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How quickly should I return a security deposit?

Todd Ortscheid - Tuesday, September 12, 2017
It's one of the first questions a tenant asks when their lease is getting close to terminating: "how quickly can you get my security deposit to me?" Far too many tenants are irresponsible with their finances, so they don't plan ahead for paying their next landlord a deposit or rent, and they want the deposit you're holding immediately. Some even ask for it before they move out!

For the latter request, the answer is simply a firm "no!" NEVER return the deposit or even give an indication that the tenant will get their deposit back until after they've completely vacated, handed over the keys, and you've inspected the property for damage.

But what about if the tenant just wants the deposit quickly? Should you agree to that? For several reasons, we advise against it. The law in both states where we operate allows a landlord up to 30 days to return a security deposit. While we don't recommend using all of that time, we do recommend not rushing it. We generally tell tenants that we usually get their deposit processed (not refunded, as we'll get to in a moment) within a week or two, but that it could possibly take up to 30 days. This puts the tenant in the right frame of mind that they shouldn't be hassling us a few days after moving out.

So why should you not rush it to make the tenant happy? Let's remember the purpose of the security deposit. The deposit is there to cover any damage to the property or any amounts that the tenant still owes you on move-out. We see landlords frequently forget items when they're actually conducting the move-out inspection (such as re-keying, carpet cleaning, etc.), and then they remember a day or two later. If they've already given the tenant the deposit back, too late! That tenant isn't going to give you money then, no matter how much you're owed it. You want to take your time and make sure you thoroughly review the condition of the property, the move-in inspection, and the terms of the lease. You don't want to miss anything.

Also, you simply have a life of your own to live, and you don't want to commit to a quick turnaround on the deposit. If you promise that up front, and then life gets in the way and you need a few more days, the tenant is going to be hassling you non-stop. Once you've told them that you'll give them a speedy refund, they're going to make plans for the money based on that. So don't promise it. Make them arrange their finances around a reasonable timeline rather than you arranging your schedule around their finances. There's a reason that the law gives you up to 30 days. Lawmakers don't think it's reasonable for you to have to immediately cut a check, so you shouldn't either.

And this gets us to the most important part: there is NO guarantee that the tenant is getting their deposit back in the first place. You should NEVER tell the tenant that they'll be getting a check on ANY date. What you should tell them is that you will "process" the security deposit in a certain time frame. Processing it could mean a refund, or it could mean that they lose their entire deposit and still owe you even more money. Or it could mean a partial refund. It all depends on what the condition of the property is and what they owe you. You don't ever want to give the tenant the impression that getting their deposit back in full (or even in part) is a foregone conclusion. They need to always be under the impression that getting their deposit back is entirely dependent upon them returning the property to you in the same or better condition than they got it, serving out the full term of their lease, and owing you no rent, late fees, or other amounts.

Security deposits are some of the biggest problem areas for do-it-yourself landlords. So if you don't want to deal with these issues, give us a call and let us take the worries off your hands!

My tenant died! What do I do?

Todd Ortscheid - Tuesday, September 05, 2017
There are many difficult circumstances to deal with as a landlord (which is why it's important to have professional management of your property), but this is one of the most difficult. On the one hand, you have sense of empathy for the surviving family, but on the other hand, this property is a business for you, and you have to treat it like a business. So how should you go about handling it when a tenant passes away?

Hopefully it isn't something that is sudden and you're aware that it could be coming on the horizon. This is frequently the case with elderly tenants going through treatment and they let you know ahead of time what is going on and who you should talk to in their family if anything should happen to them. Unfortunately, even many people in this situation don't let you know, because they aren't eager to discuss their own mortality. And then there are the people who die unexpectedly. So you have to be prepared on how to handle it if you are notified of a sudden death after the fact. You won't always have advance warning.

Usually the way you find out is when the rent doesn't get paid. You make a phone call, send an email, and send a letter, and then you get a phone call from a relative who breaks the news to you. Obviously, it is important to be understanding and express your condolences. While this is a business, even businesses shouldn't be heartless. But after expressing condolences, you do need to get down to business. Carefully ask the family how they intend to handle the deceased person's lease. Many times they'll have someone who wants to move in so that they can spend some time organizing their loved one's possessions and tying up loose ends. When that's the case, it's as simple as writing an amendment that changes the name on the lease to the family member's.

