To Restore or Not To Restore – When Can You Require Residents To Restore Modifications

Applicants and residents make requests to modify their units.  You are a dedicated Fair Housing provider.  Assuming that the resident is disabled and needs the modification, you will grant a resident’s modification request.  Everyone generally understands that disabled residents are entitled to make, at their own expense, reasonable modifications to their unit.  The resident’s restoration obligations at the end of the lease are not so well understood.  What happens when the resident leaves?  Can you condition a reasonable modification request on the resident restoring the unit when he moves out?

Maybe.  Maybe not.  Fair Housing law certainly provides a legal basis for requiring a resident to restore a unit. Both statutes and regulations provide that in the case of a rental, the landlord may, where it is reasonable to do so, condition permission for a modification on the renter agreeing to restore the interior of the premises to the condition that existed before the modification, reasonable wear and tear excepted.  The expression “where it is reasonable to do so” is not clearly defined.  Unfortunately, like so many disability related Fair Housing issues, you only find out if your conduct was reasonable when a judge, jury, HUD or the Colorado Civil Rights Division tells you.

The expression, “where it is reasonable to do so” implies that in some cases, it would not be reasonable to require the resident to restore the unit.  In fact, HUD has stated that it wishes to stress that the Fair Housing Act does not require a resident to restore all modifications.  Similar to other Fair Housing disability issues, whether you can require a resident to restore the unit depends on the facts and circumstances of the particular case.  However, based on client inquiries to the Firm, many property managers have not been adequately educated in this area.  Without sufficient training, the policy in every case might be that the resident may make the modification, but must in every case restore the unit to its pre-modification condition.  This could prove costly.  Allowing the modification, but unreasonably requiring restoration is Fair Housing discrimination.  Sooner or later, an “always restore” policy is very likely to result in a discrimination charge.

Because you can’t require restoration in every case, how do you determine when you can require restoration of the unit?  When the modifications to the interior of a dwelling unit can reasonably be expected to interfere with the landlord’s or the next tenant’s use and enjoyment of the premises, you may require restoration.  It’s important to note that disabled residents are also legally allowed to make modifications, in appropriate cases, to common areas.  You can never require a disabled resident to restore a common area modification.  HUD’s rationale is that any common area modification is likely to benefit future disabled residents, and thus you can never require restoration for common area modifications.

In appropriate cases, you can condition a modification on the resident’s promise to restore, and also further condition the modification on the resident’s execution of an appropriate restoration agreement.  A restoration agreement is a more detailed written contract between the resident and landlord which requires the resident to financially secure the resident’s promise to restore.  Restoration agreements are applicable when modifications are substantial, and the circumstances justify a concern about the resident’s or applicant’s ability to pay for the restorations.  Similar to the fact that you can’t always require a resident to restore, you can’t always require a financially secured restoration agreement when the resident is obligated to restore.  Determining when a financially secured restoration agreement is appropriate is a complex legal and factual determination.  You should always consult us prior to insisting that a resident sign a financially secured restoration agreement.

Whether a resident’s modification to a unit will interfere with your ability to rent the unit is clear in many cases.  Frequently, because the modifications won’t affect your ability to re-rent, you may not require restoration.  Unfortunately, your ability or non-ability to re-rent the unit is not always so clear.  For example, you have a 2 bed 2 bath unit.  The applicant wants to modify one bathroom by removing the tub shower combination and replacing it with a roll in shower.  Is a 2 bedroom, 1 tub shower bathroom, and 1 roll in shower un-rentable in the future?  We have posed this question to over a thousand participants at our Fair Housing classes.  The result is always the same.  A slight majority contends that the modification makes the unit unrentable unless the modification is restored.  A very substantial minority thinks that the modification does not impair the ability to rent the unit.

Our advice in this case depends on the facts.  If you have 200 units with 2 beds and 2 baths, your ability to re-rent is probably not going to be affected.  Some managers have told us that at least some residents would prefer a unit without a bathtub, and with a large shower.  If the unit in question is one of your most desirable units that has always been re-rented the second it becomes vacant, our opinion may change.  If your community only has a very limited number of this unit type, our opinion may change.  The ability to re-rent is a factual determination.  We are not property managers, we are attorneys.  You are property managers.  You are in the best position to know based on your individual property, types of units, your experience, and historical leasing patterns whether a modification will affect your ability to re-rent.  Thus, in close call cases, you should always make the final determination whether the modification will substantially affect your ability to re-rent the unit.

If you decide that that the modification will affect your ability to re-rent, you should take further steps to insulate yourself from potential Fair Housing liability.  You should open up a written dialog with the resident or applicant.  You should clearly inform them that you are willing to allow the modification if the they agree to restore upon moveout.  You should communicate in detail why you have determined that the modification, if not restored, will impact your ability to rent the unit to future residents.   For example, you made this same modification 5 years ago to Unit #302, and have had difficulty renting it ever since, or based on your leasing traffic nearly all prospective residents want a 2 bedroom with 2 full baths.  You should provide the applicant or resident an opportunity to provide additional information or feedback.  Finally, you should make it clear that you are willing to evaluate and consider any additional comments or information that they may provide.

As with all Fair Housing related decisions, risk analysis dictates that you should err on the side of caution.  You should not require residents to restore modifications that, while not cosmetically ideal, do not materially affect the use and enjoyment of the unit.  Close calls on whether to require restoration should always be decided in favor of the resident if your costs to restore would be minor.  Risk analysis also dictates that you always fully evaluate all of the facts of the particular case before conditioning any modification request on the resident restoring.  Never insist on restoration without fully evaluating, and until after you have attempted to open a dialog with a resident on the restoration issue.

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