Monthly Archives: May 2017

What To Do When a Tenant Breaks the Lease

Your tenant may believe they have a great reason to break their lease, but as a landlord — even if you’re sympathetic to your renter’s situation — a broken lease is a frustrating inconvenience. The tenant has signed a lease to occupy the unit, abide by your policies and pay rent for the agreed period of time, but then notifies you that they want to break the lease before the renewal deadline. It’s time to deal with an unexpected vacancy and iron out the financial obligations in the lease contract so you don’t end up with the short end of the stick.

Here are a few steps you can take when dealing with a broken lease.

Be proactive

Inform tenants that a lease agreement is legally binding before they sign it. Many tenants don’t understand the ramifications of breaking a lease; they might be aware that they’re supposed to stay for the entire lease term, but could assume there’s some flexibility. Explain the legal aspects of a lease and the course of action for breaking one, such as finding a subletter (if you allow it), giving up the security deposit or paying rent for the remaining months.

Some leases include an “early termination” clause, which lets the renter out of the lease, without penalty, under certain circumstances. You can decide whether to include such a clause — but if you don’t want to, and you are using a generic lease form, make sure it does not allow for early termination.

Require notice in writing

Ask your tenant to provide a written request to terminate the lease early, either through email or on paper, which explains their reason for leaving. Issues like loud neighbors, taking a job in another area, inconvenient parking or moving in with a significant other don’t require you to release a tenant from the lease.

But, other circumstances can justify breaking a lease without penalty. If you have neglected to make needed repairs or otherwise failed to provide a safe and livable property, a tenant has a good case for breaking their lease. In addition, leaving for military duty or relocating due to an employer-mandated job change are valid reason for you to comply with the tenant’s request. Check your state laws for specific exemptions.

Hold the tenant responsible — within reason

Just because the tenant is vacating the property doesn’t mean they aren’t responsible for the home. The lease is a legally enforceable document stating that the landlord has given up possession to the unit for a specified amount of time in return for rent. Even if the leaseholder finds a subletter, they retain the responsibilities for damages and payments until the end of the lease.

While the leaseholder has a legal responsibility, most states require landlords to make a reasonable effort to find a new tenant; purposefully leaving the unit vacant in order to collect rent from a tenant who’s broken their lease is not usually permitted.

Know your rights and responsibilities as a landlord

A tenant breaking a lease prematurely might put you in a tight spot, but you can always seek legal advice. Professionals will know the ins and outs of the landlord laws in your state and can help you determine the right course of action. Be sure you’ve read through your lease agreement carefully — landlords and tenants alike can miss details in the fine print, and it’s in your best interest to be fully informed about your lease as well as local statues.

 

Woman Who Made A Mistake

Top 10 Mistakes Landlords Make

People enter the landlord business for many different reasons. Maybe you’re an “accidental landlord” who decided to rent out your former residence, or you gained a property through an inheritance. Or, maybe you diligently researched properties for sale and chose to purchase one (or more) as an extra source of income. Regardless of how or why you entered the business, being a landlord can be a profitable endeavor — or a costly one if you stumble into some common pitfalls.

Here are 10 of the most common mistakes landlords make and how to avoid them.

1. (Not) Understanding your local market

The three most important words in real estate investing continue to be location, location, location. This is two-fold: First, it means making sure your rental is in a desirable area so you can attract more potential tenants. Just because the price is right doesn’t mean that the location is. Get to know the neighborhood, including access to transportation, grocery stores, area features and businesses. Second, understanding your location means learning about the dynamics of the local market, researching area taxes and determining what you can charge for rent — all of which are key to estimating the return on investment for your property so you can predict your monthly rental income.

2. (Not) Understanding fair housing laws

Before you start looking for tenants, you need to understand fair housing and discrimination laws; otherwise, you risk getting into legal trouble. Fair housing laws are federal statutes that ensure equal access to housing for everyone. It is illegal to discriminate against anyone on the basis of race, color, religion, national origin, sex, familial status or disability. Many local and state governments have additional protections that you’ll want to become familiar with. A general rule of thumb is to focus on the property and amenities in your advertising and conversations — not on who you think the ideal tenants would be or features geared toward a specific group. The bottom line is to treat and communicate with every applicant and renter in the same way.