If they do not have anyone wanting to take over the lease, though, it becomes more complicated. They're probably going to want time to put everything in order, but again, this is a business, so you can't simply allow them to take their sweet time to move the tenant's belongings out of the property. Carefully explain to them that you'd be happy to give them all the time they need (within reason) if they pay the rent. If they do not want to pay the rent, though, then give them a reasonable deadline for when to have the deceased's belongings out of the property. I would recommend something between 7-14 days. This is a reasonable period of time so that you don't seem heartless and unreasonable, but also expeditious enough so that you aren't being significantly harmed financially by the delay.

Keep in mind that you'll be entitled to keep the security deposit since the lease isn't being served out for its full term, so that will help with the financial loss of the rent if the property is in good condition.

This is a sensitive situation, so you want to treat it as such. But you also need to be somewhat firm because this is a business and not a charity. Your financial interests still matter, so don't allow yourself to be pressured into being too accommodating, but also don't be cruel to people who are going through a difficult loss.

Finally, and unfortunately, there are times when the tenant's survivors simply don't care about your situation and are in no hurry to remove the deceased's belongings. When they simply refuse to cooperate, you'll have no choice but file an eviction. The eviction would be filed against the deceased tenant "and all others"or "et al." This will ensure that the survivors who may be occupying the property are included in any judgment that gives you possession of the property. While no one wants to take a family dealing with a loss to court, sometimes they give you no choice.

If you'd like to hire a company that is used to dealing with these sorts of uncomfortable tenant situations so that you don't have to, please give us a call!

Leaving Belongings in a Rental Property

Todd Ortscheid - Friday, September 01, 2017
Sometimes a landlord is expecting that he'll only be renting his property out for a year or two and doesn't want to move all of his personal property out, or perhaps he just doesn't have storage space elsewhere, and the basement on his rental property is a good place to keep it. Is this a good idea? NO!

This creates a whole lot of problems:

1. You have to remember to specifically designate this area, whether it's a room, the basement, the attic, etc. as an area that is not included in the lease, otherwise the tenant is guaranteed access to it, even if you lock it. When a tenants signs a lease to that property, he's getting the right to possession of the entire property during the term of that agreement unless it specifically says otherwise.

2. You have to keep a very specific inventory just in case anything turns up missing. Let's be honest, putting a padlock on a door isn't very secure. If the tenant wants to get into that attic, he's going to do so. And then if your $1,000 in electronics is missing when the tenant moves out, unless you have a very detailed inventory list that the tenant signed off on at move-in, then it will be impossible to hold the tenant accountable.

3. Even if you do get a detailed inventory list and a lease that designates a private area, you're still left with trying to enforce it if the tenant steals something. Police will tell you that recovering stolen property is incredibly difficult. The tenant will claim that he didn't take anything, and the district attorney is unlikely to want to take up a case over your $1,000 in lost property. You'll probably be left to go to civil court. If you use an attorney (which is always recommended), then it will probably cost you more in attorneys' fees than the value of the last property. Sure, you may get awarded the attorneys' fees in the judgment, but then comes the next step: trying to collect on the judgment. You'll probably need to get an attorney to handle this for you also, or you'll need to turn it over to a judgment collection firm, and they will likely keep between 35-50% of what they're able to collect on your judgment.

In short, it's just not worth it. You're better off, by far, just paying for some storage space and leaving the rental property completely vacant for the new tenant. This is what we require of the properties we managed, and it's advisable for all landlords, whether they use a management company or not.

Is it too late to collect what I'm owed?

Todd Ortscheid - Tuesday, August 29, 2017
Sometimes we take on a new client who had a bad experience with a previous tenant who left the property owing money for either rent or repairs, and wondering whether it's still possible to go after that money.

Generally, as long as too much time hasn't passed, and you have documentation of what was owed, you can still go to court to try to collect what you're owed. There are two things you need to consider:

1. How much time has passed? You will need to file your case against the tenant in court before the statute of limitations for contract disputes has passed. In Georgia, for written contracts, this is six years. We won't even discuss verbal contracts, because they're pretty much useless for all intents and purposes in real estate matters. So, if it's been less than six years from when the tenant incurred the charges that you're owed, you should be good to go on this item. If it's been longer than that, then you're probably out of luck, but can always consult with an attorney to see if there might be some sort of special circumstances that would apply.

