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Early Lease Termination Clauses

Todd Ortscheid - Friday, May 08, 2015
There are two different schools of thought regarding early lease termination clauses. Some landlords hold that they don’t want an early termination clause in their lease because it makes the tenant feel that that it is okay to terminate early. Others feel that it is better to have the terms of the early termination laid out ahead of time. We fall into that second camp. Here’s why:

1. Courts like to have language to look at it rather than having to make on the spot judgment calls. If a judge can look at a specific clause in a lease that is very clear about what is required to terminate a lease early, then they are much happier about that as compared to trying to determine their own remedy.

2. The absence of an early termination clause leads tenants to believe that they can negotiate this after-the-fact rather than meeting the landlord’s demands.

3. If you don’t have a written agreement about what the penalty is for an early termination, then many courts won’t allow you to collect one. The concept of “liquidated damages” is basically that you can pre-agree on what a fair estimate of your damages would be in the event of an early termination, so that any early termination fees charged are not viewed as a penalty, but rather as reimbursing you for your direct harm. This is important in most courts, where judges will not allow penalties, but will allow liquidated damages if pre-agreed.

We think it’s quite important to have this item agreed upon in advance as part of the lease agreement. To address the concern of those landlords who feel it gives the tenant a green light to terminate early, our solution is to make the liquidated damages a sufficient amount that would discourage early termination. After all, if you have to re-rent the property, it is likely that you will suffer damages from lost rent for a period of time, costs of advertising, lost time in showing the property, etc.

Give us a call and we can take care of all of this for you with our professionally written and constantly updated lease agreements. Then you can just sit back and collect your monthly rent check.

Utility Bills

Todd Ortscheid - Thursday, April 30, 2015
Utility bills can be a real nightmare if the lease doesn’t cover them correctly. We frequently take over the management of a property that the owner had been paying the utilities for and then billing the tenant. Usually, the owner is having us take over because the tenant didn’t pay them for the utilities, and they don’t know what to do.

There’s a very simple way to avoid this: don’t leave the utilities in your name. Unless absolutely necessary (meaning it’s physically impossible for the tenant to have the utilities in her/her name because of a shared meter), ALWAYS make the tenant put the utilities in his/her name. This should be a provision of your standard lease agreement, and you shouldn’t compromise on it. Tenants will come up with all sorts of excuses for why they want you to keep the utilities in your name. Don’t do it.

Our leases require the tenants to have the utilities switched into their name within 3 days of the start of the lease. We make no exceptions to this. If the utilities aren’t switched over, we shut them off. You should do the same.

So what do you do if you have a situation where it’s physically impossible to have the tenant responsible for the utilities, which is frequently the case with duplexes and other multi-family properties that share a meter? Here are a few pointers:

  1. Any payments that the tenant has to make to you for utilities need to be referred to in the lease as "additional rent." If they are a separate kind of charge, then some courts may not allow you to evict for non-payment of those bills or allow you to charge late fees for them.
  2. Always make sure to bill the tenant and notify them immediately after receiving the bill from the utility company. Don’t give the tenant an excuse for non-payment because you waited too long to bill them. It shouldn’t matter, but some courts may take sympathy on the tenant if they are getting late notice.
  3. Have the payment terms specifically listed in the lease. It should say something about how long the tenant has to pay after being notified, and it should say that an invoice from you is sufficient rather than requiring a copy of the utility bill itself.
  4. Take a utility deposit from the tenant at the beginning of the lease along with the normal security deposit. This should cover your best estimate of the total utility costs for a peak month of the year. This ensures that you have not only enough money to cover the rent if you have to evict them, but also the utility bills.
  5. Never do this unless it is physically impossible for the tenant to be responsible for the utility bills!

Give us a call and we can start taking care of all these headaches for you. Being a landlord is a lot more complicated than just taking rent checks. Let us do the hard part for you, and just watch the checks get deposited into your account.

Tenant Supplied Credit Reports

Todd Ortscheid - Monday, April 27, 2015

If you've been a landlord for a while, you've probably encountered a tenant applicant who wanted to provide you with a copy of his credit report rather than you running a report yourself. The conversation usually goes like this:

"I just had my credit report run to (purchase a car, rent furniture, buy a computer, whatever), and I'd really prefer not to have multiple credit inquiries on my report so the score doesn't go down. Can you just take the copy that I printed out from the last credit check instead of running your own report?"

