Smart Money: Landlords have right to raise rent after lease is up

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Bruce Williams is a national radio talk show host and syndicated columnist.|ret||ret||tab|

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Dear Bruce: A friend and his mother have been renting a duplex for the past five years. The rent has increased gradually and is now $700 per month. The landlord was asked to come in and fix some peeling paint and plaster, but ended up doing the whole house, adding some little niceties. I know my friend was not obligated to let them in to do the necessary work, but that seems moot. At the end of their lease period, which comes up in a few months, they're raising the rent to $1,000. Can they do this? They say it's a much better place now. Y.C., via e-mail|ret||ret||tab|

Dear Y.C.: I don't see any reason why not. The landlord rented out the apartment for an agreed-upon rental for a stated time period. When that period is over, the landlord has a right to raise the rent, keep it the same or ask your friend to leave. Your friend, in turn, has the right to leave without further obligation or pay whatever the new rental is, assuming there is no rent control, which is relatively uncommon in our country. What the landlord did is not unusual. He's invested some money to make his apartment a better rental property, and now he's looking for return on the investment. The tenant's choices are clear: Pay the rent or look for a new place to live.|ret||ret||tab|

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Dear Bruce: My wife and I recently closed on a new home. We financed 100 percent of the amount at 6 percent interest. We then decided to sell our only rental property, a duplex that we bought for $96,000. We will net just shy of $30,000. This turnaround happened in just two years. What would you suggest we do with the $30,000? We need many improvements on our new house. I believe that our new home is just as good an investment as the rental property was, and I don't want to configure another loan with all the fees, although it would not compare with the great interest savings over time. We have debts from our student loans in the amount of $20,000. C.P., Cedar Falls, Iowa|ret||ret||tab|

Dear C.P.: I don't know why you feel that you have to configure a new loan if you chose to use $30,000 to reduce the principal on your loan, unless there's a prepayment penalty, which there could be. If you wish, you could send the $30,000 to the mortgage company to reduce the principal owed. If you choose to invest it in your new home on necessary improvements, that's OK, too. You didn't mention the interest on your student loans. If it is significant, it might lift a big burden from your collective backs to use $20,000 of your $30,000 windfall to wipe out the student loans and $10,000 for improvements.|ret||ret||tab|

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Dear Bruce: Our son agreed to purchase a home scheduled to be built and ready to move into in June. In good faith he paid $500 to hold the home for him during its construction. During the process he secured a 5.5 percent loan with a mortgage company the home builders suggested. The interest rate was to be good through Aug. 26. |ret||ret||tab|

During an Aug. 25 closing, he paid closing costs of about $6,000. Shortly before the closing, he discussed with the mortgage company that construction delays were costing him money and a higher interest rate. That's because the construction wasn't completed, and it appeared they would not be able to close on or before Aug. 26. The mortgage company and my son agreed to close without the house being fully completed. During the walk-through inspection, they found that no carpeting had been laid, there were holes in the walls both inside and outside, tile work wasn't completed, and neither the lawn sprinkler system nor the concrete fence had been started.|ret||ret||tab|

Due to noncompletion of the house, our son did not sign off on the walk-through and decided to cancel purchase of the house on Aug. 26. Had the home only had minor items to be completed, he would have signed the closing papers. As of this date he has not received a refund of his closing costs of $6,000 and the $500 deposit. What is your position on his decision to cancel the signing after the walk-through? Does he have any right to expect a full refund of his money? B.M., via e-mail|ret||ret||tab|

Dear B.M.: This is another classic illustration of why an attorney is necessary for all real estate transactions. You indicated that there was a closing on Aug. 25, but you didn't have the walkthrough until Aug. 26. How can that be? The walk-through determines whether the property is in appropriate condition before the closing, not after. Whether he can cancel this transaction after the closing is strictly a legal question that I'm not prepared to tackle. Your son should seek counsel immediately, as he very likely signed a mortgage agreement, which means that he has a debt in that amount. I just don't understand people who go into these complicated affairs without being represented.|ret||ret||tab|

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Dear Bruce: I'm 72, live on a limited income and have no savings. My house badly needs repairs. I want to pay off the mortgage and repair the house and have tried to find some grant money. Is there any out there? J.V., via e-mail|ret||ret||tab|

Dear J.V.: Unhappily, I don't know of any program on a national level that will allow you to make repairs on your house. There may be some type of assistance program in your local community. Stop by your regional social services office. Ask about any available grants for people like you. Absent these, given that you have a mortgage and a very small income, you may have to consider selling your home. It may be an unhappy choice, but it may be one that you have to make. Talk to the social services office and see if there is subsidized senior housing that may be available to you. This would relieve you of the responsibility of home ownership and provide shelter at an affordable cost.|ret||ret||tab|

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Dear Bruce.: I have two sons in college. One will be graduating this May and the other is a freshman. I also have a daughter who is in junior high school. My husband and I own our home and owe approximately $34,000 on the mortgage and home-equity loans. The house is in desperate need of repairs; paint, rot, sills, etc. These repairs are not cosmetic, but I know once we start these repairs, we are going to find more. If we take out a home-equity loan to cover these repairs, possibly doubling what we owe on the house, will this be looked at adversely when we apply for financial aid? Is there a way of letting the powers that be know that the loans were used for necessary repairs? B.G., via e-mail|ret||ret||tab|

Dear B.G.: While you have responsibilities to children, you also have a responsibility to yourselves. When your home requires repairs, they should be made, otherwise the building will decay and your equity is diminished. I understand your reluctance to take on more debt; I don't see why this will adversely affect your ability to raise aid. Even if that were the case it would still be prudent to have these repairs done. If it means that one or more of your kids will have to contribute more on their own, apply for their own loans or even put off their education for a year, that's the way it will be. No one said it should be easy.|ret||ret||tab|

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Dear Bruce: The United States has the largest bankruptcy and foreclosure rate in history. I am a rental property owner and I have many residents leave as they buy a home. I know they are doomed to fail. No one seems to realize how much it costs to own a home. Do-it-yourself means that you must have the time, skills, motivation and money to undertake projects. I'm unable to find any information about the true cost of housing for an individual. N.S., Grand Rapids, Mich.|ret||ret||tab|

Dear N.S.: Perhaps many things that you say are true, but nonetheless home ownership is very likely the easiest and most successful way that a great many people increase their worth. I don't take exception with your do-it-yourself definition, but I have no problem with a learning curve. When I bought my first house I didn't know a piece of sheet rock from a walrus tusk, but I learned, as have millions of others.|ret||ret||tab|

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