2. Assuming you're within the statute of limitations, the next element is evidence. As the plaintiff, the burden of proof will be on you to show that the tenant owes you the money. Depending on what exactly the tenant owes for, that evidence could be different things. If he owes you rent or late fees, you would probably need to present a copy of the lease and your rent ledger to the judge at trial. If the tenant claims that he made payment, he would need to show receipts, bank records, or some other form of evidence to refute your ledger. If you don't have a copy of the lease and a detailed ledger, though, you're pretty much out of luck trying to collect rent. For repairs, you'll need to have evidence of what the condition of the property was on move-in, and what the condition was on move-out. This could be as simple as a signed form that both you and the tenant signed on move-in and move-out, or it could be more detailed, such as date stamped photos or videos. The judge will probably also want to see receipts, invoices, or some other form of proof showing that you actually did incur the expenses for the repairs.

If you have all of that, you'll probably be filing in magistrate court, as the balance is likely to be under $15k. If your balance exceeds that amount, you'll need to file in superior court, which means you'll need to hire a lawyer. In magistrate court, you can represent yourself, although we would always recommend seeking out the help of an attorney if the money you're owed is significant.

Better yet, hire us and we can take care of this all for you with our in-house experts and our attorneys we always have on retainer! Give us a call.

Daily Late Fees

Todd Ortscheid - Friday, August 25, 2017
Sometimes a client asks us about daily late fees, perhaps because they've charged them themselves when managing their property on their own, or perhaps because a previous property manager charged them. We do not recommend daily late fees for several important reasons:

1. A late fee should hurt. It shouldn't be something minor that the tenant doesn't mind incurring so that they can pay someone else before you with their limited funds. You want them thinking of you as their primary person to pay on time every month. Making the late fee hurt as much as possible is a great incentive to make them pay you before paying their other creditors. So charging a modest fee up front and then a smaller daily fee defeats this purpose and could encourage bad behavior from the tenant.

2. Courts generally won't allow you to charge more than 10% of the rent as a late fee in total for the month. This means that if you want to charge a daily fee, you're severely restricting the up-front late fee that you charge on the first day the rent is late. This is bad, as it reduces the incentive for the tenant to pay on time. You want that first late fee to hurt.

3. The administrative burden is a pain. It's pretty easy to charge a flat late fee on a set day of the month. But keeping track, accurately, of a daily late fee is a lot more difficult. And you don't want to make mistakes, because that gives the tenant something to argue if you file eviction. Going before a judge, you want to make sure that you've done everything perfectly and the tenant's behavior is the only thing in question.

For these reasons, we recommend charging one late fee, on the 3rd of the month, and making it the maximum generally allowed of 10%. This provides a powerful incentive for the tenant to pay on time, it's easy for you to keep track of, and judges like the simplicity.

If you'd like us to worry about these things so that you don't have to keep up with it, please give us a call or send us an email, and we'll be happy to manage your property and take care of all the headaches for you so that you can just collect your check.

Using Security Deposit for the Rent

Todd Ortscheid - Tuesday, August 22, 2017
Your tenant is either behind on their rent, or their coming up on their last month of their lease, and they want to use their security deposit to cover it. There’s only one acceptable answer to this request: NO!

Let’s look at each situation individually. The tenant is late on the rent, and they want to use their deposit to cover all or a portion of it. This is a horrible idea for the landlord. You have nothing to gain from this. You can already see that the tenant is in financial trouble because of his request, so if you allowed him to now use his deposit to cover the rent, it’s unlikely to completely resolve his financial difficulties, so he’ll just fall behind again next month or the month after, and now you don’t have any security deposit left to cover the court costs and attorneys’ fees to get him evicted. Your generous nature has now put you in a horrible situation.

Second situation, the tenant wants to use his deposit to cover the last month’s rent. Horrible idea for you as the landlord. If you allow this, then you now have no money to cover any damage that the tenant may cause to the property. Or worse, what if the tenant doesn’t actually vacate like he’s supposed to at the end of the lease? Now you’ve used his deposit to cover the rent, and you’re stuck filing an eviction to get rid of him because he won’t leave with no money to cover the costs.

