E-Renter News

Tony, an income property owner we know, recently shared a story about his property management company. “I was surprised to receive a bill for a property inspection that I had no knowledge of,” he said. “And when I called the PM company, they claimed I was supposed to let them know if I didn’t want the inspection, not if I wanted the inspection.”

Tony learned the hard way that some property management companies will spend your money without your authorization. The best way to prevent this from happening to you is to establish limits up front. How much should you authorize your PM company to spend on your behalf? It depends. For some rental property owners, anything over $200 requires their authorization. For others, one dollar is too much for a property manager to spend without notification. Decide what limit makes you comfortable, and be sure it’s included in the contract.

Property management companies sometimes get a bad rap for tricks like:

• Taking kickbacks from favored contractors
• Marking up supplies used in maintenance
• Inventing services you have to pay for
• Sending bills for bogus inspections

Relationships succeed based on understanding and communication. If you’re researching property management companies, pay attention to the time it takes to receive a return call or email, compare services provided and fees charged, and ask a lot of questions.

Once you’ve chosen a property management company, your work doesn’t end. You must still manage the relationship, just as if they were an employee. The PM company works for you. So, you decide how much they get to spend without your authorization, how often you want to receive reports, and whether or not their advertising efforts will work for you.

As in any agreement, before you sign on with a property management company, read the contract carefully, including the fine print and question all terms and conditions that you do not fully understand. Better yet, run it by your lawyer first. It could save you a bundle in the long run.

A law enacted last March in Sand Springs, Oklahoma, holds landlords responsible for cleaning up their tenants’ methamphetamine labs before renting to new tenants. Landlords are required to notify the police when they discover their properties were used for meth production, and to clean up the toxins at their own expense before renting again.

The ordinance was passed with a goal of protecting prospective tenants of rental properties— from motel rooms and mobile homes to apartments and single family houses—where harmful, toxic chemicals were used in the production of methamphetamine.

After a meth lab is reported by a landlord, police place a notice on the property, which cannot be rented until it is cleaned and inspected. The law’s other requirements include notification by the landlord to new tenants that the property was used as a meth lab, and that the cleanup company must be nationally certified for toxic cleanup.

Because cleanup and inspection can cost landlords hundreds or thousands of dollars, many are scrutinizing prospective tenants more closely. Police recommend landlords complete thorough background checks before a lease is signed with a new tenant. One captain noted that the cost of a background check is “relatively minor compared to the thousands of dollars the landlord would spend” to clean up after a methamphetamine operation.

A pleasant side effect of the new law could be a decrease in meth lab activity in Sand Springs. Police note that compared to the previous year, the number of meth lab raids had decreased significantly. Prior to the law’s passage, police averaged about three raids per month. From March through December, police conducted only seven meth lab raids.

A Tenant Bill of Rights signed into law in Minnesota last May hasn’t had much impact on landlords, according to news reports. The bill regulates residential rental agreements, including:

• Limiting late fees to 8% of rent, beginning January 1, 2011
• Allowing tenants living in foreclosed homes to stay in the property until the end of their lease or for 90 days, whichever is longer
• Making landlords responsible to care for property left behind by tenants
• Subjecting landlords to penalties if they do not return the proper amount of a security deposit
• Mandating landlords to have a clear and consistent tenant screening process for all applicants.

In addition, the bill provides that tenants who knowingly provide materially false information on rental applications can be held liable for damages of up tot $500, plus court and attorney fees.

A tenant advocacy association spearheaded the effort to pass the bill, in response to actual tenant calls for help. A spokesperson for Homeline, which provides legal advice to renters, said that each of the issues was one they received numerous calls about. The organization received about 11,000 calls from tenants in 2009.

Property managers say the legislation has had no effect on their operation. As an example, one cited that the late fee limit is higher than the charge they currently impose on tenants. Another said that most landlords and rental property owners already have good policies in place and are very reputable.

Others are not happy with the new legislation and the administrative problems it could cause. One landlord indicated that the provision requiring tenants to provide accurate information is irrelevant, and that few landlords would bother taking any to court. Another blamed slum lords for all new legislation that seems to tilt laws in the tenant’s favor.

In Maryland, a law went into effect in October that enables domestic violence and sexual assault victims to break leases before the end of the lease term without penalty.

Under the law, the landlord must receive written notice and the tenant must move within 30 days. The tenant is responsible for paying rent and any damages to the unit, but once they move, the lease is terminated and they are not liable for the rest of the term’s rent.

The written notice must state that the lease is being terminated based on domestic violence or sexual assault. The victim’s protective order or peace order must be presented as well. Protective orders are given to victims of abusive behaviors by a person they have a particular relationship with, such as husband and wife or parents of children. Peace orders are available to victims of misconduct without the relationship that necessitates a protective order.

