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The LandLord Advocate Aug 2011

Lead Article:

The right data can help identify the perfect tenant.

Today’s financial challenges seem to be making it more and more difficult to make ends meet. Ensuring consistent income and cash flow is critical to survival. This is true not only for the landlord, but also for the tenant.

Consistent income and cash flow for the landlord comes in the form of tenants who can “meet the rent” each month. While it is not possible to anticipate and plan for every situation that may keep this from occurring, the landlord can help sidestep any roadblocks to collecting the monthly rent by ensuring the best applicant is initially put into each unit.
How do landlords measure risk when choosing a new tenant? A critical tool we continue to recommend is a complete and effective application process.
The proper approach is very similar to the process lenders put borrowers through when seeking financing – form after form after form. While the thought of paperwork may sound tedious, the rationale for its success is simple – the more information collected regarding the applicant, the easier the decision for the lender when weighing the risk.
Not unlike the bank, a landlord becomes a creditor the moment the lease is signed and the keys are handed over. Why then shouldn’t the same stringent approach to data gathering be followed by landlords?
While the idiosyncrasies of the approach may vary depending upon the landlord’s particular needs and business goals, here are some basics fundamentals that we recommend you consider including:

  • Utilize a written (or electronic) application form that collects all critical data in a single document – speeding the review process. The form should include all of the information a landlord will need during the entire tenancy. A sampling of the types of information that are recommended include: identifying information, employment and income history, rental history, banking information, criminal history, landlord references, personal references, and citizenship status.
  • Do not accept applications that are not completed in full. We recommend you immediately reject those that are submitted with partial or missing data. An applicant’s refusal to provide information is a red flag and can be viewed as an early indicator of their future attitude toward rent payment and living by the rules.
  • Consider financial, criminal, and eviction histories. Such information not only helps to identify the likelihood of the rent being paid on time, but also will aid in determining overall eligibility for your vacant unit.
  • All of the various pieces of data collected (regardless of the source(s)) must be evaluated for consistency, scrutinized for accuracy, and confirmed for integrity.

There are a number of vendors available to help landlords in the application process and many will take over the entire process for a fee. Regardless of who performs the data collection tasks, landlords should be sure to implement an advanced applicant screening process and carefully review the information collected.
NOTE: There is one critical housekeeping issue that comes into play when collecting this extensive information. Once the data is gathered, it is the landlord’s responsibility to properly protect it from misuse. To this end, landlords must ensure that their application process includes a policy for dealing with this sensitive information. See Connecticut Public Act No. 08-167, for specific requirements, and be sure to consult your landlord attorney if you have any questions or concerns about collecting or protecting this information.
Despite the ever growing number of laws and challenges involved when collecting personal information, an effective and thorough application process is especially necessary today for landlords conducting a risk analysis on who will occupy their empty unit. To avoid potential problem-tenant relationships, landlords should take the time to complete the necessary application and screening steps. Being diligent and “knowing the risk” may be the best form of preventative maintenance available to landlords.

How to predict an eviction timeline.

Landlords looking to evict a tenant are often very anxious – and rightfully so. They’re facing a loss of income and want the unit freed up ASAP. Hence, one of the most often asked questions we receive from our new clients is: “How long is this eviction going to take”? Unfortunately, the answer is dictated by a number of varying factors.

As always, the key reference point in identifying the eviction timeline is the lease. In it, you should find information related to any grace periods, default, notice requirements, or remedy concepts that will help address the issue at hand. However, while landlords may believe that the lease is intended to help streamline the eviction process, ineffective leases can (and often unwittingly do) contract away the landlord’s summary process (eviction) statutory rights simply by what’s contained in the document.
For example:

  • On the residential side, a lease that states rent is due by the 10th of the month (usually, intended to signify the 1st of the month deadline plus the 9-day statutory grace period), in reality means that the tenant has until the 19th of the month to pay. What many landlords don’t realize is that the statutory grace period applies from the lease rent payment deadline, as extended by any grace period(s) included in the lease.
  • On the commercial side, a lease that requires a default notice for nonpayment of rent eliminates the landlord’s statutory right to move directly to a notice to quit on the day after the rent is due.

