Security Deposits: Proper Care & Feeding

Most of us remember that first college apartment, when we handed over a cobbled together security deposit knowing (thanks to the warnings of older, wiser off campus friends) that we’d never see it again.  A few residences and a lot of life experience later, we’ve learned that security deposits actually can be refunded, and that your first college landlord was probably right to keep a few dollars for that scummy shower and beer stained carpet.  Looking at the security deposit from the other side of the equation is a lot more complicated than handing over a check and kissing your money goodbye.  If you’re a seasoned landlord or a first time investor, there are some helpful things to know about the proper handling of deposits.

The money isn’t yours.

Security deposits are funds that should be strictly held aside, and only applied to losses if and when they occur.  Unlike rent, a security deposit technically belongs to your tenant until they move out.  Many states even require that the funds be held in a separate bank account, which may be the wisest option for everyone when it comes to keeping your books in order.  Regardless, it’s important to note that you could potentially be asked to refund all or part of the money with little notice (as few as 14 days after move out in some states), and this is where security goes both ways.  Keeping the money separate and available for dispensation immediately after inspection will ensure that you won’t be accused of breaking the law or treating your tenants unfairly.

Time is of the essence.

A majority of states have defined guidelines on the timeframe in which security deposits must be returned, and again, this can be as little as 14 days.  Since move out inspections typically take place on or around your tenant’s last day in the unit, it’s best to begin work on a deposit resolution immediately.  Any monies you retain should be noted in a written document as an itemized list.  The easiest way to manage this list and set expectations is to make your move in and move out inspection documents identical.  When damage occurs, be sure you have set consistent replacement pricing for items like nail holes and shower doors.  Get multiple estimates for larger repairs, and keep them among your other documentation.  When it comes to returning full or partial deposit amounts, please note that different rules often apply in cases of improper notice, abandonment, or eviction.  A tenant’s failure to provide you with a proper forwarding address may also buy you additional days or weeks.

A security deposit amount is often limited.

Even if your new tenant is starting to look like a disaster in waiting, the law may limit the amount of money you can charge for a security deposit.  Often this is equal to two months’ rent, but overwhelmingly the number most landlords and property managers use is just a single month’s  rent.  Be mindful of using a security deposit as extra protection when renting to “high risk” renters (those with less than optimal credit histories, inconsistent employment,  or a troubled renting record).  The first rule of deposits should be separation from rental income, and it’s best to ask for peace of mind from iffy tenants by requiring the first and last months’ rent instead.  If your comfort level is not where it should be after this step, it may be time to evaluate the prospect more closely and decide if the lease is worth the risk.

Failure to return a deposit can be costly.

Avoiding landlord-tenant legal battles is an ongoing process that doesn’t end when your renter moves out.  Delaying a deposit return or failing to provide a tenant with specifics on what portion was kept and why can cost thousands.  Failure to return a deposit in Connecticut can result in a landlord owing twice the deposit amount back to the tenant, and in nearly all states tenants tend to win these battles.  As with most areas of concern in property management, careful documentation and a sense of urgency will keep disputes to a minimum.

Though we’ve done our best to overview the issues surrounding security deposits, please take phrases like “most states” and “some places” as signals that there are sharp legal differences from state to state.  Know your state’s rules.  Start with resources like this one to learn the basics, and always check in with your local government to make sure you’re operating within the rules.

Filed under: Property Maintenance, Property Management Topics, Real Estate Investment, Urban Renewal, affordable housing, customer satisfaction, customer service, eviction, fair housing, inspection, investment, Landabout, Landlord, lease, lease law, multi-family, Property, Property Management, real estate management, recession, reduced vacancy, rent, rent increase, rental, security deposit, tenant relationships, tenant turnover, wealth creation

Good reads: This week in property management

Landlords take a stand in Minnesota and file suit over new ordinances.

From Australia, another lesson in checking and rechecking the insurance coverage on your investment property.

There must be at least 1,000 other ways to get rid of squirrels…

 Proposed federal spending cuts could have an effect on Section 8, inspections, dollars available for repairs, etc.

The Wall Street Journal on the very high stakes, different game for developers in China. 

Good things to come?  Rental vacancies expected to drop, rents expected to rise. 

Just rolled out:  Zillow takes on rental estimates.

Always a party:  rent control in the spotlight (again) in NYC.  And, in the city’s unique housing market, is it better to rent or buy? 

This week in “we can’t make this up”…Missing property report and squatters have a go at starting a school in Guy Ritchie’s mansion, currently under renovation.

