The LandLord Advocate Nov 2011

Sadly, in today’s rental world, there are what we refer to as “professional tenants” – the tenants who, when enacting a defense for their noncompliance, often look for situations where it appears that the landlord has violated the law. Once identified, the tenant uses this claim as leverage against the landlord in an attempt to regain possession of the unit or obtain payment of damages caused by their actions. However, landlords who are aware of these “professional tenants” can implement processes to help guard against their attacks.

One simple process we recommend is that landlords keep the envelopes in which tenants send notes, letters, or other correspondence (along with the original correspondence of course) to the tenant’s file in your property management system (if you’re working in a paperless world – scan them). Why? Because while it may sound time-consuming and annoying, retaining a postmarked envelope can provide terrific evidence against a tenant trying to deflect attention from their noncompliant behavior.

Let’s look at an example involving security deposits and their return – while keeping in mind that this rule applies equally to just about any tenant claim or complaint (be it about the premises condition, personal injury or property damage suffered, maintenance requests, or default notices to the landlord, etc.).

A client recently evicted horrible tenants who caused significant damage to the premises. Nonetheless, the tenants insisted to everyone who would listen that they had left the unit pristine, except for a few minor items that they claimed totaled no more than $100.00. Upon inspection, it was found that the actual damages approached $10,000.00, or 100 times the amount the tenant claimed.

As discussed in our August 2011 newsletter article Security deposits – Know how to hold ’em, know how to fold ’em, landlords must account for and/or return the security deposit within thirty (30) days of the end of the tenancy, or fifteen (15) days after the tenant gives the landlord a forwarding address in writing, whichever is later. The tenants, knowing that they stood no chance to recover their security deposit on the merits, sought to create a situation where the landlord failed to account for the security deposit within the statutory deadline, thereby creating a claim by the tenant against the landlord. They started demanding the security deposit while the eviction case was still in process.

We, along with the client, responded to the demands by stating that the landlord would address the security deposit in compliance with state statute, and reminded the tenants of their statutory obligation to provide a written forwarding address. The tenant promised to do so, but did not.

This cycle of the tenant’s demand / the landlord’s (and our office’s) response about the requirement of a written forwarding address and / the tenant’s promise to provide the address, repeated itself several times as the eviction date approached. Yet, no forwarding address ever arrived.

Why? The tenant was trying to set-up the landlord for violation of the 30-day deadline for the security deposit accounting – allowing the tenant the opportunity to threaten the landlord with an action under the governing statute for double damages (see the August 2011 article for more on double damages). Sure enough, almost to the day of the 30-day deadline, the tenant mailed us a written forwarding address – by a letter dated two (2) weeks earlier. By doing so, the tenant was attempting to have the 15-day deadline end before the 30-day deadline, hoping that the landlord would not have sent an accounting by that 30-day deadline.

However, by keeping the envelope along with the tenant’s letter, the landlord was able show that the correspondence was postmarked two (2) weeks after the date on the letter. This then allowed the landlord 15-days from (at least) the postmark date to send the security deposit accounting, which would be more than sufficient to address the tenant’s letter and get the accounting sent.

“Professional tenants” are a reality. Contact your landlord attorney if you have questions or concerns about creating and implementing processes and procedures to help protect yourself and your operations from their tactics.

Quick Tip:

Lease violations – Why YOU may be the cause.

I know. That’s an awfully bold accusation. I surely don’t mean you are explicitly telling residents not to pay the rent or that you are giving them the green light to throw wild parties that disrupt their neighbors. What I’m referring to is how your actions may not only be undermining your efforts to maintain tenant compliance, but may also be sending your residents the message that it’s OK to violate their lease.

Let’s look at the nonpayment of rent as an example. You have a lease that each of your residents signed that clearly spells out your expectations regarding payment of the rent. It tells them how much to pay, when to pay, where and often how to pay. You emphasized your company policy regarding rent payment during that same discussion, being sure to explain your expectations and the fact that they are subject to a financial penalty – the late fee – if it payment is not turned in on time. Now, how is it that someone, anyone, knowing those expectations – along with the potential consequences if they fail to meet them – would ever consider missing a rent payment?

Well, I submit that YOU might be unintentionally influencing their failure to meet those expectations. It’s subtle, but it may be there. Case in point – The simple action of allowing a resident (who may have recently lost their job) to remain in the unit despite not having paid rent in three months, or arranging a payment schedule with a nonpayer who’s claiming a hardship. Both actions send a message to the other residents that you are now ignoring your previous expectations and will work with anyone who misses a rent payment. You’ve set a new precedent that everyone is now expecting to be applied to them.

Your actions need to stay consistent and must reinforce the expectations outlined in that original lease. If on the first, someone misses the rent payment, you send them a late notice. If they don’t pay, you follow up with a phone call or two. And, then, when those efforts fail to produce the rent, you stay late after normal office hours and knock on their door to get the rent.

Your stance should not weaken when faced with a tenant who presents you with only a partial payment of rent. I know what you may be thinking. In fact, I’ve heard it at every seminar we give and frequently hear it when someone is considering becoming part of our firm. “It’s impossible to enforce the rules because you can’t remove someone as long as they are paying.” There is no truth to that statement, but there is some concern. The real truth is that it is harder, requires more work, and will be more time consuming to remove a lease violator for something other than failure to pay the rent. That is true. There is no getting around it. However, not only is it possible, it happens all the time, regardless of how miniscule the violation may seem.

You have a lease for a reason. It contains your expectations from your legal relationship with your residents. If they are not living up to their end of the bargain, they lose their right to the benefit you provide under the lease. Period.

