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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 - Monday, September 4, 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 - Thursday, August 31, 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.

Using Security Deposit for the Rent

Todd Ortscheid - Monday, August 21, 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!

Filing Eviction - How Soon?

Todd Ortscheid - Monday, August 14, 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 - Thursday, August 10, 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 8, 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.

Fair Housing - Children

Todd Ortscheid - Saturday, August 5, 2017
Most people realize that discriminating based on things like race and gender are prohibited by law. However, we sometimes get requests from clients to not rent to people who have children. From their perspective, this is a reasonable request because they believe that children cause more damage to property. However, people with children are protected by fair housing laws in the same way that people of various races and religions are protected.

The way that the fair housing laws refer to this is by calling it “familial status.” What does familial status mean, exactly? Basically, you can’t discriminate against someone because they have children, are pregnant, or are planning on adopting children. In other words, if children are in any way involved, it’s protected. This means that not only can you not refuse to rent to people in this class, but you can’t even advertise in a way that would discourage people with kids from applying.

For example, an add that said something to the effect of “house is perfect for empty nesters or senior citizens” might be inferred to be discouraging people with children, or people who plan to have children shortly, from renting the house. This would not be allowed, and the advertisement might even draw the attention of the Department of Housing and Urban Development (HUD), which is the regulatory authority with the responsibility of overseeing fair housing compliance.

In fact, HUD, some special interest groups, and some civil rights law firms have been known to even test out landlords by calling and inquiring about renting while mentioning things that are covered by fair housing laws, to see if the landlord will deny or discourage someone in a protected class from applying. For this reason, you need to be very careful in how you word your ads and how you interact with potential renters. Anything that you write or say that could give someone the false impression that you are discriminating or even giving preference to certain groups could land you in hot water.

Our company prides itself on complying with all fair housing laws and going above and beyond to treat everyone fairly. If you’re looking for a company to manage your property so that you don’t have to worry about things like how to comply with fair housing laws, give us a call.

Remaining Rent from a Skipped/Evicted Tenant

Todd Ortscheid - Tuesday, August 1, 2017
We occasionally get asked by our clients if a tenant is responsible for rent after they’ve been evicted or skip out mid-lease. The simple answer is “yes.” However, as with most things where the law is involved, the simple answer doesn’t really give you the full story.

Let’s say you have a tenant with a one year lease. Six months into the lease, the tenant either abandons the property or is evicted for non-payment. The lease states that the tenant is responsible for the full year, so technically you could go after this tenant for that lost rent. But, a key exception is that the courts will not allow you to collect rent from two different tenants for the same property at the same time. Since it’s likely that you’re putting a new tenant in the property when the old one leaves, this means that you can only hold the old tenant responsible for the rent during the period of vacancy. As a practical matter, this means that you would have to wait until the property is re-rented to find out how much time of vacancy the old tenant was still responsible for, then file a civil action against the tenant or submit the debt to a debt collector.

The next question that comes up is whether you can hold the tenant responsible for the entire remainder of the lease if you don’t re-rent the property. The answer from most judges would be that it depends on the reason that the property was not re-rented. If the reason is that the market is awful and you can’t find a new tenant, then a judge is likely to award you the rent for the entire term of the lease. But if the reason is that you simply didn’t make any effort to get the property re-rented, the judge will likely say that you made no effort to mitigate your loss, and therefore can’t hold the tenant responsible This may seem unfair, as a contract was in place for a set period of time and a set amount of rent, but it is how the courts will generally view the matter.

As a practical matter, we rarely have evictions or abandonments from the tenants that we screen, and we are able to re-rent properties usually in only 2-3 weeks when they do occur. Therefore, actual lost rent is minimal when a tenant splits or is evicted. But whatever it is that you’re owed, we will submit to our collection agency for collection, and they will make every effort to collect using whatever legal means are available to them.

If you’ve experienced a bad tenant skipping out or having to be evicted and are looking for professional management and tenant placement, please give us a call.

Zillow Rent Estimates

Todd Ortscheid - Sunday, July 30, 2017
When we talk to prospective clients, and sometimes even current clients at lease renewal time, we sometimes gets questions about rent estimates that the person has seen online, usually on a web site such as Zillow.

While these estimates are certainly interesting for things like tracking rent trends, they are not very reliable for determining actual fair market rents of a specific house. Analysts have found that estimates on Zillow for example are frequently off by 20-30%. We’ve seen cases where it is even worse, particularly for houses in rural areas, or for multi-unit properties.

To get a real fair market rent for a given property, it is necessary to do what’s called a comparative market analysis (CMA). Real estate agents learn how to prepare an accurate CMA when they get their real estate salesperson license, and perfecting the art takes years of experience, because it’s hardly an exact science. Every property is different, even in a “cookie cutter house” neighborhood, and knowing how each of those differences affects the fair market rent (or sale price, for that matter) of a given house takes years of experience. Computer algorithms are helpful, and we even use a company called Rentometer to prepare quick estimates of rent, but the final number that we arrive at is based on our experienced agent’s judgment and knowledge of the local market.

So while we certainly wouldn’t discourage you from looking at these online estimates, we would discourage you from thinking that they’re anything more than a broad ballpark estimate. If the rent we’re charging is either higher or lower than what you see on Zillow, trust us when we say that there’s a reason for it.

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