Filed under: Links, Property Maintenance, Property Management Topics, Ramblings, Real Estate Investment, affordable housing, customer satisfaction, customer service, investment, Landabout, Landlord, lease, lease law, multi-family, multi-family safety, news, Property Management, security deposit, senior housing, tenant pet policies, tenant relationships, unified communications, wealth creation

Five things you should know about rental concessions

Depending on your market, rental concessions have either become common or ubiquitous.  They do have a lot of good qualities–they can help you close leases, lock in renewals, and keep your units full.  But, like most seemingly sunny concepts in  life and property management they do have a dark side.  If you’re using rent concessions, or looking at them because your competition does, it’s important to remember:

1. You may be violating the Fair Housing Act

When it comes to complying with Fair Housing rules, common sense and your own innate sense of fairness will be your best guides.  Concession offerings should be one size fits all, and should not be negotiated on the fly on an individual basis.  To make sure this happens, put proposed perks in writing and train all employees on the specifics each time you offer a new deal.  Offers should clearly state that you will not discriminate based on race, color, religion, sex, national origin, familial status, disability, or any other class factor.  For the most protection, keep notes on the concessions your prospects request, as well as the arrangements offered and those that were accepted or declined. 

2.  Consider your concessions’ effect on your current tenants and the community 

No one wants to feel like they missed the deal, and that’s exactly the sort of nasty feeling you don’t want to saddle your current loyal tenants with.  Be mindful of this factor when you’re at the drawing board, and regularly think of ways to reward the residents who’ve been with you.  In some markets and in some economic climates, you may have to give a little to fill a building, then give a little more to keep it full.  In addition, try to look at the breaks you’re offering from an outsider’s perspective.  Are you giving away the farm every time you sign a lease?  If so, you may be giving the entire community the impression that you’re on your last legs.  Not very good for business, and not very good for the bottom line.

3. All rent concessions should be added to the lease

Here is one dead horse that deserves another beating.  Get it in writing.  Always.  Often called a concession addendum or a temporary rent concession rider, these little notes are extremely vital.  They will clearly spell out what incentives you’re offering, when the term ends, and any additional consequences for breaking the lease (tenants are often required to pay back rent concessions if a lease is broken prematurely).

4. Reduced revenue and concessions can hurt your ability to obtain financing

Banks and lenders will look at your revenue stream in terms of the true numbers, not what you’re “supposed” to be making.  Even a subtle difference like a $75/month rent deduction can have enough of an effect on your bottom line to make lenders look twice, particularly when lending is sparse.  From this perspective, what may look like a small rate cut may be tremendously costly if you find yourself faced with a major repair or other unexpected expense.

5. Concessions now or updates later?  Think about the long term value of your property

This is a tricky line to traverse.  Nothing is quite so ugly as a vacant building, but if you’re costing your business thousands or more each year in tenant incentives it may only lead to more ugliness.  Updates and improvements–beyond basic upkeep and maintenance–are generally strong draws for prospective tenants.  Renting at the bargain basement rate or otherwise losing cashflow over a long period of time makes fewer of these improvements feasible and can set up a dangerous, losing cycle.  Whenever you’re deciding what will woo best, always consider the long term impact.

Filed under: General Information, Property Maintenance, Property Management Topics, Real Estate Investment, Urban Renewal, affordable housing, customer satisfaction, customer service, eviction, fair housing, foreclosure, investment, Landabout, Landlord, lease, lease law, multi-family, multi-family safety, Property Management, real estate management, recession, reduced vacancy, rent, rent concessions, rent incentives, rent increase, rental, security deposit, tenant relationships, tenant turnover, wealth creation

Good reads: This week in property management

Insecurity deposit.  SF landlord pays big for deposit swiping controversy.

Another craigslist rental scam leaves a family of four without housing.

Ever wonder who is responsible if your tenant is the victim of a break in?  This, plus questions of running a business from a rental residence answered.

Adding your two cents to tenants’ credit reports.  What do we think, property owners?

Are you an accidental landlord?  Tips on navigating tax time.

He just didn’t seem that creepy.  Quebec landlord accused of peeping in on his tenants.

Tenants need help figuring out who pays more for the big closet, and how much?  Enter Split The Rent.  Now we just need the app that removes all the awkward from settling up the dinner check when you’re dining out with *those* friends.

Denver stays hot:  Rental home vacancies at an all time low.

More good news?  Okay.  Better than elsewhere job growth keeps Boston’s multifamily in good shape.

Why do they move? Renters move for jobs, flexibility, money…some info to help you find your next prospect.

Energy consumption still a big unknown in multifamily, the space is left out of Obama’s Better Building Initiative as a result.

They must be reeeeeally good cigars:  Man agrees to pay tenants in a neighboring unit $2,000 every time he lights up.