Hopefully you said "heck no" if you've encountered this, because it's the oldest tenant scam in the book. With today's ease of access to credit reports, anyone can get a copy of their credit report in minutes online. And as everyone knows, it's also incredibly easy to "photoshop" just about anything nowadays to make it look like something different than what it is. In the case of a credit report, it usually doesn't even take Photoshop skills or software. A simple copy-and-paste of the credit report from the internet into a word processor will allow the applicant to make adjustments, keeping all of the graphics and everything else from the original report to make it look legit.

Anytime someone doesn't want you to run a full background check, that's a red flag. Never accept any reduction of your normal background check process. You should be running a credit report, criminal background check, sexual predator list check, and even terrorist watch list check. Every. Single. Time. No tenant applicant should be an exception to this rule.

Give us a call and have us take care of this for you! We can handle all of the tenant screening and keep you out of trouble, avoiding problem tenants to the maximum extent possible.

Why Property Management Software is Important to You

Todd Ortscheid - Tuesday, April 07, 2015

Obviously, property management companies buy software packages to make their operations more efficient. But it isn't just about helping the property manager. It's also about helping the client.

When you're looking for a property management company, make sure you pick someone who is using the latest property management software. Brokers using old software (and for some smaller companies, no property management software at all) are doing you a big disservice as their client.

Here are just a few key benefits that you as the client receive from the property manager using the latest property management software:

  • An Owner Portal that allows you to login and see the most up-to-date information on your property.
  • The ability for you to make electronic payments using a bank account or credit card when you need to pay for repairs for your property, instead of having to send paper checks.
  • Direct deposit of your rent payments into your checking account.
  • Having instant online access to your lease documents and owner statements.
  • The ability for your tenants to make electronic payments for their rent, making it more likely that rent will be paid on time.
  • Automatic tracking of repair requests so that your tenants stay happy and your property stays in good shape.
  • Automatic scheduling of inspections of your property, and PDF reports sent directly to your email.
  • And more!

At Central Georgia Realty, we use Propertyware, which is a cloud based solution that is constantly being updated with the latest technology to assist both us and you. Don't hire a property management company using a bargain basement software solution. Give us a call to see how we can help you manage your property. Our service usually pays for itself with reduced vacancy rates!

Tenant Prospects in a Hurry

Todd Ortscheid - Monday, March 30, 2015

If you've been renting properties for a while, then you've probably run into tenant prospects who call wanting to move in almost immediately. There are several reasons that you should be very wary of any prospective tenant who is in such a hurry:

  1. They're frequently getting evicted from their current property, and they're trying to find a new place before the eviction shows up on their record.
  2. Sometimes they're breaking their current lease without paying the required early termination penalties. You may think that that isn't your problem, but consider this: if they're cheating their current landlord, then they're probably going to cheat you, too.
  3. Sometimes they're looking for a place before a criminal conviction pops up on their record.

Now, it's entirely possible that the person is in a hurry for a legitimate reason. But because that isn't the case usually, you need to be extra vigilant in screening these tenants. Never let them talk you into renting to them without a background check. Nowadays, background checks can be done instantly, so there is no legitimate excuse for them not wanting you to do one. Being in a hurry is no excuse.

But what about those problems listed above that won't pop up on the background check? This is why you make absolutely sure to call their previous two landlords, and also speak to their employer. If they won't let you talk to either of them, then reject the tenant. It's not worth the risk. Another tenant prospect will come along.

Do you want to avoid worrying about these things and leave it to a professional? Give us a call and we'll be happy to talk to you about professional property management services.

Tenant Threats about Security Deposits

Todd Ortscheid - Thursday, March 26, 2015

If you've been a landlord for long, you've probably dealt with tenants who left the property owing money, either for repairs or for unpaid rent or late fees. Obviously, the reason that a landlord requires a security deposit is to cover these amounts. But when a landlord withholds the deposit as he's supposed to, tenants frequently start throwing around threats about getting lawyers and filing lawsuits. What should you do when this happens?

