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Finding the win-win with third-party management companies.

Lead Article:

enant locking you out? When can you legally enter after they say “NO”?

Connecticut law says that tenants cannot unreasonably withhold consent to a landlord entering the unit (for inspection, repairs, maintenance, etc.) after receiving reasonable notice of the landlord’s intent to enter, except in an emergency. So, can a landlord enter if the tenant is present at the appointed date and time and refuses consent even after the landlord gave appropriate notice for a non-emergency situation? No.

A housing mediator shared with me recently that he is continuing to see these kinds of cases, which often include the police arresting the landlord and the tenant suing the landlord for damages in a civil lawsuit. Under one of the governing civil statutes, the tenant will get at least one (1) month’s rent and attorney’s fees from the court in such a case.

Sound unfair? Not really, because the law provides landlords with powerful rights in this situation to:

  1. demand the judge’s immediate attention, as in the judge must stop everything and address the landlord’s claim;
  2. obtain a court order compelling the tenant to give access, or the court will deem the lease terminated and evict the tenant; and
  3. make the tenant pay the landlord’s damages and attorney’s fees for the experience.

We have several clients who have taken advantage of these statutory rights, to the immediate detriment of the tenants involved and a clarion bell sounding for other tenants in the community about the seriousness of a landlord’s reasonable notice of intent to enter the unit.

Accordingly, rather than enter, we recommend that landlords simply smile, walk away, and call your landlord attorney when the tenant unreasonably refuses consent to enter after you have given notice – the tenant has given you a gift that will keep on giving. See our June 2009 article, “Landlord’s a-knockin’ but he can’t come in” for more details.

How about an emergency situation? Here, Connecticut law says clearly that a landlord may enter without the tenant’s consent and, if necessary, at non-reasonable times (for example, late at night or early in the morning). Nonetheless, landlords still face the risks described above when entering without the tenant’s consent, because it may become a debate over whether there was in fact an emergency, and debates mean increased risk, expense, and uncertainty for the landlord. Remember, anyone (i.e. tenants) can sue another (i.e. landlords) for anything – the question is not whether the court will hear the case (it will), but whether the tenant will win or lose.

In this situation, we recommend that landlords not let the tenant call the police and/or fire departments on you – you call the police or fire department on the tenant. If there is a true emergency, there will be a need for one or both to respond.

On the police side, the tenant who intentionally or recklessly damages the landlord’s property has committed a crime, which (depending on the monetary loss involved) can range from a misdemeanor to a felony, and the police can and will arrest the tenant on the spot. Fire department personnel are generally even less forgiving with people interfering with their ability to handle or address something falling within their purview.

Regardless of what caused the emergency, the tenant is responsible for anything that happens after the landlord shows-up and is unable to address the problem, as the tenant refused to permit the landlord access. These damages can include contractor fees, staff regular (or overtime) pay, the need for (and potential cost of) the police and/or fire department’s involvement, and attorney’s fees, to name a few.

Landlords should remember that they are taxpayers (often, significantly so) of the towns and cities in which they own and lease property, and should never hesitate to contact the emergency responders for assistance when faced with an obstructive tenant. Landlords will also experience the welcome benefits of a written record of the events when the police and/or fire departments are involved, which your landlord attorney will find particularly helpful in addressing the situation further with the tenant (as desired by the landlord).


Finding the win-win with third-party management companies.

Property owners often hire third-party managers to reduce their workload and help make their properties more profitable. The experience and expertise third-party management companies can bring to the property has allowed many individuals to become owners without the need for late-night emergency phone calls or chasing the rent down from tenants. Of course, this experience and expertise comes with a cost. However, if you find the right management company, it is well worth the price.

One challenge owners and third-party managers face today is that tough economic times call for lean operating budgets. Cash flow headaches require larger doses of medicine when they are surrounded by financial challenges from outside sources. Thus, it is very important for owners and third-party management companies to investigate each other and do their homework before sitting down to discuss their future business relationship. By doing the legwork at the beginning, both parties can work together to find the win-win that benefits all involved.