 

Filed under: General Information, Green Building, Links, Property Maintenance, Property Management Topics, Real Estate Investment, Urban Renewal, affordable housing, customer satisfaction, customer service, eviction, foreclosure, green, investment, Landlord, real estate management, reduced vacancy, rent, rent increase, rental, security deposit, taxes, tenant relationships, tenant turnover, wealth creation

Understanding or unbelievable? When, how, and if to break the rules

So much about Tara Smiley’s post on Multi-Family Insiders got us thinking, but in particular we wondered how much is too much when it comes to breaking with your standards in order to close the deal.  Playing risky business with a renter’s credit history is one thing, but what about things like pet policies and criminal background checks?  You’re no doubt keeping an eye on your comps the way Tara is, and if you haven’t gone shopping in awhile you may want to go have a look.  While she saw a few cases of complete disregard for the traditional “rules”, you may find that things in your market are more subtle.  It pays to know about a few of the strings being loosened, and what they mean for you and your business.

Is Fido (the pitbull) a no no?

Pets, dogs in particular, will always be an issue with devotees on either side claiming they have the answer.  Many pet behaviorists and animal care experts claim that no breed is inherently dangerous, but there really is no fudging the numbers when it comes to animal aggression, injuries, and certain breeds.

That said, keep in mind that Teddy Roosevelt had a Pitbull in the White House.  Because of the human habit of training and breeding aggressive animals for sport no matter what, establishing rules based on a handful of breeds has proven to be an exercise in tail chasing (so to speak).  For instance, if Pitbulls get banned or restricted, you’ll almost always see a rise in Rottweilers.  Or Dobermans.  And yes, there have even been recorded cases of Cocker Spaniel attacks.  Statistics aside, problems, damage, and lawsuits have come from full range of multi-family dwelling animals.

The “right” answer when it comes to pets may simply be good judgment and your own instinct. Animals, like your tenants, are individuals.  Ask the right questions–find out if the pet has ever lived in a rental property before, if the animal has been to obedience training, and ask to speak to the animal’s vet.  Obviously, no animal who displays aggressive behavior should be welcome, and be clear about reserving the right to immediately remove any pet that does.

Convicted Arsonist?  Sure, come on in.

Second chances are a good thing, but how likely are you to be the one handing them out?

If your prospect is coming to you with open communication about a criminal past, you may already be one step ahead.  Let’s face it, even people who’ve made poor decisions need a place to live.  When it comes to deciding where to draw your lines here, it may be helpful to consider why you’re interested in a criminal history in the first place.  It’s not just because you want another form to fill out and another fee to pay.  You check because you want to do as much as you can to ensure the safety of everyone in your community.  Case by case?  It may be cliche, but not all criminal backgrounds are alike.  Should you consider the sex offender or the armed robber?  Not advisable.  When it comes the one time offender who screwed up 7 years ago, you may wish to take a closer look and consider that second chance.

Looking at credit where credit is due.

It’s true that credit has changed, but to say it no longer matters at all as Tara was told is a little far fetched.  If you have to make a spreadsheet to keep track of a tenant’s co-signers or, worse, you don’t even run a credit report, you may have too much slack in the reins.  It doesn’t appear that we’re out of the mortgage crises yet, and you will be taking to prospects with some pretty serious negative marks.  Giving these folks a housing opportunity is one thing, but turning a blind eye to those with chronic issues (and maybe even a negative rental history!) is quite another.  Pretend it’s 2005, and look at credit.  Then remember that it’s 2011 and listen.

At the end of the day, you’ll find that in any economic environment you’ll have competitors who will undercut you–and potentially themselves–to take the business.  But is it truly the business you want?  Shopping the, ah, eager community down the block will only give you a clearer picture of where you are and aren’t comfortable when it comes to bending the rules.  Remember that there will always be the guys signing off on that pet tiger and chasing prospects out the door with free televisions.  Decide where your line is, and know that it’s okay to stand firm by it.

Filed under: General Information, Links, Property Maintenance, Property Management Topics, Real Estate Investment, Urban Renewal, affordable housing, banned breeds, customer satisfaction, customer service, eviction, foreclosure, green, home staging, investment, Landabout, Landlord, multi-family, multi-family safety, real estate management, reduced vacancy, rental incentives, security deposit, tenant pet policies, tenant relationships, tenant turnover

Please hold the animals: Renting to college students

“Who dropped a whole truckload of fizzies into the varsity swim meet? Who delivered the medical school cadavers to the alumni dinner? Every Halloween, the trees are filled with underwear. Every spring, the toilets explode.”

–Dean Wormer, National Lampoon’s Animal House

Ah, college.  The time in life so bursting with memories that many of us look back on it with a wistful fondness.  And maybe a pinch of horror.  Some of us more horror than others.

If you’re fortunate enough to own property in a college community, you’re either just beginning to weigh the advantages and disadvantages of renting to students, or you’ve already looked at the risks and rewards.  Regardless, college communities are target rich–new prospective tenants roll into town two to three times a year–and there is no question that renting to them can be highly profitable.  From a business perspective, eliminating the student population from your potential tenant pool makes very little sense.