The security deposit is for one purpose and one purpose only: the cover any costs that the tenant owes after vacating the property at the end of the lease. That’s it. It should never be used for anything else. Any smart landlord should have a zero tolerance policy on this point.

Of course, if you hire us to manage your property, the security deposit will be held in our trust account and we can worry about all of this for you. Give us a call!

Hiring the Cheapest Management Company

Todd Ortscheid - Saturday, August 19, 2017
You're probably looking for a management company, otherwise you probably wouldn't be reading this blog. So what should you do? Should you just select the company with the cheapest monthly management fee? Probably not, for several reasons.

First, you should take note that the monthly management fee, which can be either a flat rate or a percentage of the rent, is only a part of what you'll be paying for any management company's services. Depending on which company you hire, you could also be paying setup fees, marketing fees, mileage, leasing fees, renewal fees, maintenance fees, etc. Some companies even try to hide these fees from you by burying them in the fine print scattered all over the contract. So if pricing is important to you, it's necessary to look at the full picture instead of just the management fee. You'll likely find that a company with a bargain basement management fee has much higher costs for their other fees. This is frequently the case with companies that have a "flat rate" monthly management fee. We see this from some of the franchise operations and the bigger national companies, mostly. They lure you in the door with a $79 flat rate monthly management fee, for example, but then they gouge you with other fees that companies like ours aren't charging, such as setup fees (in other words, you pay them up front before they've even done any work). It may be smart marketing, but it's also a bit disingenuous, to put it kindly.

But more importantly, is price really the most important factor when you're talking about someone managing what is probably your most expensive investment asset? Would you hire a mutual fund manager who only charged a 1% fee, but who only earned you 2% a year, instead of hiring someone who charged a 2% fee but who earned you 10% a year? Obviously the latter is the better option, even though he charges double for his services. What you want is expertise. That's true when you're hiring someone to manage any of your investments, including real estate. Especially real estate, in fact. It's important to examine many facets of the management company you're considering. How long have they been managing property? Do they specialize in property management, or is it just a small side business to their primary sales business? How many properties do they manage? How many employees do they have to look out for you? Are they doing yearly inspections of your property, or do they only see it at move-in and move-out? What sort of tenant screening process do they use? The list goes on and on. It's important to analyze the total picture of the management company and not just the price. You may find that the least expensive company offers you the worst value.

Give us a call and we'll be happy to discuss not only our pricing, but also our extensive experience and our full service management product.

Filing Eviction - How Soon?

Todd Ortscheid - Tuesday, August 15, 2017
Something that differentiates us from our competitors, and from most property management companies even outside of our markets, is how quickly we file evictions when a tenant hasn’t paid. When we take over accounts from other management companies, we frequently see that those companies aren’t even charging a late fee until after the 5th, and in many cases not filing eviction until a full month after the rent was due. Quite frankly, this is insane, and it is not in a landlord’s best interest in our view.

Most leases have a security deposit of one month’s rent. That means if everything goes south and the tenant stops paying, you have only one month to get rid of that tenant before it starts costing you money out of your own pocket. And that’s before you take into account the attorneys’ fees and court costs for an eviction, which can easily exceed $1k if you’re an individual landlord, and even with the deep discounts we receive from our attorneys still usually cost around $500. So in reality, you already start the game with less than a month of leeway before your own wallet starts to get hit. Why on earth would you give the tenant a full month of free rent before filing the eviction? Well, we don’t.

When we’re managing a property, the rent is due on the 1st, there’s a late fee if the rent isn’t paid by the 2nd, and we’re filing eviction on the 8th (or the next business day). If a tenant pays half the rent before the 8th, we will usually give them some extra time to pay the rest, but that’s the only leeway we give. Sob stories don’t pay mortgages, so it doesn’t matter to us what the reason is that the tenant hasn’t paid. Either they pay, or they have to go.

We make this policy very clear to the tenant up front so that they know that they have to pay on time or face an eviction on their record. For this reason, combined with our screening criteria, we have relatively few evictions.

If you want someone on your side making sure that your tenants are paying on time, give us a call about managing your property.

Objective Tenant Screening

Todd Ortscheid - Friday, August 11, 2017
You may notice that we talk a lot about fair housing laws on this blog. There’s a good reason for that: violating the fair housing laws is a BIG deal, with BIG penalties. Making sure that you follow fair housing laws is one of the most important aspects of being a landlord.

