How to Limit Alterations Households May Make

Last year, the United States tallied a record high bill of $306 billion in weather-related disasters, according to the National Oceanic and Atmospheric Administration (NOAA). The total amount includes damage from three of the five most expensive hurricanes in U.S. history: Hurricane Harvey cost $125 billion, second only to 2005’s Katrina; while Maria cost $90 billion, ranking third, according to the NOAA. Irma was $50 billion, for the fifth most expensive hurricane.

If your site is located in an area prone to weather-related disasters, you may experience a situation in which residents, eager to bring units online or habitable, may be involved in work to be done on their units. Just how much leeway sites may give residents who want to make alterations to their units may be a concern in rebuilding efforts in areas affected by hurricanes. Residents who want to be involved in rebuilding are willing to paint, panel, wallpaper, or make other necessary alterations, either by themselves or paying someone else to do it for them. The HUD lease says they cannot do this without the owner’s written permission.

However, a household may be allowed to add a little of its own personality to the unit it occupies, within limits. Of course, you can’t let households make whatever alterations they want, or your site could be harmed by those who are careless. And since the HUD lease doesn’t say what happens to the alteration when the household moves out, you may want to include in your lease what exactly you expect of households who want to make changes.

Many owners and managers rightly worry that, instead of improving their units, household members might leave behind a mess that’s costly to clean up. Unless you, as the owner or manager, set standards, households can easily make unsightly or destructive alterations that you’ll have to undo when they leave. To make matters worse, agreeing in the lease to alterations, without setting standards, may cost you the right to deduct repair and cleanup expenses from the security deposit. And you could be left liable for any injuries caused by dangerous alterations.

You can close this loophole by spelling out restrictions on alterations in a lease clause. We’ll give you a Model Lease Clause: Prevent Households from Making Unauthorized Alterations to Units, that you can show your attorney and ask HUD to approve before adding it to your lease.

IMPLEMENT SEVEN GROUND RULES FOR ALTERATIONS

To keep household alterations under control, make sure you can tell households exactly how to do the job. You can do this if you add the following rules to your lease in a separate paragraph on “Restrictions on Alterations.” Alternatively, you can set these standards in a house rule. A house rule is the easiest and fastest way to put alterations standards into effect. Although you must give households 30 days’ notice before a house rule can become effective, you do not need HUD’s approval.

1. Require Approval in Writing

Although already contained in the HUD lease, repeat the requirement that management’s approval for any alteration must be in writing. Requiring written approval can eliminate potential misunderstandings that end up in court.

Even if requiring written approval doesn’t head off legal disputes, it can help you collect damages against households that make alterations to their units without your agreeing to them. These residents might claim that you approved their plans. But without your written approval, they’ll have a hard time proving it.

Also, make sure the document giving your approval also spells out what work you authorized. This document can be used against households that do more than you said they could, as when a household installs new flooring after you agreed only to let it repaint existing floorboards.

2. Explain What You Mean by ‘Alterations’

Be specific enough to cover all types of alterations that can cause problems. Households might be able to get away with making unauthorized alterations by claiming that they’ve made “repairs.” Since the HUD lease doesn’t bar households from making repairs without permission, an imprecise definition of “alterations” can create a loophole in your lease.

3. Get Right to Approve Contractor

Some households make alterations themselves; others hire a contractor. When it comes to hiring contractors, you should not expect households’ standards to be as high as yours. You’ll want to make sure they don’t hire an incompetent contractor. You don’t want to trust your site to someone’s “brother-in-law in the painting business.”

Owners have a choice about exercising control over households’ contractor selections. The first option is to obtain the right to approve the contractor selected by the household. That contractor should be someone you would feel comfortable hiring yourself. The contractor should be licensed and carry enough insurance coverage to protect you.

The second option is to require households to use the same contractors you use. This spares you the trouble of having to do background checks on third-party contractors you don’t know.

4. Control When and How Work Is Done, Set Quality Standards

To save money, households may skimp on the quality of the materials and workmanship. Therefore, if you don’t want people making alterations with low-grade materials and shoddy workmanship, specify that all materials and work—whether done by household members or contractors—must meet quality standards that you set for the job.

Also, require the work to be done in “such time and manner” as you set forth. By controlling the work schedule, you can minimize inconvenience to your building’s staff and operations. And control over the way the work is done enables you to limit danger and disruption to other households.

State the work restrictions when you give written approval to specific jobs. Suppose you let a household repaint its unit. You might want to specify:

• Brand name and color of paint;
• Type of paint—for example, water-based;
• Company that will do the paint job;
• One coat of primer, one coat of finish paint;
• Use of drop cloths to protect floors, furnishings, and surfaces;
• Work is to be done only on days and at times that won’t interfere with preventive maintenance, pest control, or any other on-site operations;
• Ban on cleaning brushes or pouring paints, thinners, or other chemicals down sinks or toilets; and
• Designated area for disposal of empty cans, used brushes, and other materials.

5. Require Compliance with Local Codes, Other Laws

Guard against alterations that can get you in trouble with HUD inspectors as well as with local health and safety officials. You don’t want a household to seal off access to the only fire escape in the unit, for example, or incorrectly wire a ceiling fan. If that happens, you’re the one HUD will write up for a violation. Indicate in your lease that all household alterations must comply with local, state, and federal laws and regulations.

6. Guard Against Liens

Many contractors will accept a promise instead of cash from the people who hire them. To secure the promise, the household might allow the contractor to attach a lien to the unit. Or, if the household doesn’t pay, the contractor might slap the unit with what’s called a “mechanic’s lien.”

As you may know already, a mechanic’s lien can jeopardize the owner’s ability to obtain credit, get a loan, or sell the building. Therefore, you should bar households that make alterations from allowing contractors to attach liens to their units. In addition, require households to pay off the full amount of any liens the contractor files.

7. State that Alterations Become Your Property

Make sure the clause says that all alterations become your property—no matter who pays for them. Making this clear at the beginning is very important. Households sometimes assume that the new closet organizer or ceiling fan belongs to them, especially when they paid for it. As a result, they might try to take it with them when they move. The clause should require households to surrender—that is, leave behind—the alteration when the lease ends.

In additions, households should do more than agree to surrender the alteration. They should promise to surrender it in one piece. This is important because households might try to dismantle lofts, partitions, or other alterations. Intentionally or not, when households take apart what they put up, they almost always inflict serious damage. The lease should say, in effect, that households must surrender the alternation “without disturbance, molestation, or injury.”