So how to decide if renting to students is right for you?  Contrary to all the horror stories you may have heard, most students do not move in hellbent on hosting five parties a week and destroying everything they can.  In fact, if you look back on your own experience you may even remember some studying and quiet Sunday afternoons.  You can and should expect more damage and a few mistakes, but an inexperienced tenant doesn’t have to be an impossible one.  In fact, some of the extra care required of college landlords may be helpful for all landlords.  When it comes to dealing with new or inexperienced renters, care is the first word.

If you’re thinking of opening your doors to college students, study this.

• Expect higher than average repair costs and damage. Making your property a no party zone is sort of rolling out the welcome mat for mockery and defiance.  Unless you’re lucky enough to rent to the campus exceptions, parties and gatherings will, more than likely, take place at some point.  Prepare to repaint as often as each turnover season, and replace carpet on an accelerated schedule.  Build these additional costs into the monthly rent and charge a security deposit that makes you feel secure (and complies with any of your state’s security deposit limits or maximums).   As always, be clear in your lease language that your tenant is responsible for major damages and losses.
• Every man is *not* for himself. College students tend to live together, and college students tend to be a bit transient.  When it comes to collecting the rent in full, neither of these tendencies is your concern.  When screening and signing leases with multiple parties, each enters the agreement as though he or she has full responsibility for the rent.  If Joe + Mark + Brad becomes just Joe, Joe agrees to pay Mark’s 1/3 and Brad’s 1/3 until the lease ends or you both agree to a sublease.  It’s best to allow no exceptions.
• Use one year leases, charge more for school year leases. For some college students, a “year” in your property is considered August to May, which makes yours a very cold summer.  Because some students will always choose to leave for break, it makes sense to offer a 9-10 month lease at a premium and/or make subleasing options available.  While longer committments are preferable, you may find that shortened leases are helpful when it comes to making repairs, painting, etc. and getting units ready for new fall tenants.  Particularly if you’ve cushioned the financial hit ahead of time.
• For credit and other screening, talk to mom and dad.  Running a credit report on your student tenant may not be particularly helpful.  At this stage of the game, your tenant(s) may have little to no credit history, but it’s a fact that comes in handy.  Involving a student’s parent or guardian in the transaction is a wise move no matter what, not only to insure that your financial interest is backed but to help mitigate party problems.  Of course it’s not true for everyone, but having a parent’s phone number at your disposal when noise or damage gets out of hand can be a quick, effective solution…particularly if mom and dad are footing all or part of the bill.  Parent co-signers should be a rule when a student’s credit history is insufficient, and you may even wish to consider it a rule for all student tenants, even those with a history you’re comfortable with.  While you’re talking, take note of the parent’s interest level, willingness to cooperate with rules, and questions.  Most apples don’t fall far from the tree, and you may be able to learn a lot about your new tenant by watching mom and dad.
• Assume they’re all mama’s boys and pampered princesses–save your appliances! While it’s a scary thought to imagine a 19 year old who hasn’t touched a dishwasher or dryer, they’re rare but out there.  You can’t guarantee that they’ll be read, but you should include a handout of appliance usage instructions in a new tenant packet.  Also helpful are large, easy to read signs in communal laundry areas specifying the do’s and don’ts of washer and dryer use.  Insulting one or two “domestic experts” is worth it if you can save yourself one kitchen flood or prevent an appliance replacement.
• Think extra security during breaks. Nothing is more appealing to would be criminals than apartments containing more electronics than furniture that are  known to be deserted for a month.  If you don’t have onsite management, prepare for semester breaks by adding security to protect against break ins and vandalism.  It can be as simple as extra lighting programmed with timers, as complex as outsourcing a security service.  Anything you choose to do will protect your property and give your tenants extra peace of mind.
• No tolerance: Police visits, rent problems, and unauthorized guests.  Again, most college students are not there to cause trouble, but the ones who are will show themselves pretty readily.  Your lease should include some no tolerance issues and the consequences for violation.  If your property suddenly becomes a known problem house for the police, or you get the sense that it’s filled with squatters, or timely rent payments are becoming a fantasy, it’s best to cut your losses and find a new tenant or tenants.  If there is an upside to taking action in these extreme cases, it’s knowing that most of those kids won’t stick around long enough to bad mouth you to the college set.  If they do, people rarely trust the word of the guy majoring in beer pong anyway.