Another factor in the residential eviction timeline is whether the rental situation benefits from government or private-source funding (i.e. Section 8, HOME, tax credits, and municipal bond programs). If so, there are routine operating agreements, statutes, and/or regulations that may affect whether and how you can evict a tenant. For example, properties or tenants that participate in rent-subsidy programs like Project-Based Section 8 or Section 8 Vouchers create a situation where the landlord has entered a payments contract with the Section 8 administrator (or other government agency) that will impact the situation (see “Section 8 – So many contracts – so little time” in our February 2009 edition for more on this subject).

In contrast, the law is much more straightforward when defining an eviction timeline. For example, when using nonpayment of rent in a market transaction (i.e. no government program involved) – regardless of whether it’s residential or commercial – your landlord attorney, in most instances, should be able to get you a tenant deadline to file an appearance in court and a responsive pleading to the complaint within approximately twenty-three (23) days.
From there, if the tenant fails to file an appearance, your landlord attorney can file a motion for default against the tenant, which – by law – the court should grant within one (1) business day. If the tenant files an appearance but does not plead, your attorney can file a different motion for default against the tenant, which obligates the tenant to file a pleading within three (3) business days or the court will grant the landlord default judgment.

Keep in mind that one can never account for the potential backlog of work in the Housing Clerk’s Office, or whether a tenant (or the tenant’s attorney) files motions or discovery, which could dramatically expand the timeframe in which the case gets resolved.

Although landlords cannot control how quickly the court responds to default motions, or whether a tenant or tenant’s attorney files motions or discovery, landlords can control the timeliness of the document filings and the response(s) necessary to get a case favorably resolved by selecting the right landlord attorney.

Assuming the tenant files an appearance and responsive pleading (and the landlord responds, as necessary), the court will schedule the case for trial or a hearing on the tenant’s pleading. Depending on the court, this can take anywhere from a few days to four (4) or more weeks. How quickly the landlord obtains judgment in this situation is usually a function of how well the landlord and its attorney structured the case, handle the (usually) mandatory mediation and potential stipulated agreement (commonly referred to as a “stip”), and are prepared for, and can handle, the trial or hearing if the case does not settle in court.

Lastly, after the landlord receives judgment for possession, a statutory five (5) day stay of execution automatically applies (not counting Sundays or holidays), and marshals are required to give at least one (1) calendar day notice to the tenant of the eviction date, which is often defined by when the town/city is available to schedule the eviction.

Again, landlords cannot control the timeliness of the court’s response in this situation, but landlords can significantly influence the execution filing (for court processing) and marshal selection (and performance) by working with a landlord attorney well versed in landlord-tenant law, and with established relationships with similarly knowledgeable marshals who have good working relationships with the cities and towns in their county.

As you can see, there are a number of different factors that come into play when calculating an eviction timeline. While one can not anticipate every turn a case may take, landlords – with the proper landlord attorney – can rest assured knowing that the process will be expertly managed with the goal of restoring (as quickly as possible) the landlord’s income and cash flow associated with that unit.

Security deposits – Know how to hold ’em, know how to fold ’em.

Not knowing the rules on security deposits can be a costly mistake for landlords. According to the Connecticut’s security deposit statue, if challenged regarding the handling of a tenant’s security deposit, non-compliant landlords could face criminal (jail time) and civil (money) penalties of at least double the amount of the security deposit and accrued interest. In addition, if the landlord is found negligent in handling such a matter, the landlord may be held responsible for any attorney’s fees and costs the tenant incurred during the litigation process.

