What You Need To Know About Rental Property Constructions & Renovations

rental property construction and renovations

Renovating a rental property can be complicated. Renovations often require a permit, and state or local legal requirements may apply if the property being renovated is occupied. In this article, we’ll discuss what to consider before starting a renovation, how to get the most out of your rental investment, and what your tenant’s rights are with respect to rentals and renovations.

Can You Renovate Your Property When It is Occupied by Residents?

First things first, can landlords do construction while their property is occupied by residents? If you have good cause, you can renovate a property occupied by a tenant, but you must give them proper notice and make other arrangements. These requirements vary by state and depend on the type of renovation. Some refurbishments may cause inconvenience but can reasonably be carried out in the presence of residents. You can also offer rental discounts or move the residents to another unit if possible. Other tips include:

  • Always provide a landlord’s ‘Notice To Enter’ if you need access to the unit. 
  • Be prepared to cover damages or losses incurred due to refurbishment work.
  • Be transparent and explain to residents the scope, duration, and potential inconvenience of renovations. 
  • Negotiate an agreement if possible. For example, if your laundry is temporarily closed, you can offer a lower rent as a concession through a change of lease.
  • Keep tenants updated on the progress, including any significant changes in the renovation process.

Note that if you want to renovate a rental property that is in use, the resident has every right to deny your request and enjoy the home without worrying about the duration of the lease. Every rental agreement is different, so the first step is to thoroughly review your tenant’s rental agreement. Most leases have a standard contract to make the necessary repairs. However, if the lease includes anything other than normal charges, the rules outlined must be followed. A rental agreement is a legal contract, so your first priority should be to follow the contract you made with your resident when they moved in.

Communication is Key

If you are planning to renovate your property, communication with your residents is essential to keep the process running smoothly. Even if there is no contractual or legal obligation to notify changes in a timely manner, most people will not suddenly accept construction workers or loud noises. If planned renovations do not directly affect tenant premises but are noticeable, early notification is recommended.

Communication is even more important when the construction of a rental property has a significant impact on the quality of life and use of space of the residents. Tenant rights during construction are robust, and they often have what is called a “right to Implied Warranty Or Covenant Of Quiet Enjoyment.” While there is no specific federal law regarding this, all rental lease agreements include language regarding this renter’s right to quiet enjoyment. It basically means that you are not allowed to interfere with or change what you have agreed to in your lease. If you have specific questions about whether a renovation violates your resident’s right to quiet enjoyment, please consult a legal professional in your area. 

Renovate to Rent – When Do You Need Building Permits?

You don’t need building permits for the following renovations:

  • Painting the interiors
  • Replacing flooring, cabinets, or light fixtures
  • Carrying out non-structural repairs and renovations to the exterior

You need building permits for the following construction and renovations:

  • Moving existing electrical, plumbing, and gas lines
  • Installing new electrical, plumbing, and gas lines
  • Moving interior walls or partitions
  • Removing drywall
  • Making any other structural repairs
  • Roofing

Note that even if the improvements made to rental property are by the tenant, you should still be taking permits for the repairs mentioned above and renovations.

What are Tenant Rights During Construction?

If construction allows a tenant to break their lease, the landlord may be required to compensate the tenant in various ways, including:

1. Relocation Assistance

Landlords may be required to cover the cost of their tenant’s relocation, including moving costs and other expenses, if the tenant is forced to move during the construction. If the relocation is temporary, landlords may be required to pay tenants’ hotel fees or the cost of a new rental unit until the primary unit is repaired.

2. Rent Reduction

Some jurisdictions allow a tenant dealing with ongoing construction to be eligible for a rent reduction.

3. Actual Damages

If a property owner has permitted a tenant to run a business in the rental space, and the construction work disrupts that business, the tenant might have the right to seek compensation for the real financial harm and losses they’ve experienced.

Single, full-time workers who rarely spend time at home on weekdays may only need a few adjustments while construction activities are ongoing during those hours. However, tenants having children under the age of 5, running home-based businesses, or having limited access to their rental units because of ongoing construction may be able to file claims. It is especially true if the landlord is aware of the tenant’s situation.

When a landlord disturbs a tenant’s peaceful living conditions, the tenant can take legal action to seek compensation for any harm caused due to the construction work. Some jurisdictions also allow tenants to sue for breach of contract. The construction company, contractors, and even laborers may also be liable.

Does a Tenant Have to Pay Full Rent During Construction?

There’s no legal ‘yes’ or ‘no’ answer to this. If a planned renovation during a resident’s lease period materially violates their right to enjoy and use their living space as intended, one option you may have is to lower their rent during the project. This may not be ideal for you, but it makes sense that the residents get what they are paying for. Having a frank and honest discussion about this can make your residents feel seen and respected. It can also resolve disputes before they arise.

Leave Your Property Management Woes to BFPM

Building rental properties and their upkeep and maintenance is a priority, and having residents living there doesn’t change that. Although you may have the right to construct and renovate, your residents, too, have the right to the space they agreed to in your rental agreement. Navigating this balance can be tricky. That’s where Beach Front Property Management experts can help you. By thoroughly understanding your lease, having clear and honest communication with your residents, and a little bit of negotiation, we can help you start the renovation work quickly. To know more, feel free to book a quick 15-minute consultation call with us.


Trevor Henson

Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…
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Frequently Asked Questions(FAQs)

There are a few key factors that can help you land the perfect rental property which can provide great ROI. They are: Neighborhood, Crime rate in that neighborhood, Amenities, Property taxes, Average rent in the area, Planned future developments in the area

Predominantly, there are three types of rental properties that are the most profitable – Commercial, Residential and Fixer-uppers.

Yes, rental income is taxable. Landlords use Schedule E (Form 1040) to report their income and expenses from rental real estate.