First, it's important to make sure that you've followed the law and the lease agreement. If the tenant really does have a legitimate dispute, then you should work to resolve it fairly. This is rarely the case, though. Usually the landlord has complied with the lease and the law, but the tenant is still demanding their deposit back.

So after you've confirmed that you're within your rights, the next step is to send the tenant a response to their dispute in writing. Make sure that the response is written in a professional manner and not as an angry diatribe. If the tenant has angered you with their accusations, then take a break and come back to write the response after you've calmed down. If the matter does end up in court, you want to make sure that you looked like a consummate professional. Judges do factor that in and will make assumptions about you if you behave unprofessionally. In your response, just state the facts about what the lease says regarding return of the security deposit, and clearly state why the security deposit was withheld.

If the tenant still doesn't relent, and starts making threats about hiring a lawyer, then don't worry. We hear this constantly from angry tenants, and 99% of the time, they never hire any lawyer and never file any lawsuit. They're just trying to scare you. Ask yourself this: if the tenant couldn't even afford to pay their rent or pay for the repairs to get the property ready for move-out, how are they going to afford a lawyer or court costs? Just calmly tell the tenant that you will be more than happy to speak with their attorney, because you know that any attorney will see the facts and realize that you have complied with the law and lease. That will almost certainly be the end of it.

In that incredibly rare occasion when a tenant actually does file a lawsuit to try to recover their deposit that they are not entitled to, you can either defend yourself in court or hire an attorney. We would recommend hiring an attorney, but there is no requirement to do so in most jurisdictions.

Obviously, the best way to avoid these problems is to hire a professional property manager, like us. When these problems come up, we take care of them so you don't have to, and we have a team of attorneys to deal with frivolous litigation. Give us a call to talk to us about how we can help you so that you don't have to worry about these tenant problems.

Legal Documents

Todd Ortscheid - Thursday, February 26, 2015

One of the most important reasons to hire a professional to manage your properties is the importance of the various legal documents associated with it. Everyone is familiar with leases (although few individual landlords have a good lease form), but there is actually a lot more documents that you really should be familiar with if you're going to manage rental properties. This is just a small sample:

  • Lease Agreement
  • Lead Paint Disclosure (for properties built before 1978)
  • Government's "Protecting Your Family from Lead in Your Home" pamphlet
  • Move-In/Move-Out Inspection Form
  • Amendments
  • Tenant application
  • Credit reporting disclosure
  • Notice to Pay Rent or Quit
  • Tenant Move-Out Statement & Security Deposit Reconciliation
  • Etc.

Failure to use the proper legal documents can land you in hot water. For example, federal law requires that the lead paint disclosure be provided and signed by both parties on any home built prior to 1978, and it has to contain the information required by the government statute. Along with the disclosure, a copy of the government's pamphlet about lead-based paint has to be provided to the tenant.

Other items may not be required by law, but will cause you problems if civil suit is filed. For example, if there are two tenants in the property and one of them leaves, if you don't do an amendment addressing the security deposit, you could end up with a lawsuit disputing who gets the security deposit and when.

The best thing to do is to hire a professional management firm so that these items are taken care of for you. Barring that, you should consult an attorney to make sure that the forms that you're using are sufficient. Give us a call if you'd like to hand over management of your property to a professional team that can take care of everything for you!

Roommates and Security Deposits

Todd Ortscheid - Friday, January 30, 2015

Something that comes up pretty regularly, especially in college communities, is how you're supposed to deal with a security deposit when there are non-married roommates listed on the same lease. It's important to deal with this correctly, otherwise you could end up with legal problems.

Our standard leases (and any decent standard lease form) will state that all tenants are "jointly and severally responsible." What this means in layman's terms is that money that is paid or money that is owed is for all tenants named on the lease, not divided up into equal parts. So if you receive a security deposit for $1,000 from two roommates, it is not $500 from each. It is $1,000 total from both of them. This is an important distinction.

When one roommate moves out, he frequently wants "his half" of the security deposit back. Sorry, but there is no such thing. There is only the one security deposit, and it is not due for disposition until all tenants named on the lease terminate the lease. So if one roommate leaves earlier, then the deposit is not owed to him, in whole or in part. He just has to wait until the termination of the lease.

