Duplex Chick

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If you owned residential income property in the state of Minnesota in 2011, consider this a friendly reminder that your CRP (Certificate of Rent Paid) must be issued no later than January 31, 2012.

A CRP is a form that helps tenants get a tax refund because they essentially helped pay your property tax for the year.

A CRP must be completed even if you sold a duplex, or purchased one during 2011. Each owner must issue a separate CRP to tenants for the time they owned the property.

Roommate CRPs are to be divided according to the the amount each individual paid.

Remember, if you forget to issue a CRP, you may be assessed a $100 penalty for each instance. In other words, if you have four tenants in your duplex, all of whom are unmarried, you could face $400 in fines.

I’ve made it easy for you. To get the forms, just click here.

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Earlier this month, Minnesota Gov. Tim Pawlenty (R) signed a bill into law which has commonly been called the “Tenant Bill of Rights”.

Highlights of the bill include:

Cap On Late Fees- As of January 1, 2011, late fees can not exceed 8 percent of rent.

Receipt For Rent – As of August 1, 2010, if tenants pay their rent with cash, they must be given a receipt. Tenants who use money orders may use those receipts as proof of rent paid unless the landlord can provide proof it wasn’t.

Screening Fees: Starting August 1, 2020, landlords must use a consistent process to screen prospective tenants and inform those applicants of the process they use.

A duplex owner must now tell the applicant what criteria they consider. She must also process applications in the order they were received, and if she rejects someone for reasons other than those they provided, return the application fee.

Security Deposits  – After August 1, 2010, a landlord who doesn’t return the right amount of a security deposit in bad faith can be penalized up to $500. The previous cap was $200.

Tenants Living In Foreclosures – In August, both state and federal law will allow for tenants living in foreclosed property to stay through the term of their lease, or 90 days after the redemption period ends, whichever is longer.

For a complete text of the bill and its changes, click here: HF2668.

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If I asked you to describe a bedroom to me, chances are that early on, you’d include the word “closet”.

For most of us, a closet is a necessity in a bedroom. After all, where would we hide the mess when company’s coming over if we didn’t have one.

So if you see a duplex or single family home with a room that doesn’t have one, it can’t be a bedroom. Right?

Not in the city of Minneapolis.

In fact, the word closet isn’t even mentioned in the city’s requirements for a bedroom.

Minneapolis bedrooms are required to have a door and at least one escape window. The window has to be at least 20″ wide and 24″ tall, with a net overall clear opening of 5.7 feet.  What’s more, the bottom sill can’t be more than 44 ” above the floor.

Of course, you can’t cover the window with anything that would keep someone from escaping during an emergency, like grilles or grates, unless they have approved release latches.

If the bedroom is below ground level, the window needs to have a window well. If the well is more than 44″ deep, it’s also  required to have a permanent ladder.

Bedrooms must also provide the equivalent of at least 8 percent of the floor area in window glass. For example, if you have a room that’s 200 square feet in size, you would need window glass totalling at least 16 square feet.

According to the city of Minneapolis, bedrooms must also have a minimum ceiling height of 7 feet, and be no less than 70 square feet in size.

Since this is Minnesota, it goes without saying that the city also demands a bedroom feature a heat source capable of keeping the room at a minimum temperature of 69 degrees.

The city clearly cares about the health and well-being of its residents.

But it could care less what they do with their clothes.

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It’s often said that blood is thicker than water.

With that in mind, I often have two family members express an interest in buying a duplex together. Each intends to live in one of the units.

Sometimes the buyers are a grown child and a parent who winters in warmer climates.

Sometimes the buyers are siblings.

In one case I even encountered a former husband and wife who saw a duplex as a way to co-parent their children, but continue on with their respective lives.

Sharing a multifamily property can be a workable solution for some people. And while family may well look out for each other’s interests more reliably than friends or acquaintances, it’s important to remember life circumstances can change.

And that’s why deciding how your going to take ownership at closing is so very important.

There are two ways a pair of buyers can take title; either as joint tenants or tenants in common.

Read the rest of this entry »

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One of my buyers cheated on me last week.

He called another agent about a property the agent had listed.

After he told me he’d see only me!

It could cause me not to get paid.

See, in real estate there’s something called “procuring cause”.  And it belongs to the agent who caused the buyer to purchase the duplex.

If my client called and asked me to help him see or write an offer on the property, I could have to split my commission with the listing agent. Why? Because that Realtor could argue that he was the one who was responsible for the purchase; having provided my client with the information that caused him to write an offer.

The same could be true if you asked another agent to show you a property, walked through an open house and spoke with the agent, or even called on a newspaper ad.

It doesn’t matter how long I’ve been working with that buyer, how many duplexes I’ve shown him, nothing. And I’d have to split my check because of that one phone call.

Of course, I do practice safe real estate and have a Exclusive Right to Represent Buyer contract in place. However, even that may not protect me entirely.

So my buyer and I had a talk; one in which I reminded him to always disclose to other agent that he’s working with another Realtor.

As part of our understanding, he can’t ask another agent to show him a property, call listing agents for information, and must always tell open house agents he’s working with me.

He understood. And since he’s a good guy, I forgave him.