Filed under: General Information, Links, Property Maintenance, Property Management Topics, Real Estate Investment, Urban Renewal, affordable housing, college housing, customer service, eviction, fair housing, foreclosure, investment, Landabout, Landlord, Property Management, real estate management, reduced vacancy, rental, security deposit, tenant pet policies, tenant turnover, wealth creation

Bitten: Property management, bedbug infestations, and who is responsible

If you were ever tucked in as a child with the sweet sing-songy phrase, “Sleep tight, don’t let the bedbugs bite” you may not have the worst opinion of the pest known as the bedbug.  Outside of your grandmother’s nuturing rituals, however, bedbugs are highly frustrating and anything but cute.

Bedbugs are small, parasitic insects from the family Cimicidae.  Although they will feed on any warm blooded animal, they have a particular soft spot for the taste of human blood.  They are flat, reddish-brown in color, wingless, and about the size of an apple seed when mature.  Because of the microscopic hairs on their bodies, they may look as though they have stripes.  They are elusive and generally nocturnal, and because not all humans have a reaction to their bites, infestations can progress and spread to a serious degree before a problem is even detected.

Gross, right?  Wait, there’s more.  Unlike other pests (rats, mice, roaches, ants, etc) bedbugs aren’t at all selective.  They aren’t drawn to filth, and there is very little that can be done to prevent them.  They are extremely adept hitchhikers, and will gladly move in with the rich, the poor, the meticulous, and the messy.  Having a warm blooded animal around would seem to be their only screening criteria, but even that doesn’t pass the test.    Able to live up to 18 months (no, that’s not a typo) without feeding, they are content to wait it out in duct work, walls, carpets, or any number of other hiding places until their next meal moves in.  Bedbugs do have a few natural enemies, but because they tend to be other bugs like roaches, spiders, and biting ants, most people are reluctant to invite those kinds of troops to fight a bedbug war.

Fifteen or twenty years ago, you would have had a much tougher time finding cases of bedbug infestation.  Chances are, if you were a property manager back then, it wasn’t even on your radar.  This is because bedbugs were all but eliminated from the US by the 1960s.  A variety of factors, including a sharp spike in international travel, the banning and regulation of certain pesticides like DDT, and even an increase in the sale and exchange of second hand furnishings have given the bedbug new power.  Cases have steadily been on the rise since the mid 1990’s, and by some accounts the number of  infestations nationwide has increased up to 500% in that time period.  In NYC alone, complaints jumped from 1,839 in 2005 to 8, 830 in 2008. 

Overwhelmingly in property management, the biggest question after “How do I get rid of them?” is “Who has to pay for it?”  It’s question that is not at all black and white.  Treatment is often a long term process with multiple visits from a service provider and can be expensive (a few hundred dollars if detected early, thousands in other cases). Some non profit organizations will help with the cost for low income victims, but all cases will require a great deal of landlord/tenant cooperation.  No one could or should put cost aside, but bedbugs are unique in their obstinance and neither party can get them out on his or her own.  Laws vary by state, and the expense is often considered to be the tenant’s.  However, the rise in cases has more states adopting tenant protections when it comes to bedbugs, and more courts are finding against property management companies in these matters.

Unlike most damage to your property, the origination of a bedbug infestion is often impossible to pinpoint.  Culpability is not only difficult, it becomes extremely tricky when you consider a tenant plagued by bedbugs may have picked them up on a movie theatre seat, or by brushing up next to the wrong person on the train.  Yet placing extermination costs solely with a property owner is arguably unfair as well, particularly if a tenant fails to report the problem early or doesn’t cooperate with treatment preparations and follow up.  That said, when it comes to disputes, a court may fall back to the unique nature of this problem.  In 2004,  Judge Cyril Bedford sided with a tenant in Ludlow Properties, LLC v. Young.  The tenant refused to pay rent for six months because of a persistent bed bug problem, and Judge Bedford wrote, “Although bed bugs are classified as vermin, they are unlike … mice and roaches, which, although offensive, do not have the effect on one’s life as bed bugs do, feeding upon one’s blood in hoards nightly turning what is supposed to be bed rest or sleep into a hellish experience.”

By now, you’re already reviewing your lease to check on your pest control treatment language.  Nearly as important as the guidelines you establish for financial responsibility are your requirements for treatment preparation, temporary displacement, and any necessary moving or discarding of personal property that goes along with it.  First and foremost, when you learn about a bedbug problem, don’t lose months in a back and forth debate over who will pay.  One female bedbug can lay 500 eggs over a year, and they are mature and ready to feed every three to five days in as little as 5 weeks.  To say time is of the essence is a horrible understatement, since a bedbug family can turn into a booming metropolis, infecting not just one but all of your units, in the blink of an eye.

When it comes to deciding just how much responsibility you will take (should your state’s laws leave it up to you), there are a few important things to consider.  As mentioned before, a bedbug issue should be approached differently than any other pest or damage concern, and the importance of working with your tenant(s) to solve the problem can’t be overemphasized.  For this reason, fully absorbing or sharing the cost of elimination may be in your best interest. 