Your plan, once you get together, should be focused on getting a complete, thorough, and meticulous understanding of your relationship as it will go forward. It should include walking the property, talking policies, and getting your mutual understanding captured in writing. With these three things in place, your future together will start on a great note. Let’s talk more about each of them.

  • Walk the property, completely. While you may already do that, make sure you do it together with pen in hand. Discuss the things each of you see on the property, your perspective on the attention each might need, and the expectations you each have of addressing the situation in a particular timeframe. The manager may have some thoughts on how immediate resolution will benefit the property’s curb appeal that may convince the owner to invest in the situation immediately. The owner may want to ensure the situation is promptly reconciled in order to defer the likelihood of immediate, large-scale, capital improvements. One thing is for sure. Owners and third-party management companies are likely to have differing opinions on the issue. Sharing them now and coming to an agreement on how to proceed will prevent the possibility of conflict between the two parties who most need to be on the same page in order for the property to make money.
  • Talk about policies, thoroughly. Owners and managers look at the property from differing angles. Owners may be influenced most by the return on their investment as they consider their on-site policies. Managers might be focusing on risk management and diversion. These valuable perspectives, when comingled, can offer some solid operational guidance for the property and its management. If the management company has recently conducted fair housing training for its personnel, the owner can reap the benefits of this information during policy reviews and implementation. An owner returning from a national multi-family conference can help implement new rent collection strategies that they find appealing. Again, the diversity of information between the owner and manager is a valuable resource for making the property successful.
  • Get everything in writing, meticulously. While your lease may be the most important contract you prepare, the management agreement is a close second. All of the expectations owners have of management, and that management has of the owners, should be spelled out in the management agreement. You’ve done all of this homework together, you’ve crafted and cobbled your perspectives into a working model that you both believe will create a profit. Now is the time to make sure all of that hard work wasn’t for naught. Make sure the win-win arrangement you have so painstakingly formulated doesn’t get toppled by a generic third-party management agreement that ignores all of your efforts.

Both the management company and the owner have a huge investment and stake in this relationship. Protect yourselves and protect that investment in your sophisticated management agreement. In the end, you will all reap the reward of your complete, thorough, and meticulous win-win design.


Ensuring consistency through the use of SOPs.

As Dr. Seuss might say,

“Do you have a SOP?
Should you have a SOP?
Do you have one in a book?
I don’t know. I’ll have to look.
I do not have a SOP, I say.
I guess I need one right away.”

And they say you learned everything you need to know in kindergarten. I say it was preschool.

SOP stands for Standard Operating Procedure. Well, at least that’s what we called it in the Navy “way back when”. In fact, SOP, (pronounced aloud as S-O-P), was probably the dirtiest three letter word I ever heard in the Navy. It was decades of testing, training, experimenting, succeeding – and sometimes failing – all wrapped up into a giant set of manuals that explained how to do almost anything that needed to be done. And, I mean almost anything. But, one thing was for sure. There was no question what to do or how to do it when you ran into a problem. Everything from preventative maintenance to firing a shipboard weapon was spelled out in painstaking detail and it was up to the highly trained sailors to implement those procedures timely and accurately every time duty called.

Do you have a SOP? Is it written down? Does it cover your entire operation, including how to order soap for the management office bathrooms? Is everyone involved in your property familiar with its contents, its location, and your expectation that it is followed, religiously? Do you have a SOP for changing your SOPs?

If your answer to any of these questions is no, please read on. If you answered yes to all of them, read on anyway. You might change your answer once you finish reading.

Here’s a short list of the topics you want to make sure your SOP covers:

  • Tenant application standards
  • Eligibility criteria
  • Prospect communications guidelines
  • Lease execution and review
  • Rent collection
  • Fair Housing accommodations and modifications
  • Lease Renewals
  • Work orders and maintenance
  • Rules enforcement
  • Tenant complaints and suggestions