The key to protecting yourself is to know how to properly handle the security deposit.
As we’ve stated in the past, if you collect security deposits from incoming residents (and we highly recommend that you do), you must ensure the funds are handled properly as required by law. The Connecticut Banking Commission (the agency appointed to oversee security deposit handling) has defined the following simple rules for landlords to follow:

  1. Landlords may collect no more than the equivalent of two (2) month’s rent (one (1) month for residents 62 years or older);
  2. Landlords must hold the security deposits collected in a separate interest-bearing account and serve as the escrow agent for that account;
  3. Once a year, the landlord must pay to the tenant any interest earned on the deposit;
  4. After the resident vacates the premises and provides a forwarding address (in writing), the landlord must return the security deposit or account for how it was used within the appropriate timeframe.

While many landlords will testify that they are aware of (and practice) steps 1 and 2, we commonly see problems arise with items 3 and 4. For that reason, let’s delve a little deeper into each item:

3. Interest earned on security deposits

Interest earned on each security deposit must be paid once a year directly to the tenant. Failure to do so can result in a Banking Commission fine or, in some instances, prosecution and incarceration. Landlords can make payment either through a rent credit or direct compensation to the tenant.
IMPORTANT: Landlords are only responsible for paying interest earned during months in which the rent was paid on time (within the statutory grace period). If payment is late, no interest is accrued.
EQUALLY IMPORTANT: Landlords who charge late fees cannot withhold interest on the security deposit, even when the rent is late. If a late fee is collected for late rent, full interest is due

4. Returning a security deposit

Rules regarding the return of a resident’s security deposit seem equally simple in design; however, they are much more complicated to put into practice. To avoid pitfalls, the landlord must:

  • Return the security deposit within 30 days of the tenant vacating (assuming the tenant provided a forwarding address in writing).
    NOTE: If the tenant fails to provide a written forwarding address prior to (or at) departure, the landlord need not return the security deposits or provide a notice of damages until fifteen days after receipt of a valid forwarding address in writing.
  • Account, in writing (within the same time period), for any financial use of the security deposit, along with the return of any unused portion (if it exists).

Now, what if the landlord has a claim against a tenant’s security deposit? Typically, issues with the return of a security deposit arises when the premises are damaged (or left in disarray), or if the tenant vacates with an unpaid balance on their account. The correct process in either (or both) of these situations rely largely upon what is written in the lease.
While state statute dictates that landlords may charge for damages resulting from the tenant’s failure to comply with their lease obligations, the language is a bit vague. Luckily, any ambiguity can be superseded by imposing lease language that outlines what can (and will be) charged against a security deposit upon the tenant’s departure. Without a sound lease provision, landlords can expect to a battle over money they feel that they should be able to collect.
However, there are guidelines that limit what the lease provision may contain. Landlords should consult with their landlord attorney to discuss those limits before implementing a security deposit provision in their lease.
As with unit damage, landlords left with unpaid charges on their tenant accounts should rely on a sound lease (and not state statutes) to determine whether – and to what extent – a former tenant can be pursued for monies owed.
Security deposits serve a vital function in the business of property management. When used correctly, they are an effective deterrent against tenant damage and payment default. Be sure to collect them, and be sure that you know how to hold ‘em and, more importantly, how to fold ‘em.

How simple planning could help take the bite out of bed bugs.

Bed bugs, bed bugs, and more bed bugs. Seems just when we think the topic has fallen off the radar, they come crawling back. As attorneys, we’re always at the ready to help landlords deal with the legalities associated with bed bugs (i.e. dealing with the problem tenant). However, we believe that reinforcing the importance of a proactive prevention plan is equally important. So, back by popular demand, here is our discussion on implementing a bed bug PEST plan.
The most important aspect of dealing with bed bugs (or any infestation for that matter) is to have a plan in place that you can, and do follow. Handling infestations cannot be a reactive process. You cannot wait until you learn of a problem before you determine how you will handle it. By the time you learn that there is a problem, it will already be significant. You WILL have an infestation of some kind. Plan on it and be ready when it happens.
Here is our simple formula to help you develop your infestation strategy – it’s your PEST plan:

  • Prevention. Discuss with your pest management company the various things you can do to help prevent infestations. Whether it is preventative treatments, inspection plans, or other strategies, find out what you need to do to help prevent bugs in the first place. Perhaps education of your residents would be part of that plan. Also, discuss with your landlord attorney the policies and procedures you can implement to prevent infestation. Case in point: We have a client who during a move-in inspection, noticed bed bugs on a mattress headed for the unit. She promptly stopped the movers and had them immediately remove the mattress from the building. She informed the resident that she was not allowed to bring her furniture into the unit if it was infested. This was a great example of an effective PEST plan at work.
  • Extermination. Again, your pest management company is your best resource for the treatment plan. Know how you will handle whatever infestation you are facing and be ready to institute your plan. You have all faced the situation where you have a treatment plan in place, but your resident interferes, won’t let them in, or failed to properly prepare for the treatment. Knowing how you will react to this situation is covered the next part of the PEST plan.
  • Sound Documentation. It all starts with a good lease that contains infestation clauses that support your PEST plan. Your community rules and regulations are also a vital part of the documentation you will need to implement your PEST plan. Lastly, your communications with your residents and your pest management company will round out the necessary documentation to implement and enforce your PEST plan. Once you have your prevention plan in place, your extermination plan in action, and all of it is supported by sound documentation, you may find yourself with no choice but to exercise the last step in the plan.
  • Termination. If you have implemented a prevention and extermination plan, and you support both with sound documentation, you may find yourself enforcing those plans through lease termination. Properly developed and documented, your PEST plan will allow you to put a resident in jeopardy of losing their home if they do not comply with your policies. While this is the extreme outcome in a rare situation, a proper PEST plan can give you the option of terminating someone’s tenancy if you want to exercise it. Without such a PEST plan, you will likely be chasing those bed bugs from one place to another for a REALLY long time.

So, when it comes to bed bugs, utilize a good offense as your best defense. Your landlord attorney can assist you with developing the P (Prevention) and S (Sound Documentation) phases. Your goal should be to use the P, E and S stages to resolve all your bed bug matters – and have help ready to step in should you find yourself in the T stage (Termination).

Quick Tip:

FAQs on security deposits.

Each time we speak to a new group of seminar attendees, the subject of security deposits ultimately surfaces. So, we will use this monthly Quick Tip to relay the answers to the most common questions:

  • NO – You cannot collect the first month’s rent, the last month’s rent, and two (2) month’s security;
  • NO – You cannot keep the security deposit (not just yet anyway) if the tenant simply vacates without returning the keys; and
  • YES – You must provide the former tenant with an itemized list describing the nature and amount of any damages that you withhold from the security deposit – a summary sentence does not fulfill the statute’s accounting requirement.

As discussed in our accompanying article, landlords who fail to comply with the Connecticut security deposit statue face both criminal (jail time) and civil (money) penalties.

As always, contact your landlord attorney if you have any questions regarding the law associated with security deposits – asking your attorney some simple questions now, may help you prevent unnecessary, time-consuming, and costly litigation down the road.

Quick Tip:

Simplify to save your sanity.

Are you one of those landlords that keep a folder full of varying leases, designed around specific tenant situations? If so, don’t make yourself crazy.

Save time and money by eliminating your multiple, varying leases, and replace them with a single base lease that enforces a common set of contractual obligations across all of your rental units.

Once in place, absent a significant reason to do so, changes should be hard thought and infrequent. If you find that a policy adjustment is necessary, simply communicate it to your community through a rule or regulation announcement that complies with the governing statute (so you can enforce it against your tenants), and not via a lease revision.

Stop spending time and money differentiating between your residents. Implement a single lease – you’ll be amazed at how much it simplifies the leasing and lease enforcement processes – as well as saves your sanity.

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.