Taking on or sharing responsibility allows you one important liberty that can have an impact on a successful result: control over the pest management provider.  Having a say in the extermination process means being able to work with someone who has direct experience with multi-family dwellings, which is extremely important since bedbugs are crafty travelers.  Having a tenant in a multi-family property hire his or her own exterminator to treat a single space may simply send them running into another unit.  In fact, when an infestation begins, you can generally count on the fact that it won’t be or stay confined to a single living space.  Now a problem that began in one unit becomes the problem of two or more units, and the question of who pays to fix it gets even fuzzier.

Unfortunately, basic fairness can’t really be a tool in the handling of bedbugs in a rental property, as nothing is fair in bedbugs.  No human behavior or habit invites them, and they are exceptionally difficult to remove.  Yet, the job is impossible without making it a group effort.  Though it’s an expense that no one wants to take on, agreeing to do so in full or in part may be the best solution to a problem that really bites.

Filed under: General Information, Property Maintenance, Property Management Topics, Real Estate Investment, affordable housing, bedbugs, customer service, investment, Landabout, Landlord, lease, lease law, multi-family, multi-family safety, pest control, Property Management, real estate management, reduced vacancy, rent, rental, security deposit, tenant pet policies, tenant relationships, tenant turnover, unified communications

Extra baggage: Dealing with the unauthorized tenant

As a landlord, you know it’s best to play by the rules.  You take careful steps to screen your tenants and make them accountable for payment of rent, the appropriate treatment of your property, and each of the terms of your lease.  So who is the stranger who answers the door when you pay your “by the rules” tenant a maintenence call?

Unauthorized tenants are not as uncommon as we’d like to think.  They may be a guest of your authorized tenant who goes from couch surfer to roomate, a new significant other, or a subleaser by handshake.  Regardless, they are people who claim your property as a primary residence, and they may care very little about your rules.  In the worst situations, they may even see their under the radar status as an opportunity to break your rules…when you don’t have so much as a first name or cell phone number.  More often, extra “tenants” cause parking issues, laundry facility headaches, unexpected damage or noise, strain occupancy codes, and may even cost you income.  Doesn’t sound quite fair, does it?

How to Avoid Unauthorized Tenancy

As with most unwanted elements of leasing a rental property, head off problems by including an unauthorized tenant clause in your lease.  Allow for an appropriate guest period (take into consideration things like helping a relative recover from a medical procedure or a visit from overseas; 7 to 14 days is common with landlord notification for longer periods less than 30 days), then promise a hefty rent increase or termination of lease for those found to be in violation.  Be sure to specify that legal costs are the tenant’s responsibility should the matter end up in court.

Make a clear distinction between an unauthorized tenant and a sublease, if you permit them.  The big difference in terms of protecting your property and business is paperwork, and making this clear will help your tenants understand that you don’t discourage change, you simply want it done right.

Last, know your property or hire someone who will.  Unauthorized tenants aren’t known for making themselves known, and oftentimes it’s for a reason.  Knowing your property does not mean knocking on doors every three days to do a head count, but simply being onsite on a regular basis, talking to tenants to ask how things are going, and staying on top of maintenance and repairs.  Your legal tenants will be your best source for volunteering information when something is not right.  After all, they are playing by the rules and they’re doing the suffering when there is never an empty washer or a free parking space.

What to Do If You Find A Violation

When it comes to unauthorized tenants, it’s generally in everyone’s best interest to solve the situation amicably.  It can be difficult to prove unlawful occupancy, and you may even have to subpeona other tenants to verify that they’ve seen the person(s) coming and going at all hours, for long and consecutive periods of time.

First, you can serve your legal tenants a notice of lease violation, and include a rental application (with notice of any new deposit or rent requirements) to be completed by the guest within a period determined by you, anywhere from 24 hours to 7 days.  The tone should be firm, but allow them the opportunity to right the situation quickly.  Most people keeping this sort of secret will respond when it’s made clear that the jig is up, and your letter will explicitly tell your tenant that you are to recieve the appropriate paperwork or the guest is to vacate.  If not, it is appropriate to pass along a notice of intention to vacate and give your tenant (and guest or guests) the chance to get out before things get ugly.

Last Resort: What Happens If They Won’t Leave

If all attempts to restore this particular tenancy to the rules have failed, the steps in a typical legal eviction will apply.  If you’ve taken your time and made attempts to come to an agreement, you have plenty of documentation showing that your tenant violated their lease and you offered a remedy with no compliance.

