posts, read 3,910,286 times
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Personally I wouldn't want to rent a house that had a locked up garage/office conversion on the property. I might not choose to even use it, but if it's on the property, then I would want to at least have the option to use it.
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Old 09-27-2011, 04:47 PM
 
Location: A little suburb of Houston
3,700 posts, read 11,144,743 times
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I agree with hubby unless you do what Shane said. I would not allow a space heater, the chance of a fire is way too high.
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Old 09-27-2011, 05:31 PM
 
Location: Seaford, Delaware
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A provision can be put in the lease that the property is to be used as a residence only. State that no commercial activity can take place on the property. A private office that does not have customers coming and going is not a commercial activity, even of the person works from home. You can also put a provision in the lease for the total number of people living on the property. "The residence is to be occupied only by ## of adults with ## minor children. Your lease can address any issues you are worried about by forbiding those actions.
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Old 09-27-2011, 06:59 PM
 
Location: NYC
1,216 posts, read 1,080,523 times
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Quote:
Originally Posted by ShaneSA View Post
A provision can be put in the lease that the property is to be used as a residence only. State that no commercial activity can take place on the property. A private office that does not have customers coming and going is not a commercial activity, even of the person works from home. You can also put a provision in the lease for the total number of people living on the property. "The residence is to be occupied only by ## of adults with ## minor children. Your lease can address any issues you are worried about by forbiding those actions.

Check the laws in your state on the bolded statement. It's not legal where I am.
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Old 09-27-2011, 07:52 PM
 
Location: Seaford, Delaware
3,350 posts, read 10,120,900 times
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The OP is located in Texas. The bolded statement is legal in Texas. I am a LL in Texas. It's what I do with my leases. Especially in single houses.

B. Occupancy Limits Tex. Prop. Code SS 92.010

This section limits the number of adults that a landlord may allow to occupy a dwelling. The general rule is three times the number of bedrooms in the dwelling. More are allowed if this rule were to violate fair housing laws, or the extra adult is temporarily seeking sanctuary from domestic violence. A tenant association or other entity has standing to bring an action under this section.

Last edited by ShaneSA; 09-27-2011 at 08:14 PM.. Reason: addition of document
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Old 09-27-2011, 08:40 PM
 
Location: Simmering in DFW
6,836 posts, read 9,618,562 times
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I agree that I would not want to lease a property and have space not made available to me. It is a good idea to cap off the plumbing. in the kitchen area and, if possible make the bathroom plumbing functional. However, the expense of making the bathroom functional and installing climate control will not, in our opinion, have a significant impact on the rental amount. We'll think about it.
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