The LandLord Advocate March 2015

Landlords often struggle with utility bills – not their own, but their tenants’ failure to transfer the utility service to their name (and from the landlord) and/or pay their bills (and force a utility shut-off). Landlords then incur significant time loss and expense as they attempt to get the tenant to comply with the lease requirements on utilities. How can landlords deal with this seemingly intractable situation?

Landlords must recognize that they can exercise significant control over this situation. They must make business decisions about tenant selection, lease provision(s), and lease-up / lease termination processes regarding utility service issues, and then implement those decisions. In short, they must have a plan and process(es) in place well before they lease-up a unit.

Landlords must ask and answer four key questions to develop that plan and process(es). Is the landlord willing to:

• Create clarity on utility service issues in the tenant application and lease?
• Lease a unit to a prospective tenant who has utility service payment issues on his/her background check and/or credit report?
• Give the tenant keys to (and, therefore, possession of) the unit without confirmation that the tenant has transferred the applicable utility service(s) to the tenant’s name?
• Allow the unit to have no utility service if the tenant fails to pay the bills, or does the landlord want the service transferred into its name to ensure uninterrupted service?

Landlords cannot rely on stock tenant application and lease language to adequately protect themselves on utility issues. The tenant application must specifically inquire about the tenant’s history with utility services and provide a release for the landlord to ask the utility companies about that tenant’s actual payment history. The lease must address all of the landlord’s business decisions reflected in Questions ##3 and 4 above, and what the tenant must do (and what happens to the tenant) in any of those situations.

At the lease application stage, nonpayment of rent and/or utilities is a leading indicator of a problem tenant. Landlords should ensure that their tenant selection process includes checking with prior landlords about these two issues, confirming the answers with the utility companies themselves, and ensuring that their credit report screening flags an applicant’s utility billing/payment issues.

During lease-up, a landlord can require that the tenant obtain a form or letter from the utility company confirming that the tenant has placed the utility in his/her name before giving the tenant the keys. Alternatively, the landlord can create a form acceptable to the utility on which the tenant instructs the utility to place the service in the tenant’s name as of the lease term start date. The landlord can require that the tenant sign the form (in compliance with the lease) during the lease-up process, and then simply fax, email, or mail that form to the utility to ensure that the utility handles the billing correctly.
Finally, before a utility shutoff can occur, the landlord must decide what is more important – avoiding any utility bill for a leased unit, or allowing the utility to transfer the bill to the landlord’s name to keep the service intact (e.g., to keep the heat on in the winter to avoid frozen, and maybe broken, pipes and the resulting water damage). If the landlord chooses to allow utility shutoff, the landlord must be prepared to give the utility company access to the meter or tenant’s unit to shutoff the service. Moreover, the landlord must be ready to refer the tenant to its attorney for injunctive relief and/or a summary process (eviction) action to get a court order forcing the tenant to pay for and resume the utility service or lose possession of the unit.

If the landlord chooses to have the utility company automatically transfer the service into its name to protect the unit, the landlord must take steps to ensure that it is notified of this event when (or, even better, before) it happens. Unfortunately, landlords often rely on the utility company’s own form for this situation, and therefore do not learn about the utility billing issue until it receives a bill for the unit as much as 30-40 days after the switch. As above, the landlord must also be ready to take the appropriate legal action against the tenant to resolve the situation.

Quick Tip:

Orderly files prevent disorderly trials – especially in complex cases.

Over and over, we have clients requesting us to review the status of their files. Typically, the catalyst for these reviews center on either the tenant’s desire to review their file, or more recently, for the tenant’s attorney to conduct a full file review prior to a complex case.

Complex cases are those where, rather than answer the Complaint directly, the tenant, usually with assistance of counsel, is filing motions and discovery that ultimately make the case longer and much costlier than it could have been. The complexity comes in the form of time and resources that you and your attorney must bring to bear to achieve your desired outcome in the case. So, as a precursor to releasing the file for review, we are often asked by our clients to inspect the file to ensure it is in order, contains the proper information, and omits those items either unnecessary or privileged.

In each case, we are more than happy to oblige as there are any number of tiger traps that can be identified and avoided with a quick file inspection. As the doctor always says, “An ounce of prevention…”

The phases involved are detailed below:
The first step of each review is to help our client identify the important, relevant information that will be critical to the legal issues they will face in these complex cases.

The next step is to ensure that our client’s confidentiality privilege is protected. As you all know, your communication with your attorney and their responses is privileged information. Nobody, especially an attorney representing your tenant, has a right to see that information. That is one of the most important aspects of your relationship with your attorney. Your discussions are protected by attorney-client privilege and need not be disclosed to your opponent. Inadvertently losing this advantage because your file discloses privileged information to your tenant’s attorney is one way to make a complex case nearly insurmountable. It’s almost like giving the other team your playbook.

Lastly, most file inspections unearth bigger and better discussions regarding operational improvements that may ultimately make the manager’s daily life, as well as that of their staff, much more efficient and effective. How you maintain your tenant files is often a reflection of your operational processes. Even a quick inspection by your attorney in complex cases can have long-term downstream effects if that inspection reveals a flaw in your processes.

The important point is that orderly files invariably make complex cases much more efficient and cost effective. Being familiar with their contents and their organization will make any discussion with your attorney (be it be during the preparation or execution of a complex trial) a seamless, well organized exchange with a focus on achieving your desired outcome.

DISCLAIMER:
The reading of this newsletter does not form an attorney-client relationship. The contents of this newsletter are for informational purposes only and do not constitute legal advice. Nothing in this newsletter is intended to imply or predict the outcome of any legal matter that you may be considering or be involved in. The Landlord Law Firm makes no warranties of any kind regarding the information contained in this newsletter.