I am sure there are many more. The point here, though, is that each one of these elements of your busy management day should be handled consistently by everyone in your office, consistently with everyone who interacts with your office. This will allow you to develop the most effective means to handle a given situation, and can help you avoid creating liability issues you didn’t even know existed (more on that subject later in this article).
Consistent operating procedures will allow you and management to evaluate effectiveness. You can keep track of how well things work when they are handled in accordance with procedure and use this information to make improvements in the operation of your office. Trained personnel can experiment with alternative procedures and compare the results to your standard procedure. This will provide invaluable feedback on how your operations are working. The key, though, is having a standard procedure to begin with. Without the baseline against which to compare your variables, you won’t really know what changes you made gave you the desired outcome.
If you don’t know how many times you routinely ask a resident for the rent before it gets paid, you won’t know whether the “extra” phone call or the letter you sent this time got their attention. If you receive a compliment on your prompt response to a maintenance request but don’t know how that particular one was handled, you can’t replicate the procedure to make your entire community equally happy.
As mentioned above, SOPs can also help you avoid liabilities that are lurking under the surface of everything you do. Any of you who have had fair housing training know that the risk of receiving a discrimination complaint grows as each day goes by. One of the most common elements in these complaints is how someone was treated differently than everyone else. When that happens, the “victim” tenant will claim that the reason they received such disparate treatment was an illegal one for which you are responsible. While you and I know that such a claim is preposterous, without a SOP to show that the “victim” was in fact treated the same as all other residents, the investigator of such a claim will assume the “victim’s” story is legitimate and hold you liable. It may not sound fair, but it is a reality. Generally, fair housing requires you to treat everyone the same. If you don’t know what that same treatment looks like, you are setting yourself up for a possible disaster.
Don’t be intimidated by the above list or the even longer one you may come up with. You are 90{b3839be935df112798d4ec5997aa1a27aa9a9725854b075bcbd0000f0c7f06fc} done with your SOP, you just haven’t thought about it that way. First, get your daily routines on paper. Then move on to those things that you encounter on a weekly basis, monthly basis, and so on. Lastly, tackle those items you see only once in a blue moon. Develop the SOP as you handle each of these situations so you can be sure your capture of the procedure is contemporaneous to your performance of it. This will give you a real-time picture of how you operate so that when it is time to evaluate your operation, you know you are starting with accurate information.
In no time, you will have a SOP for all you do. And, when you encounter a new situation, incorporating that into your existing SOP will already be part of your standard operating procedure.


The importance of establishing the policy before the procedures to enact it.

We often see landlord and property management clients who have moved directly to procedures without establishing the policy first, or have allowed the procedures to overwhelm the policy and changed it in fact and practice, if not in theory. Of course, landlords and property managers run businesses, not theory, and fact and practice govern the results.
These concepts recently became clearer to me as the member of the leadership council of a local nonprofit organization. We faced the question: What is our fire alarm response plan?
We had experienced a fire alarm the previous week, which was an unsettling and uncommon event, particularly because it occurred when lots of families and children were in the building. We were lucky – a young child had pulled one of the fire alarm boxes (she did not know any better), so no harm occurred to people or the building and its contents. However, we learned that no one vacated the building despite the alarm, and the alarm company called the organization first (not the fire department) to determine whether it was a false alarm, even though there had no previous alarms (whether drill, false, or real) in well over a year. Ultimately, the fire department never heard about the alarm.
Many of us shuddered at the thought of what the school teachers of our youth would say about our blatant disregard of their repetitive instruction to “always evacuate” when the fire alarm sounded, not to mention what the fire marshal might say if he learned about the situation. We recalled the building’s history, which includes two (2) fires that completely destroyed the building each time, and decided to make sure that we were better prepared the next time the alarm rang.
We formed a small, informal subgroup to meet, discuss, and develop a fire alarm response plan, which I joined. After the first meeting, we agreed that the interim policy would be: “Everyone will calmly evacuate the building if the fire alarm sounds, period – it does not matter why or how the fire alarm sounded.” We announced this policy to the organization.
We are now in the midst of drafting the processes to effectuate that policy, and we reviewed a 10-page draft procedures document at our last meeting, thanks to the hard work of some dedicated group members. Interestingly, over several pages, these procedures detailed how we would respond to an alarm – and not immediately evacuate everyone – on the premise that we need to determine if it is a false alarm first.
The people involved in the subgroup are smart, thoughtful, and caring. They were not trying to undermine the policy; rather, they were thinking about “all the possibilities” and the “grey areas” that surround every policy.
Our subgroup is a solid bunch, where we welcome and thoughtfully consider disagreement and debate. We decided to step-back and reevaluate our commitment to the policy as originally defined, even though we had already spent considerable time addressing the procedural details, when one member expressed concern that the policy was getting lost in the procedures.
After intense discussion, we agreed the original policy statement was correct and primary, not secondary, to the procedures that we were generating. We promptly deleted much of the procedures document as unnecessary, particularly the parts about checking first for a false alarm before evacuating the building.
Take a moment and reflect on your application, tenant screening, security deposit, rent collection, inspection, tenant insurance, tenant-to-tenant dispute, and problem tenant processes. Have you established the policy first or the procedures, or – if you did establish the policy first – have you allowed the procedures (as they have evolved over time) to undermine the policy itself?
Contact your landlord attorney if you need an outside perspective – they see the net results of your business operations on a daily basis, and can give you an unbiased review.