3. (Not) Putting your best marketing foot forward

While advertising a rental property may not be as sexy as advertising a hot new car, there are many similarities. Just like the best product ads, you’ll want to feature high-quality photos of your rental — and the more, the better. It’s worth the expense to have professional photos taken during the spring and summer months so your property looks its best. You’ll also want a clearly written, accurate and error-free description of the property and amenities. Consider posting your property for free on Zillow Rental Manager to reach as wide of an audience as possible.

4. (Not) Conducting a thorough tenant screening

While speed is important in filling your vacancy, you still want to choose a highly qualified renter. Create a documented process and criteria for finding, screening and securing your tenants. Make each potential renter fill out an application and verify everything from employment to past addresses (and get landlord references while you’re at it). You’ll want to perform a tenant background check and run a tenant credit report. Confirm that renters have paid the rent on time and have not caused problems for their previous landlords or employers.

5. (Not) Completing accurate leasing paperwork

A lease serves as a binding, legal agreement between you and the tenant. As such, you’ll want to make sure it thoroughly addresses the rules, policies, and conflict resolution procedures for living on your property, and clearly defines tenant and landlord responsibilities. Remember to put everything down in writing: A handshake or verbal agreement won’t hold up in court. You can find many generic leases online, but you’ll want to review the lease requirements specific to your state or municipality and incorporate them into your rental agreement. Have it examined by a legal professional to ensure that the terms protect your interests and comply with local and state regulations.

6. (Not) Knowing your landlord responsibilities

Securing a tenant for your property is a huge milestone. But, your work is not done. As a landlord, it’s your job to meet your terms of the lease agreement: Check in with your tenants, keep tabs on the condition of the property, complete regular preventative maintenance and seasonal maintenance, and respond quickly to requests. Make sure your property is a healthy and safe place to live, and that you keep up on your taxes and financial reporting. Neglecting your tenants and your property can result in higher turnover, more vacancies, less rental income or even lawsuits.

7. (Not) Anticipating maintenance costs

Be prepared for the possibility that your property won’t always be occupied. If you aren’t able to fill a vacancy right away, do you have enough cash set aside to pay for the mortgage, utilities and other maintenance costs? Maintaining a rental property comes with unforeseen expenses, such as damages and unexpected repairs, and the bills still need to be paid. Complete a cash flow analysis and establish a budget so you’ll be able to cover these potential costs, then track your expenses to ensure you’re staying in the black.

8. (Not) Knowing when to hire a professional

If you live in the area, are handy around the house and have the time to quickly respond to requests, you can maximize your rental income by handling some of the general maintenance and management of your property. However, if you have several properties or are juggling an investment on top of a full-time job, you may be better off enlisting the services of a professional property manager. Also, depending on your experience and the condition of the rental after your tenants leave, you might want to hire a contractor to make significant improvements or repairs.

9. (Not) Managing your time efficiently

For many landlords, managing even one investment property can be a full-time job. Between securing a tenant and keeping up the books, you should understand that any investment property is a big time commitment. No matter how much you love what you do, make sure to take time for yourself and create a list of people you can rely on for backup. Having a network of people who can help in a pinch is important for the maintenance and safety of your property.

10. (Not) Treating your rental like a business

However you got into landlording, your rental property is a business and an income source — and you need to treat it that way. Consider setting up a Limited Liability Company (LLC) for ownership. This can help protect you personally from legal actions or claims. In addition, consider using accounting software or a spreadsheet to keep close track of your income, expenses and ultimately your return on investment. Document all of your procedures and communications with applicants and tenants, and make sure to stick to your procedures. When you’re renting a property, you will hear a lot of different stories, and some of them may be sad. There are many opportunities to help your community, but you want to make sure any action you take makes good business sense.

Successful landlords leverage skills from many different areas: customer service, marketing, accounting and home repair, among others. Reduce the risks that come with being a landlord by educating yourself and networking with other experienced landlords and related professionals. Join local or national landlord associations to keep up with changing rules and regulations, and share your experiences, so you can avoid the most common landlord mistakes.