In a perfect world, the situation doesn’t escalate to termination or eviction.  Your tenant doesn’t want to lose his or her home over an illegal roomate any more than you want to lose the lease.  There are ways to peacefully and profitably reach an agreement, and the best start is to treat the stranger as a new tenant who will play by the rules with a carefully managed second chance.

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Raising the rent: The smoothest ways to handle one of your bumpiest tasks

It happens to all of us, everywhere. A few more pennies for milk, an extra dollar to fill up your tank. The cost of living our lives changes regularly, and the cost of doing business is no different. As a result, you will eventually find yourself in the position of asking your tenants to pay more in rent. Despite the fact that they will greet the news with no more enthusiasm than you do when you pay that extra dollar at the pump, at the end of the day most tenants will accept reasonable increases as a normal and predictable shift in their cost of living.

For your part, failing to initiate rental adjustments because of a fear of confrontation or vacancy makes very little business sense and can cost you thousands. Undercharging becomes a greater hurdle with each passing lease period, as the market continues to command more around you and your tenants become even more comfortable and complacent (and far more likely to balk at change, when it does come). Charging slightly less than market comps to keep tenants is a good strategy, charging significantly less is foolish. Do the math and determine which is more expensive–a five year tenant underpaying by $600 a year, or the cost of attracting a new tenant who will pay what your property is worth.

Naturally, you can remove this task from the “fun” column. It will never be pleasant, and you can count on some fallout. Fortunately, there are ways to make it as trouble-free as possible for both sides, and in some situations maybe even as (relatively) painless as shelling out that extra nickel for a gallon of milk.

Tips and tricks for when it’s time to raise the rent:

• Prepare in advance for vacancies created by those already at the top of their spending limit. With each rent increase, you should assume that you will not have 100% retention. Keep your advertising, marketing, and social media efforts strong at all times to keep your pipeline of prospective tenants full
• Rent increases can be structured annually, biannually, or at your own chosen intervals taking economic & market conditions into consideration. Whatever increase schedule you choose, remember that the longer you wait between adjustments the greater the likelihood of pushback
• Do not schedule increases for fall and winter, or in the middle of a lease term. In addition to the cruelty factor in forcing your tenants to amend their budgets around the holidays, if they do choose to leave, units that turn over in the colder months are more likely to stay vacant until spring
• If using a lease from a book or online form library, study the rent adjustment language closely and make any necessary corrections to section(s) that would bar you from making increases. If you’ve just taken over a property, be mindful of the language in tenants’ existing leases and make changes at renewal time. Discuss changes clearly with tenants before they sign a new lease under your management
• Plan to give your tenants more notice than your state requires when preparing for a rent increase, a policy that helps all involved. Most states require 30-90 days, but if you don’t have an annual planned increase try to exceed the required period of notice. Some would say this gives the tenant extra time to drop their renewal and find a new place to live, but know that it works both ways…you’ll have extra time to replace tenants who don’t choose to stay
• Weigh the benefits of freezing an rent hike in exchange for a longer lease period. If tenant loyalty is a goal over cashflow, give your tenant the opportunity to lock in for 18-24 months and enjoy the security of having rented unit for a longer period of time
• Keep all things equal. It’s never a good idea to raise the rent for some tenants and not for others (obvious exceptions being optional long term lease freezes mentioned above). Tenants will talk, and not only is an arbitrary rent increase system a lawsuit waiting to happen, it’s generally an unfair business practice. If you’re using rent increases to chase away problem tenants, it’s best to look into other ways to tighten the screws
• Check on and stay up to date with local rent control requirements. Rent control in your region is likely something you’re already on top of as an owner or property manager, but as with most regulation it’s very costly to be misinformed or uninformed
• As a rule, gradual increases are better received than large jumps. Your tenants live by a budget just as you do, and tweaking the balance sheet by $25 each month is generally easier to swallow than, say, a larger amount like $100. Naturally the real figures vary wildly, but bear in mind that some of your tenants may already be spending up to 40%-50% of their take home pay on housing. Jumps in rent of even 10-15% can turn a spending plan that’s already tight on its head

Above all, the bottom line is that you are in the property management business to turn a profit and provide a service.  Rent increases are a necessary evil, and you should not be apologetic about running your business in a fiscally prudent manner.

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Successfully taking the “zombie” out of property management

As a property manager, you’ve probably seen everything. In a world with deity-laced grilled cheese sandwiches and television shows about women who turn their uteruses into clown cars, protecting oneself and one’s property from the ever rising tide of crazy is no longer as straightforward as it used to be. It could even be said that the statement, “When hell is full, the Undead will walk the Earth” has never been more real. While we don’t have access to the data, chances are good that things are close to capacity downstairs. Therefore, it’s best to prepare, do your research, and be willing to pound some zombie cranium if duty calls.