Tenants who have obtained a protective order are allowed to terminate a lease before it’s up, but those with peace orders must have obtained it in response to sexual abuse to break a lease without penalty.

The law applies to all legal occupants of a rental unit—not just the leaseholder. For example, a tenant can break a lease if their daughter obtains a peace order based on sexual assault or a protective order.

The law also allows tenants to change their locks if they decide to stay in their rental unit, at their own expense. And, it prevents landlords from evicting tenants because they are victims of domestic violence or sexual abuse.

The foreclosure crisis and sad housing market are combining to create renters out of former homeowners. These folks may not feel like they are in control of their finances, their housing options or their lives. Perhaps they are under- or unemployed. Or they’ve lost their homes to foreclosure. Or maybe they were forced to sell at a loss before losing their homes.

These “transition tenants” may not appear on paper to be the high-quality tenants you typically look for, but with a little patience and extra communication effort, you can turn them into long-term, good tenants.

Remember that these new tenants are used to owning—not renting. They are accustomed to making their own rules and doing what they want in their own homes. It might be tough to re-learn what it’s like to live by a landlord’s rules.

Landlords recognize that rules exist for the good of the whole. Parking is limited to certain spaces so everyone gets a spot. Bicycles are not to be locked to stairwells to prevent injury to other residents. And no, your band may not rehearse in your apartment.

But sometimes the last thing a person who’s feeling powerless needs is another set of rules to adhere to. So make sure you present your lease documents, security deposit information and rental property rules in a way that encourages agreement and respects everyone’s intelligence.

When you interact with homeowners-turned-renters, you could be faced with a range of emotions, from anger, to depression, from resignation to sheer determination. While you’re not expected to be a psychologist, at least be aware of the emotions that could be behind some of the actions you might observe. Stay calm and focused, repeat the rules and explain the meaning behind each one, if necessary.

Turning a transition tenant into a long-term tenant has only advantages for a landlord—why not do what it takes to make it happen?

For many landlords,  their tenants are facing a tough holiday season this year. Lingering unemployment, foreclosures, and a lack of job growth nationwide are adding up to a gloomy end to 2010. We were curious about whether landlords routinely took a holiday from evicting tenants at this time of year. Here’s what we found:

In New York City, an informal eviction reprieve has been occurring for decades. No one knows how it started, or who sanctions it, but the marshals whose job it is to evict New Yorkers from their apartments take a two-week break at year’s end. The actual date shifts every year—and even judges and lawyers involved find out via word of mouth.

Whether tenants even know they’re receiving a reprieve is one of the moratorium’s mysteries. The exact number of tenants affected is another. Some estimate the annual number of evictions in New York City at around 25,000. Housing Court judges and lawyers say there are significantly fewer in the last two weeks of December than any other time of year.

While many see the holiday reprieve as an act of kindness toward the poor or struggling tenants, others see it as a way to avoid negative publicity. The marshals themselves describe a lack of desire to evict families and their possessions, including Christmas trees. “I wouldn’t do that,” said one. “I’m Jewish, but it’s still Christmas.”

In Milwaukee, WI, a formal eviction moratorium existed, but it was stopped in 1991 after a landlord and the Americans Civil Liberties Union complained the practice promoted the religious celebration of Christmas. In Detroit, a landlord sued the state in the mid-1980s over a holiday moratorium, claiming it violated his constitutional rights and the separation of church and state.

Is it fair to ask landlords to absorb the loss of keeping a tenant who would normally be evicted? Should landlords just avoid the drama by pushing through evictions earlier in December?

What is your take on holiday evictions? Do you give tenants a reprieve this time of year?

Here are ten quick tips for landlords considering making the move to hiring a property management company:

1. Remember, everything is negotiable. From monthly fees to maintenance schedules, you can ask for what works for you.
2. Find out exactly how they conduct tenant screening and background checks. You'll want a credit check, criminal background check, plus previous evictions and bankruptcies.
3. Look for hidden fees. Find out if there is an upcharge on repair parts. Question “administration fees” on security deposits. Make sure you get a refund on leasing fees if the tenant leaves before the end of the lease.
4. You’ll want electronic funds transfer and the ability for tenants to pay their rent online.
5. Get references—and check them out! Have a list of questions prepared and ask them all. You want to be 100% comfortable with your choice before you sign a contract.
6. Verify that security deposits are maintained in a separate account.
7. Drive around and check out the company’s other properties—are they well-maintained? Clean? Are there junk cars parked on the lawn? Make sure they look as you want your properties to look—because chances are, they will!
8. Communication is key. Do your prospective PM companies return your phone calls promptly? Is it difficult to get complete answers out of them? Do they seem honest and open—or do you get the feeling they have something to hide?
9. Do they offer complete reports? Statements such as the date and amount of rents collected, expenses incurred and vacancy showings vs. lease signings are all vital to the health of your business.
10. Remember, you’re in control. The PM company works for you. If they add value to your investment property business, great—if not, keep looking for one that will.