HARASSMENT

by Cathy L. Lucrezi, Attorney at Law

“Harassment” is used so often in our vernacular, the word fails to even raise an eyebrow. Not so in fair housing law. “Discriminatory Harassment” has a specific meaning and a powerful impact.

Under fair housing laws, “discriminatory harassment” includes any abusive, foul or threatening language or behavior directed at a tenant because of that person’s protected class. [Protected classes include race, color, national origin, religion, sex, disability, familial status, as well as any protected classes created by local ordinances.]

Harassment occurs when the landlord or staff or other tenants, target a tenant with hostile conduct. The hostile conduct might be using racial epithets, making sexually suggestive proposals, yelling profanity at a person, persistently photographing the person in common areas, and any other annoying and threatening behavior.

Of course, not all annoying conduct is a fair housing violation. A person who yells profanity at his neighbor may simply be a jerk. If the person yells the profanity because he dislikes his neighbor’s religious beliefs, then it is discriminatory harassment.

You would be correct in assuming the landlord can be sued for damages if he or his staff is the source of the harassment. However, you might be surprised to learn the landlord can be held liable even if the harassment comes from other tenants.

Staff who witness or learn of harassment should investigate the complaint. If there is merit to it, a notice of noncompliance should be served to the harasser. If the harassment is repeated following expiration of the notice, termination and eviction may be appropriate.

Prevention helps avoid harassment complaints. The landlord should foster an environment that is free from discriminatory harassment or intimidation. All staff should model appropriate non-discriminatory behavior. That means, no offensive “jokes” or names, no matter how friendly the listener may be. All staff should attend fair housing training. If you would like to adopt a staff policy of “no harassment” that includes directions to staff on how to handle complaints, contact our office for a sample policy.

EVICTIONS AND FAIR HOUSING

by Cathy L. Lucrezi, Attorney at Law
A proper notice and a risk of eviction often make a tenant comply with the lease. However, that notice and risk of eviction can sometimes be perceived as a fair housing violation. How can a landlord figure out how to enforce the lease without looking like he is violating the law? Is there really such a tightrope to walk?

If a tenant is violating the lease, the landlord serves a notice. Sometimes it’s a three day notice to pay rent or move. Sometimes it’s a seven day notice to correct a problem and not do it again. Sometimes it’s a notice to vacate.

Landlords often worry that the tenant who receives such a notice will claim a violation of fair housing law. It is thus not surprising that some landlords hesitate to take any action, even though the noncompliance persists.

A landlord protects himself by being sure that his decision to serve a notice or to start an eviction is based solely on non-discriminatory reasons. The decision can never be based, even in part, on the tenant’s race, color, religion, sex, national origin, familial status, or handicap. [Don’t forget – Your local government may have added one or two to that list.]

As long as the landlord is not considering the tenant’s protected class, it is okay to evict a tenant. There must be valid, nondiscriminatory reasons for the eviction. It is okay to evict a tenant who fails to pay rent regardless of the tenant’s protected status. A landlord could cross the line, though, if he treats one group of non-payers differently from another group of non-payers. For instance, if the landlord generally serves three day notices on the 10th of each month, but serves three day notices to families with children on the 5th of each month, then the landlord should expect a fair housing complaint to be made.

Here are some other situations that can result in discrimination complaints:

A single woman is told that her partner is approved to move in with her, and then is evicted when management learns her partner is of a different race.

A married couple who lives in a one bedroom apartment is asked to vacate after management learns the wife is pregnant.

Tenants who invited guests of a particular racial, ethnic or religious group for dinner or an afternoon at the pool are asked to vacate.

A tenant with epilepsy falls at the property and has a seizure. The ensuing flurry of emergency personnel causes the landlord to issue a disturbance notice.

WHAT IS A REFUSAL?

by Cathy L. Lucrezi, Attorney at Law
The fair housing laws are very clear: It is unlawful to refuse to rent to a person because of that person’s race, color, religion, sex, national origin, familial status, or handicap. What is not so clear, perhaps, is that a refusal can occur even if the word “no” is never used.