Surviving a zombie attack begins with recognition. Knowing your enemy is the first step, and, fortunately for us humans, zombies aren’t practiced in camouflage. A zombie will display a set of very distinct characteristics, but what separates the victims from the survivors is the ability to know them at a glance and take serious, immediate action. Because zombies can be mistaken fairly easily for your garden variety vagrant or drunk, pay particular attention to a subject’s keen, unnatural interest in brains and his or her indifference to the odor and unsightly nature of decomposing flesh. A zombie is also far less personable than a drunk, and will lack even the most basic communication skills.

Immediately following confirmation of an attack, know that you will not have a great deal of time to collect yourself. This is why preparation is so imperative, but more on that later. As a human, you possess a number of skills that will play to your advantage. The first is your brain (ironically the one bit of you your enemy craves). Learn to recognize the weapon in everyday objects, and look for creative barricading solutions. By choosing to stay with your property and defend it, you are accepting a challenge, but not an insurmountable one. Please note that you should never use a basement as a bunker, or any area that has an entrance but no exit. If you are forced to flee, choose a path with a low zombie density, arm yourself, and move quickly. Their erratic form of locomotion makes most zombies slow, and outrunning them shouldn’t be a concern. Keep your eyes open, and know your route before you go.

The first step in defense is reinforcing all windows and doors and collecting your survival materials. Because there are a number of tasks to manage in a very short time, you should take on this project with as many uninfected buddies as possible. Remember that reanimation can take up to 24 hours, so make it clear to all of those on your team that anyone presenting with zombie symptoms will be taken out immediately, no questions asked. Members of your group will learn very quickly that a zombie attack allows for none of the following: emotion, nostalgia, or jokes.

To lock down your building, preparing in advance is the key. For property managers, we recommend filling a storage unit on premises with zombie attack essentials. Note: Unless prospective tenants ask about zombie readiness, it is best to omit this information during tours and showings. A complete zombie preparedness kit should include:

• A dozen or more rechargeable chainsaws. Keep an eye out for sales and ask about buying in bulk. While guns and other firearms are effective when aimed correctly, it is difficult to keep the amount of ammunition on hand required to withstand a long-term attack, and you’ll likely find yourself in the midst of the paperwork hassle of an FBI watchlist.
• Stackable 5 gallon buckets for water collection. Gathering as much tap water as possible as quickly as possible should be a priority. Assume that all municipal utilities and systems will be lost almost immediately. Also on this note, prepare to shed any ideas you maintain about modesty and toilet use.
• A collection of coats, pants and other clothing made of a sturdy material such as leather, as well as a number of cycling and other helmets. Designs should offer cover to more vulnerable parts of the body like the neck and arms, and most importantly, your head. These items have the added advantage of being easily explained away to the suspicious, as you have simply been saving them to donate to a disadvantaged motorcylists’ club.
• Foodstuffs that will not break down over a term of days, months, or even years, and (for the most severe attacks) seeds and soil for indoor gardening. Foods with long term staying power include Twinkies and Ding Dongs, or essentially anything with a name that sounds more like an insult than a snack.
• A supply of random, innocuous garden tools, crowbars, and combustible cleaning products to use as a backup weapon supply. These items will chop and burn things nicely and run solely on human power, a plus if or when your supplies run scarce.

In terms of additional preparation, take note of any tenants and neighbors who may exhibit a predilection toward zombie safety and awareness. These people may ask you about extra storage space for the 1,000 freeze dried military rations they purchased on eBay (just in case) or openly talk about helping a “friend” build a bomb shelter just before Y2K. These are the people who will be your trusted allies and partners in a zombie attack, so it’s wise to stay close.

Finally, some basics for surviving an attack that every property manager should know:

• Location, location, location. Think carefully before investing in a property located near a cemetery or morgue. Because zombies will initially emerge from these areas, you’ve just purchased a little bit of zombie ground zero.
• Make good use of outdoor mats and rugs. Not only will they reduce slippage and accidents for your tenants, they make for easy cleanup in the event of a brief zombie attack. Rinse and resume.
• Practice cracking soft, slow, round things open. As everyone knows, the only way to permanently un-animate a zombie is to destroy its brain. This process will get easier over time, and rest assured the zombie you’re disposing of won’t feel a thing. Basic decapitation, while cool and satisfying, leaves you exposed to risk that the separated parts of the zombie will still function. If you opt to use this technique by accident or for sport, be sure to finish the job immediately. Zombies are as persistent as they are unattractive, and will pursue their pleasures even in the midst of serious injury.
• In the end, zombie management is an every man for himself game. Choose your partners wisely and stay together for as long as possible, but always be ready to destroy some rotten brain—even if that rotten brain used to be the tenant who was always a month ahead on his rent and offered to help with the landscaping.

Reprinted from the Landabout Blog, 2009. Happy Halloween!

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