With that in mind, we want to talk a bit in this article about standardizing the tenant screening process to avoid fair housing issues. For those not familiar, the term “fair housing” basically means not discriminating against people who fit into any of the government’s protected classes: race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and disability. Keep in mind that some of these terms can be broad. For example, “sex” has been interpreted by many to include sexual orientation and gender identity. There isn’t always clear guidance from HUD on what exactly these terms all encompass, so it’s always better to be broad yourself in how you define them. Even though the law doesn’t specifically state that sexual orientation is protected, be on the safe side and never discriminate on this basis, and then you don’t have to worry about it. After all, someone’s sexual orientation isn’t going to affect whether they can pay you the rent or not, so why worry about it?

Now that we know what fair housing is and what sort of violations we’re avoiding, how do we put in place a process that protects us and ensures that all applicants are being treated fairly? The best thing to do is to put down a list of objective criteria that every applicant has to meet in order to qualify to rent your property. For example, a minimum credit score, a minimum income as a multiple of the rent, no history of unpaid debts to landlords, etc. Make sure that EVERY applicant is scored using these same criteria, and no exceptions are made because you just “have a bad feeling” about an individual applicant. Those sorts of subjective impressions getting involved in the screening process are what HUD and trial attorneys will look for. If EVERY applicant has to meet the same criteria, and those criteria have nothing to do with any of the protected classes in the law, then you can be certain that you’re complying with the law, being fair to everyone, and keeping yourself out of trouble.

If you hire our company to manage your property, all of this will be taken care of for you. So give us a call to take this burden off of your own shoulders.

Emotional Support Animals

Todd Ortscheid - Tuesday, August 08, 2017
Emotional support animals are a big bone of contention with some landlords who really don’t want any pets on their properties. However, it’s important for landlords to understand that these animals are not considered pets, and are in fact protected by federal law.

An emotional support animal (ESA) is protected by the Fair Housing Act because the animal is intended to assist with a disability. Some landlords get confused because the Americans with Disability Act does not specifically address ESAs, but this doesn’t really matter to a landlord. Because landlords have to comply with the Fair Housing Act, which protects all people with disabilities, an ESA is considered a “reasonable accommodation” for someone with a disability, no different than allowing a tenant to install a wheelchair ramp.

What this means is that you don’t have a choice when it comes to ESAs. If someone has a legitimate disability and they are assisted with that disability by the ESA, then you have to allow the tenant and their ESA. Not only that, but you cannot charge a pet fee (again, it’s not a pet), pet rent, or other additional fees that you wouldn’t charge any other tenant who didn’t have an ESA.

Now, that said, there are important things to consider here. First, you have to be on the look-out for scammers. There are people out there who take advantage of this law that is intended to help people who legitimately need service animals. If you search online, you’ll find doctors of questionable ethics who will even sign a letter for a fee saying that someone needs an ESA, even though they’ve never personally examined the person they’re writing a letter for. In fact, the doctor could be in California while the person buying the letter is in Georgia.

For this reason, we utilize a three-prong test for ESAs:

1. Does the person have a disability?

2. Does the service animal assist them in some way with this disability?

3. Do they have documentation from a doctor who has examined them certifying the answers to the previous two questions?

If the answer is yes to all of the above, then the animal is legitimate, and the tenant is entitled to the service animal without paying any additional fees. If the person cannot produce documentation from their doctor, then we stop right there and tell the tenant that what they have is a pet and not an ESA, and they have to comply with all of the requirements that any other person would have to comply with for having a pet. In some cases, this means that they can’t rent a particular property at all, because the landlord doesn’t allow pets.

As a strong advocate of fair housing laws, and a company that strictly adheres to them and prides ourselves on doing so, we are always more than happy to accommodate ESAs when a tenant has a legitimate disability. But when someone is trying to scam the system, they are doing a disservice not only to us and our client, but also to all of the people out there who do have a legitimate need for a service animal. That won’t be tolerated by us.

If you'd like to hire a company that can worry about all of these legal issues for you, give us a call or send us a message. We'll keep you out of trouble while you're renting out your property.

Central Georgia Realty
42 Main Street Suite 2B
Senoia, GA 30276

(678) 648-1244

Office Hours: 8am - 5pm

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