Durham, NH is a college town, where University of New Hampshire students increasingly live in rental housing in single-family neighborhoods. Unfortunately, some of their actions have resulted in an ordinance passed by the Town Council that holds landlords responsible for their tenants' behavior.

Back in September, the council approved the ordinance, which fines landlords for their tenants’ actions. While the Durham Landlord Association initially supported the ordinance, they retracted their support on questions of the legality of holding landlords responsible for tenant behavior.

Now the landlord group wants the town’s Rental Housing Commission to appeal to the town council on its behalf and ask for withdrawal or rewrite of the ordinance. While the DLA “is generally supportive of the Town’s effort to eliminate the well-publicized problems…and the impact it has on quality of life,” they do not believe the ordinance is “legally enforceable.”

The ordinance defines “disorderly acts” as loud music, boisterous parties, excessively loud or unnecessary noises, fights and public intoxication. When police are called to respond to complaints, and witness any of these infractions, they are to issue notices to the house and keep track of the number issued. The property owner is subject to a $500 fine for the second disorderly event. Subsequent events could result in $1,000 fines.

The Town’s legal counsel interprets the ordinance as holding landlords responsible for their own behavior, not their tenants’—specifically, by not taking proper control to prevent disorderly conduct at their rental properties.

The purpose of the ordinance has been described as a way to deal with absentee landlords who do not address complaints at their rental properties. The ordinance seems to have had an effect:since it was enacted in September, the town has not needed to enforce it. “That’s exactly what we were hoping for,” said Administrator Todd Selig. “Our goal is to never have to use the ordinance.”

Landlords: does your city or town have such an ordinance? How does it work (or not)?

A new report by Marcus & Millichap Research Services indicates the second quarter of 2010 was a big one in sales of multifamily buildings. Apartment transactions were up 32% to $7.1 billion.

The trend continued into August, which was the highest sales month this year, at $2.6 billion, according to Real Capital Analytics. While these sales figures are way below 2006, when the total was over $120 billion, they are still picking up steadily form the lowest levels of the housing crash.

Prices are rising, along with sales numbers, according to Real Capital. In depressed areas, developers are seeing yields close to 5% in some areas, according to REIT analyst Haendel St. Juste.

As activity increases, delinquent mortgages do, too. As of August 31, 14.5% of multifamily loans held in commercial mortgage-backed securities were delinquent—an increase from 6.7% a year ago.

Overall, apartment owners fared better than expected during the downturn. In the beginning, landlords were offering rental discounts and big incentives to get leases signed, but now, rents are rising and vacancies are dropping. Some analysts expect vacancies to drop to 5.5% by the end of 2011—a decline from a high of 7.4% at the end of 2009.

Overall, low prices and mortgage rates are filing up the multifamily building pipeline. It will be interesting to see what the third quarter numbers reveal.

New York City landlords and property managers must now provide potential tenants with a new disclosure form that reveals whether bed bugs have been reported in a rental apartment or anywhere else in the building. Similar to mold and termite disclosures used in home sale documents, the form is signed by both landlord and tenant.

The idea is to give tenants an out before signing a lease. Bedbugs have been found increasingly in New York and are spreading across the country, as we reported in a recent blog post. And as more tenants become aware of the problem, more are inquiring about the presence of bedbugs in the apartment they’re about to move into.

Some landlords are not happy about the form, saying through a lawyer that the language is too broad and there is no distinction made between the appearance and treatment of a couple of bedbugs and “incredible infestations.” On the form, landlords are required to state whether bedbugs had been found in the previous year and whether or not an attempt to eradicate them was made.

One broker reports that about half of all apartment-seekers mentioned bedbugs. Bu the city says the number of bedbug reports to the 311 hotline fell by 13% so far this year. That could be good news, although without a sure means of controlling the blood-sucking bugs, it’s not likely they will be going away for some time to come.

While bedbugs are enough to scare some renters away from a building, the vacancy rate in Manhattan is at 1%-–so they fact remains that renters there don’t have a lot of choice.

Whether bedbugs have come to your city or not, it’s good to know what’s happening in other rental markets. Start planning your bedbug battle strategy before they hit!