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What one thing do you have to do after closing on your new duplex or rental property that you don’t have to do when you buy your own house?

Get a license.

Whether you’re owner occuping your duplex or intend to operate it as an investment, many cities require you to have a rental license.

What does that take?

Rules vary according to municipalities. In Minneapolis, however, a new rental property owner must fill out an application, as well as provide the city with a copy of either the Minneapolis Truth & Housing Certificate of Approval or Buyer Certificate of Completion.

If the property is owned by an LLC, partnership or corporation, articles of incorporation are also required. New owners must also attach proof of ownership, which is generally covered by a HUD Statement, copy of a Certificate of Real Estate Value or Bill of Sale.

The fee, at least in Minneapolis, is $65 for the first unit, and $19 for each additional unit. This covers licensing from September 1 to August 31 of the following year.

And if you don’t get a license? Fines can run north of $500, and tenants can file a rent escrow case, where rental income is escrowed until the situation is resolved. Tenants may not, however, withhold rent simply because you don’t have a license.

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Is there ever a reason you don’t need a rental license in the city of Minneapolis? For any kind of house?

What if you’re selling your Minneapolis duplex, do you need one? After all, you’re almost done with the property, right?  How about if you live there?

The answer is yes. To all of the above.

As long as there are tenants, the city of Minneapolis requires any type of  rental dwelling to have a license; whether it’s a single family home, duplex, apartment or rooming house, regardless of or whether or not it’s for sale.

And yes, if the duplex is owner occupied, it too needs to be licensed.

The rental license application fee is $84. The fine for not having a license is $500.

What if you buy a Minneapolis duplex?

Provided the property has been a licensed rental property in the past, your license application fee is the same $84.

As of June 8, 2009, however, the city doesn’t stop there. When the property changes ownership, you are required to pay a $450 “change of ownership inspection fee”.  A truth in sale of housing report doesn’t count, nor does the independent inspection you paid for prior to purchasing it. The city wants to look at it again to make sure it’s in compliance.

What if you’ve decided to rent out your house instead of selling it? Well, as it’s never been a rental property before, the city requires not only the $84 application fee, but an additional $1000 for inspections.

Are you surprised? After all, these are the folks that require us to license dogs.

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Sometimes government rules and regulations just don’t make sense.

Take, for example, the city of Minneapolis’ rule on the number of unrelated people who can occupy a rental unit.

If a property has a zoning designation of R 1-3 (residential 1- 3 units), a maximum of three unrelated people can live in each of the units.

The number of bedrooms or amount of square footage in each is irrelevant. In other words, if you own a duplex with a five bedroom unit, you can only have three unrelated people living in it.

If the multi-family property is zoned R 4-6, however, you can have up to five unrelated people in each unit; even if there’s only one bedroom in each apartment.

Of course, if the other people occupying a unit are related by blood, marriage, or adoption, an R 1-3 property can house the family plus two unrelated people.

In a R 4-6 zoned multi-family building, a family can have up to four unrelated people living with them; again, regardless of the number of bedrooms in the apartment.

What happens if the city discovers there are more residents than allowed in a duplex? The landlord can lose his rental license.

So if you have a Minneapolis duplex, say, by the U of M or in Uptown with a couple of four bedroom units, how can you make sure you’re in compliance?

Get your tenants to marry or adopt each other.

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Working with a Realtor is a lot like dating.

But with a contract.

And without those perks.

Once you’ve reached a certain point in your relationship with your agent, she may ask you to sign what’s known as a Buyer Representation agreement. There are many types of representation, but most often, she’ll ask you to sign a document that gives her the exclusive right to represent you.

If you think about it, this document makes sense. Agents work long and hard to find the right properties for our buyers.  And once we do, we want to have the legal assurance we’ll be paid for our efforts. After all, we don’t get paid a thing; not a salary, not mileage, not base pay…nothing, until you buy your duplex.

So it makes sense that you should be committed to your agent. And, your monogamous relationship with that agent is considered so sacred you may even walk into an open house and have other Realtors ask whether you’ve signed a buyer representation agreement.

Why do they ask? Because the state of Minnesota says if you have, they’re not allowed to talk with you in any way that could be perceived as a violation of that pact. This law is so thorough that even if you’ve successfully negotiated a purchase agreement, but have yet to close, you aren’t allowed to speak with the agent representing the seller unless it’s through your Realtor.

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The Minneapolis Star Tribune reported last week that the city of Minneapolis has changed the rules for “relative homesteading”.

Relative homesteading is when an individual owns a second home, and allows a relative to live there, rent free. This helped the property owner qualify for owner-occupied property tax status, and, until now, avoid paying a $65 rental license fee and the avoid the required city inspections for rental property.

A 2008 change in state law requires a property to be registered with the city if the owner receives any kind of compensation for allowing occupancy of any part of the property.

Compensation does not have to be in the form of rent. It may be as simple as the relative living there maintaining the property in lieu of rent.

As a result of the new statute, the City of Minneapolis’ Inspections Department decided to require all single-family relative homesteaded properties to get licensed. This was done with a goal of increasing the safety of these properties through inspections.

The new rule doesn’t apply to small multi-family properties like duplexes and triplexes.