Rent abatement is a provision in many property agreements -- you'll find it in both residential and commercial leases. A rent abatement clause in your lease could help save you money if your landlord fails to meet his or her obligations under that agreement or if your rental unit sustains damage and becomes uninhabitable. Here, we'll discuss what rent abatement is and when it applies.
What is rent abatement?
Rent abatement is a provision that allows you, as a tenant, to stop paying rent or to pay less rent when your home isn't livable or your commercial property isn't usable. The length of a rent abatement period hinges on:
- The severity of the problem at hand.
- The extent to which the home or unit is rendered unusable.
- The length of time the issue has been present.
When does rent abatement apply?
The scenarios in which rent abatement may apply can vary from lease to lease. But generally speaking, you may be eligible for rent abatement in the following situations:
- Your home or commercial rental is damaged by fire, flood, or a natural disaster, like a hurricane.
- You're forced to evacuate your rental unit due to a government order.
- Your rental unit has a major repair issue that remains unaddressed, such as non-working heat or hot water.
- Your rental unit experiences a mold infestation, making it an unsafe place to live or conduct business.
Generally speaking, rent abatement applies when your home or unit is deemed unusable. As such, minor damage, or a minor repair that remains unaddressed, is highly unlikely to warrant a reduction in rent.
For example, say your commercial unit undergoes water damage that impacts one-tenth of your total space. Since the bulk of that unit is usable, you may not be entitled to abatement. Similarly, if you rent your home and your landlord doesn't manage to fix your broken dishwasher for months, that may be inconvenient, but it doesn't render your home unlivable. As such, rent abatement won't apply.
Keep in mind that you may need to give your landlord a reasonable amount of time to make repairs before rent abatement kicks in. The specific amount of time in question will depend on the terms of your lease, but don't be surprised if your landlord gets a full 30 days to address an issue like a non-working shower -- something that clearly impacts everyday life and is, arguably, an unreasonable thing to have to live with for more than a couple of days.
Another thing you should know is that in the context of commercial lease agreements, rent abatement can apply in scenarios even when there's no damage to the unit in question. For example, if you're a commercial tenant who needs to make improvements to the space you're renting, your landlord may agree to a period of rent abatement while you get that unit up to snuff.
What costs does rent abatement cover?
To be clear, rent abatement isn't designed to provide tenants with compensation when their personal property is damaged in conjunction with damage to their units. Imagine you rent an apartment and a fire breaks out in your building, leaving your home uninhabitable for many weeks until that damage is addressed. At that point, you'll generally be entitled to rent abatement because your home isn't usable. But you won't be entitled to compensation for your damaged belongings. For that, you'll need renters insurance.
If you rent a commercial space that sustains damage and your business equipment is damaged, you'll be in a similar boat. At that point, you'll need to look to your business liability insurance. If you have business interruption insurance, you'll be protected from income losses that ensue while your place of business is unusable.
Keep in mind that rent abatement generally won't apply if your home or unit is rendered unusable due to damage caused by you, the tenant. Furthermore, if you're entitled to rent abatement, you may still be liable for other costs associated with your rental unit, like common area maintenance fees or utilities.
How to qualify for rent abatement
Your chances of getting a temporary rent reduction or not having to pay rent at all for a period of time are highest if you have a rent abatement clause in your real estate lease. If you're looking to sign a lease that doesn't include this provision, you can negotiate rent abatement before moving forward. Keep in mind that the longer the unit you're looking to rent has been without an occupant, the more likely your landlord is to negotiate and give you what you want.
If your lease does contain a rent abatement clause, you're entitled to withhold or pay less rent when the circumstances outlined in that clause come into play -- such as when your rental sustains damage that renders it unlivable or unusable. But in some cases, you can request rent abatement even if your lease doesn't call for it.
For example, if your landlord fails to make repairs as per the terms of your lease agreement, you may be entitled to withhold rent for the period during which your home or unit isn't usable. Generally, there's a process involved -- you'll need to service your landlord with official notice that repairs are required, give your landlord the amount of time to make those repairs as specified in your lease, and then file a legal notice if your landlord fails to perform his or her duties. At that point, a court might grant you the right to rent abatement due to your landlord's failure to make good on his or her obligations under your lease.
What landlords need to know about rent abatement
As a landlord, offering rent abatement could be an effective means of attracting tenants and avoiding vacancies. For example, if you have a commercial space that's outdated with a prospective tenant who's willing to fix it up in exchange for reduced or free rent for a period of time, that could be a deal worth striking.
Furthermore, you should know that if you fail to fulfill your obligations under your lease agreement, you could land in a scenario where you're forced to offer a tenant (residential or commercial) a break on rent, or free rent.
Even if there's no rent abatement clause in your lease, in some cases, a tenant whose space has gone without repairs for an extended period of time may be entitled to withhold rent, or pay less rent, as compensation via a court order. You may also have a tenant who negotiates to have his or her rent waived or reduced in scenarios where repairs take longer than anticipated, and it may be in your best interest to agree to that rather than risk having that tenant take you to court.
Understand your rights
Whether you're renting a residential or commercial property, rent abatement can ultimately serve as a solid means of protection. Read the terms of your lease carefully so you understand when it kicks in, and don't hesitate to consult an attorney if you feel you're entitled to rent abatement due to actions or inaction on your landlord's part.
And the same advice holds true if you're a landlord and you're being asked to reduce or waive a tenant's rent -- it never hurts to get a legal perspective to ensure you're not losing money needlessly.
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