An unlawful refusal of housing can be the basis for a fair housing complaint and can result in the landlord being liable to the applicant or tenant for a substantial sum of damages, as well as fines and attorney’s fees. Examples of an unlawful refusal of housing:

The landlord takes the application but allows it to languish on his desk, hoping the applicant will forget about it or find some other place to live. The landlord’s inaction is as good as a “no”.

Of course, delays occur for reasons totally unrelated to unlawful discrimination. The agent may go on vacation, or the agent may be waiting for the employment verification to come back. A good management office will make diligent efforts to make sure such delays are avoided. If delays do occur, good management will communicate with the applicant to assuage any of his concerns.

“This place is terrible!”

The landlord shows the home to the applicant but persistently bad-mouths it, in the hopes the person will just walk away. Showing the unit does not disguise what is really happening: The landlord does not want to rent to the person.

Of course, the landlord is obligated to tell a prospective tenant about “latent defects” – negative things that the person would not be able to learn from an inspection. However, the law is violated when the landlord goes beyond this; being so negative that the applicant begs to be shown another unit or disappears altogether.

“You’re approved, but you need a co-signer.”

The landlord is requiring a guarantor or co-signer from an applicant merely because the person is a member of a protected class. Whether the landlord is doing it intentionally or doing it because of some wrong-headed generalization about a group of people, it violates the law. The “conditional approval” is the same as a refusal.

Of course, it is absolutely ok to require a guarantor or co-signer to the lease, provided it is done for a sound business reason. Regrettably, some landlords impose such a condition on single mothers, disabled individuals, and non-citizens who are lawfully present in the U.S.A.

The solution

Develop written criteria for who will qualify for a rental. Develop a written procedure for how each application will be handled. Follow the procedures! The more standardized the procedure is, the less likely there will be one of the refusals listed above.

Be sure that your decisions about who qualifies and what conditions are imposed are based on legitimate, non-discriminatory reasons. If it can’t pass that test, you shouldn’t be doing it.

WELCOMING DISABLED TENANTS

by Cathy L. Lucrezi, Attorney at Law

 

A disabled applicant should be treated just as any other applicant.  The process of accepting an application, showing available units, doing a credit and background check, and executing a lease should be the same as you it would be for a non-disabled person.  There are a few exceptions, described later in this article.
The business office.
Make sure that your leasing office meets accessibility standards. This includes being sure there is an accessible route from the parking area to your leasing office.   This may mean adding a ramp or curb cut, or outfitting at least one restroom that is accessible.
Reasonable accommodations.
If the disabled applicant needs an accommodation in order to apply for housing, make it.  Examples include allowing a vision-impaired applicant to have his friend complete the forms, or allowing a service animal to enter the business office.  Another example would be to allow the disabled person’s guardian do the paperwork and sign the lease.

The applicant may say she wants the unit, but will need a modification or accommodation.  You can ask the applicant to put the request in writing and provide you with verification of disability.  (Hopefully, you already have a policy in place for handling this type of request.)
Question “Do’s”
Generally, a landlord should only ask a person with a disability questions that are asked of all applicants or tenants.  It’s OKAY to ask questions such as:
— Can you pay the rent?

— Do you have references regarding your tenant history?

–Who will be living in the unit?

— Do you have a criminal history?

If ours is an apartment community designated for people with disabilities, you can ask the applicant if he or she qualifies for the housing.
Question “Don’ts”
It is NOT ok to ask the following:

–Do you have a disability?

–Do you take medication?

–How severe is your disability?

–Why are you getting SSI?

–Can I see your medical records?

–Have you ever been hospitalized for mental illness?

–Have you ever been in drug or alcohol rehab?

–Are you capable of living independently?

A few more “Don’ts”.
Do not presume to know what is best for the disabled applicant.  If a person with a mobility impairment wants a unit on the second floor, do not try to talk him into a first floor unit.  You would be presuming to know better what the applicant needs, than the applicant himself!  It would be a violation of fair housing laws, no matter that you acted with good intentions.
Do not offer a particular accommodation.  Don’t suggest: “Will you need a handicapped parking space since you are in a wheelchair?”  Instead, respond positively if the individual in the wheelchair asks for a handicapped parking space.  The request for such an accommodation should come from the tenant, not you.  You can let applicants know you welcome requests for reasonable accommodations and modifications, by noting it in your application materials.