Whether the noncompliance is rooted in the failure to pay rent, or in a behavior that violates the lease – your conduct is the key to the equation. Are you tacitly approving the violating conduct just by “throwing in the towel”, by ignoring it and hoping it will go away? Maybe. The best news is that there is a really simple solution that you have absolute control over. Change your behavior. While your goal is to change theirs, perhaps your best chance of doing so is by changing yours first.

Quick Tip:

In landlording, there’s more to social media than just being “Friends”.

It’s no secret that social media has become a powerful tool in helping to market properties. Many of you have, I’m sure, researched the topic or attended seminars and workshops on the best way to deploy this incredible resource to help keep your units full and your applications flowing. From those I know who are using this asset, I hear incredible experiences with positive results. However, what may often be overlooked is what social media websites may be able to tell you about current and future tenants.

I recently met with a potential client whose experience with social media got me to thinking. Her situation was straight forward – a problem resident started a negative social media campaign against her and her property over unsupported claims on how the property was being managed. Learning of the situation, she, very smartly, joined this social media group and began monitoring the pulse of this resident and the community he was trying to infect. I think her wisdom was brilliant. She proved to me that social media websites provide landlords an inside look into the thinking and attitudes of their tenants that they might otherwise not be privy to.

People use social media for many things, not the least of which is to complain. Luckily for landlords, these complaints are often detailed, specific and publicly available for the viewing. Often, right there for the reading may be extensive information about a potential tenant and the situation surrounding their current or prior landlord. You may be able to glean in just a few clicks why this individual is suddenly looking for a new place to call home. And wouldn’t you be interested to find that there are really five people living in one of your rented units when there are only two listed on the application? Your existing tenant may be disclosing such information for all to read.

While there may be some that consider this practice a form of snooping, it really amounts to nothing more than an expansion of your duties as a landlord or property manager. You are simply looking to verify that the information the applicant provided on their application matches the reality that you uncover. And if you learn of past or current tenant behaviors that may not be conducive to the overall atmosphere of your community – all the better. Why not use every resource at your disposal to not only test the veracity of the information provided on the application, but also hopefully learn of other subtle, nuanced information available on current or potential tenants?

Employers have long reviewed information shared on social media sites to weed out potential “bad seeds”. Why shouldn’t landlords take advantage of the same resources? There’s no question that the practice translates into more work, but adding the extra step may be well worth the effort. You may unearth nuggets of gold that could save you a headache in the future.

Quick Tip:

Accepting – and ensuring you get to keep – late tenant payments.

The old-saying when purchasing real estate is “location, location, location”. Similarly, as landlord attorneys, we often hear from our clients that the key to effective property management is “cash flow, cash flow, cash flow.”

This concentration on cash flow makes perfect sense, as the landlord must not only produce a solid rate of return for the property owner, but must also address the daily financial demands of property management, maintenance, and repair – as well as having something to put aside for long-term capital improvements. Not an easy task.

Nonetheless, our new landlord clients often report that they repeatedly chase tenants for the rent payment, only to then reject the same payment once legal action is initiated. This surprises us, as it undermines this cash flow philosophy. When we delve into the situation further with the client, we learn that the decision resulted from misguided (or simply incorrect) legal advice that they had received from a previous attorney. Usually, it goes something like this: “I was told that I cannot accept any payments after service of the notice to quit.” Not so. However, there are conditions that must first be met.
There are two (2) key actions landlords can take to ensure they collect – and get to keep – every dollar they’re entitled to – whether it’s received before or after legal actions have started:

• First, they can return to the basic goal – full units with compliant tenants paying the rent on time and in full – and ask themselves whether “chasing” the tenant for rent payment is reinforcing the tenant behavior they want (payment of rent) or facilitating the tenant’s bad behavior (tenants learn that rent payment deadlines are unimportant, as the landlord will simply keep following-up for payment). The plan to follow is simple – make sure payment is received when payment is due.
  However, while a good landlord attorney will assist their clients in obtaining compliance and cash flow from the tenants (thus minimizing the need for legal action), there will always be tenants who will not comply or pay the rent – for whatever reason – no matter how well the landlord has designed and implemented its operations. In this situation, landlords need to seek their attorney’s assistance to obtain that compliance and payments through legal action.
• Second, once a matter gets to the situation where it must go “legal”, the landlord should use an attorney whose goal becomes to structure the legal action so that the landlord can take EVERY dollar in payment from the tenant without jeopardizing the landlord’s legal rights – whether to obtain the tenant’s future compliance through a court-enforced stipulated agreement, or evicting the tenant (depending on the client’s goals). This is completely doable – do not let any attorney tell you otherwise.

Another misconception we often hear that effect’s a landlord’s cash flow, is that the court’s notice to quit form must be used to initiate legal action against a tenant. No, it does not, and it absolutely does not protect the landlord’s objectives. Every document involved in a summary process (eviction) action is a legal document (regardless of whether the landlord can create and use the document himself), and can be adjusted and drafted by a good landlord attorney to give the landlord maximum advantage.

While every situation is different, the general rule is that:

1. If you are operating correctly,
2. You are being represented competently, and
3. The tenant owes you money,

you CAN take the payment. However, all three of those criteria must be met. If you have concern as to whether you are meeting any one of these conditions, find out the answer BEFORE you take the money. Failure to do so may force you to either give back the payment and/or spend a lot of your money to address the problem.

Contact your landlord attorney so that you can demand that the tenant show you the money, and once you have it – keep it.

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.