Alternatively, the roommates could come up with an agreement to deal with the security deposit differently. For example, they may agree that half of the deposit is to be returned to the departing tenant, and the remaining tenant has to replace it. The landlord is under no obligation to do this, however. He may consider it easier than dealing with a fight over the deposit, though.

The best practice is to make sure that you explain all of this up front to the tenants so that there aren't any surprises. They usually don't understand the legal jargon in the lease, or worse, they don't read it at all, so explaining it to them is the smart move to avoid future problems.

If you'd like to just avoid these issues and allow a group of professionals to deal with it for you, give us a call or submit a request for more information on our web site. We would love to assist you with your rental property.

ALWAYS screen. No exceptions.

Todd Ortscheid - Sunday, January 25, 2015

Sometimes a tenant prospect comes along who tries to avoid the usual screening process, and there is some sort of circumstance that tempts you to accept his or her request. Perhaps the tenant is offering to pay six months' rent up front, or perhaps you've been waiting for a while for a tenant and this person wants to move in immediately. Whatever the circumstances, NEVER rent to someone without going through the full screening process.

There are many reasons to screen tenants. It isn't just to make sure that they can afford the rent, so someone offering to pay big sums up front shouldn't dissuade you from a full screening process. Here are a few reasons that screening is still important, no matter what:

  • Some tenants are trying to cover up histories of bankruptcy filings. And we aren't talking about a legitimate Chapter 11 bankruptcy where someone just got a little over his head and needed some help. That sort of person is pretty common in the rental market. What we're talking about here is someone who habitually abuses the bankruptcy process. This sort of person files frivolous bankruptcy after frivolous bankruptcy to escape debt as a normal course of business. This can be a nightmare for a landlord, because a bankruptcy filing immediately puts a stay on any eviction proceeding until you can get an attorney to get the stay lifted.
  • Some tenants are trying to cover up criminal backgrounds. While a non-violent drug offense for carrying a little pot as a college student may not be a big deal, sometimes you turn up people who were convicted of making meth in a rental property, or who are on the sexual predators list. These are tenants that you want to avoid for obvious reasons.
  • Some tenants are covering up a long history of evictions. They hope that you'll jump on their offer of three months' rent in advance to avoid the background check, and then they won't pay anything after the three months are over. That few months of rent up front doesn't feel much better when you're fighting to evict a bad tenant a few months later.
  • Some tenants are just trying to hide their identity. Perhaps they're engaged in identity theft (a serious crime), which would flag on a background check if someone has filed a claim of stolen identity on their credit report. These people are hoping you won't check their credit so that they won't get caught.

These are just a few examples. The short answer is that it's just never a good idea to rent to someone without conducting a full background check. No matter what the circumstances, always run the check, and refuse to rent to anyone who won't accept it.

If you are tired of dealing with these issues and just want to hire a group of professionals to deal with all of this for you, give us a call or send us a message through our web site. We will be more than happy to assist you.

Reviewing the lease with the tenant

Todd Ortscheid - Thursday, September 25, 2014

One of the most important things that can be done to ensure compliance with the lease is to review it in detail with the tenant(s). It's hard to believe for many property owners, but most tenants will just sign the lease without bothering to read any of it. For those who do read it, they usually just skim the"highlights" like the monthly rent, the late fee, and scheduled rent increases. The rest of the document gets completely skipped. It's the rare tenant who actually does any due diligence in reading over the entire document and knowing what their legal obligations are.

While you may think that this isn't a big deal, since they're still responsible for whatever they sign, whether they read it or not, we find that compliance with the lease is a lot higher if the tenant knows up front what their obligations are. If they find out after the fact, after they've already incurred penalties, then they're more likely to not pay and create hassles.

In order to avoid this problem, all of our agents review the lease with the tenant in detail prior to the tenant signing and moving in to the house. We go paragraph by paragraph and explain all of the details about late rent, eviction, their responsibilities for maintenance and repairs, etc.

By doing this up front, the tenant is far more likely to comply with what the lease requires, leading to fewer headaches for the landlord and less likelihood of having to deal with it in court.

Give us a call and let us take care of all of this for you! We'll have a qualified tenant in your property in short order and take care of full management for you for a reasonable price.

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

(678) 648-1244

Office Hours: 8am - 5pm

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