Quick Tip:

Don’t kill the “stip” judgment by offering a renewal lease.

We often tell clients and landlords in our seminars to never use the phrases “lease renewal,” “rent demand,” or “late rent notice” when dealing with a tenant who is under a court-ordered stipulated judgment (“stip”) following a summary process (eviction) case. Why? Because the tenant is not on a lease or paying rent when under a stipulated judgment – instead, the tenant is using and occupying the unit under the judgment and is paying “use and occupancy.”

A thoughtful client recently asked how to deal with tenants on a reinstatement stip, which means that the lease would come back into force if the tenant successfully completed the stip. In this situation, the stip ran through the 11th month of the tenants’ original one-year lease term, and the soon-to-be-reinstated lease required a 60-day notice to vacate from the tenant, or the tenant would have to sign a new one-year lease or pay a higher monthly rent for a month-to-month lease.

In the normal course, the landlord would send a lease renewal offer letter to the tenant outlining:

  • the one-year lease rent amount,
  • the month-to-month amount,
  • and the 60-day notice requirement

well in advance of the lease expiration date (and the 60-day notice deadline). If the landlord did that with a stip in place, would it kill the stip and underlying court case?

Yes, but the landlord was not stuck with either keeping and enforcing the stip through its conclusion, or sending the lease renewal letter.

As a client, they had the immediate advantage of the Landlord Law Firm’s practice of incorporating the lease terms and conditions into all stips with tenants. Moreover, by giving us a chance to address this situation in advance, we were able to provide our client with language that they could send out before the end of the stip to accomplish their dual objectives of retaining the ability to enforce the stip, and get the tenants the appropriate notice of the upcoming soon-to-be-reinstated lease term.

Remember, as we discussed in our July 2009 newsletter article “Attorneys as Business Advisors – It’s not just about the eviction,” the law exists to facilitate your business, not run it.
Contact your landlord lawyer when faced with a perceived no-win situation to find the path to accomplishing all of your business objectives.


Quick Tip:

Implementing immediate lease modifications.

Our second quick tip this month comes directly from a reader’s inquiry. Our reader wanted to know how to implement a lease modification immediately. Being faced with a particularly difficult tenant situation, he wanted to ensure that after handling his urgent need, he was protected from similar challenges with his remaining tenants.

Landlords can always modify their lease and implement the change immediately, if your tenant agrees to the lease modification. Without the tenant’s consent, your lease modification cannot go into effect until your lease renewal period. Your modified lease would then become your standard lease that you would expect the tenant to execute upon renewal. You may still face the challenges of tenants who will not sign the modified lease and automatically renewing leases, to name a couple.

You may consider handling such changes to your operations in the context of your rules and regulations. This can be a very effective and useful tool for your operation. However, using rules changes can get tricky and you should consult your landlord attorney before you pursue this course of action.

The bottom line is, you cannot modify an existing lease without the tenant’s consent. Take a look at “Don’t let your tenants “off the hook” when implementing a new lease” from our November 2009 issue of The Landlord Advocate. This may also help.


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.