Archive for the 'Tenants' Category
said on October 22nd, 2008 categorized under: Tenants
1 Comment »
A relatively new landlord contacted me earlier in the week and asked some terrific questions.
In an effort to have the other side of her unit occupied before the first mortgage payment came due, she rented to someone with less than perfect credit. Just five months into the lease, the tenant was already late on one month’s rent. While the gas, phone and electric are in her tenants names, she’s certain they are also behind in some of these bills.
While the tenant has stable employment and worked with her to make amends on the late rent, he’s uncertain how he should approach the potential utility delinquencies. A friend suggested he contact the utility companies to check whether the bills have been paid on time.
What, if anything, can she do?
The answer is, not a lot. Maybe.
According to
Xcel Energy, provided it’s delineated in the lease that the tenant is responsible for the utilities, the landlord is absolved from any obligation to pay these bills. Of all the utilities involved in living in a property, it is only the water bill that follows the property. The rest follow the person whose name they were in.
What’s more, sharing the current status of payments with an unrelated third party is a violation of most utility companies privacy policies.
There is, of course, an exception. If the lease contains a clause stating falling behind in utility payments is a violation, the tenant and property owner may mutually sign a third party notification letter. This letter is then sent to the respective utility companies. In the event the tenant falls behind, it is mailed to the landlord at his service address. If the letter is not pre-signed by both parties, it cannot be sent.
It is important to note that the standard lease available through the
Minnesota Multi-Housing Association does not contain a third party notification clause. It may be worth a short appointment with an attorney to have it and a notification letter drafted.
So what if there’s no letter, it’s the middle of January, and the tenant is so far behind the heat is shut off? Won’t the pipes freeze and burst, causing thousands of dollars in damage?
Not to worry. In Minnesota, which is a cold weather state, if the tenant has filed for the cold weather rule, Xcel will not disconnect any electricity involved in a heating system between October 15 and April 15.
The same holds true for
Centerpoint; again, provided the tenant has applied for the cold weather rule exception. If they have not, Centerpoint will disconnect the gas, but during the winter months will notify the landlord of such with or without a third party notification letter. In the summer months, however, it’s important to note that Centerpoint does require a third party notification letter.
Excellent question!
said on July 18th, 2008 categorized under: Tenants
Comment
One of the biggest challenges landlords face is finding great tenants who not only pay their rent on time, but also take care of your property, communicate with you and are generally respectful.
Most landlords run a credit and criminal background check on any prospective tenant through companies like the locally based ASP Screening. The applicant must give you written permission to gather this information; which can be achieved by using MHA’s standard application.
For a nominal fee, usually about $20, these companies can almost immediately provide you with an individual’s complete credit report and a state by state criminal record. It is common to ask an applicant for this processing fee up front. This accomplishes several things: it proves they are serious, tends to weed people out who know their past is suspect, and reimburses your expense.
While these reports are useful, they often don’t contain invaluable information like evictions? Why? In Minnesota, the court costs of filing an eviction notice, then having it reported to the credit bureaus is hundreds of dollars. As a result, landlords often offer incentives for a delinquent tenant to vacate the property. Carrots they dangle include not reporting the rent delinquency to the credit bureaus, leaving the renter’s record clean and the next property owner they rent from exposed.
In addition to these reports, it’s imperative to call as many of the tenant’s previous landlords as possible, their employer, and any references you can procure outside of family members. After all, no matter how difficult anyone’s son or sister may be, family ties are always stronger than the most airtight of leases.
While all of these efforts are scientific, it’s also a good idea, on occasion, to trust your gut. I had once had an applicant who, while everything checked out, seemed off. I couldn’t put my finger on it, and by law, couldn’t reject him “just because” (or discriminate against him in any way). So I Googled him. Turns out he took a butcher knife to his family in a state I didn’t pull a criminal background check in.
Finally, there’s a new way to screen for all of the things that don’t show up via conventional means. KPIC, a CBS affiliate station in Roseburg, Oregon, recently reported on a new web site where landlords can share all the intangibles on undesirable tenants. For a subscription fee of about $30, DoNotRentTo.com lets you search for reports of an applicant trashing a place, was noisy, or exhibited any other sort of undesirable behavior.
This site also affords you an opportunity to report tenants whose behavior was unacceptable while living in your property.
While this site seems as if it could potentially be libellous, it does require the landlord be able to provide documentation of any incendiary events.
No system is perfect. But these are good places to start.
said on July 7th, 2008 categorized under: Tenants
Comment
One of the most valuable lessons I’ve learned as a landlord is to make sure that the amount I charge for a security or damage deposit is a different amount than the monthly rent. This helps tenants understand that it is, in fact, for something other than the rent.
I can’t even count the number of times tenants have given me proper notice, then not paid the last month’s rent. When I approach them for it, the answer is always the same, “just take it out of my security deposit.”
That would be fine if I knew with certainty that the place will be left clean and in impeccable condition. Most of the time, it’s not. And if I’ve allowed the security deposit to be used in lieu of rent, I’m forced to pay for any repairs for damages caused by the tenant out of pocket. In order to be reimbursed, I then need to pursue the matter in court.
Simply making the amount different than the rent, along with offering a clear explanation that it may not be used for rent, helps prevent this misunderstanding.
Comment
At the start of the decade, vacancy rates for rental units in the Twin Cities hovered near an almost incomprehensible two percent. Demand for places to rent came probably about as close at it could statistically to 100 percent.
As a result, landlords didn’t have to offer very much in the way of perks, upgrades or property improvements. Rent went up every year. And owners could almost do as little as stick a sign in the front yard and have the new tenant move in the front door while the old loaded things out the back.
Times changed. Low interest rates and the boom in housing wreaked havoc on vacancy rates. Qualifying for home loans was comparatively easy. It made more sense for a tenant with a good credit score to buy a property rather than rent. After all, that way he or she could realize the tax benefits and appreciation that come with property ownership.
Needless to say, vacancy rates skyrocketed. While low compared to U.S. markets, the cities of Minneapolis and St Paul spiked to seven and eight percent, while the outer ring suburbs saw double digit numbers in several types of units.
To attract tenants, landlords started offering incentives. If a renter signed a one-year lease, he might get the first month free. Some landlords gave away televisions, free cable, and when all else failed, decreased the amount of rent until someone decided to move in. Rent increases became almost unheard of.
Here’s the good news about today’s down real estate market. Fewer people are buying houses. Some are even losing their houses to foreclosure. Those folks still need places to live. So they rent. Demand goes up, and inevitably, so does rent.
In the tight credit market, it’s also more difficult for people to get loans. Which means there are fewer buyers for rental properties, which means purchase prices are going down.
Translation? In the short term, I’m seeing small multi-family properties on the market with very good cash flows. In the longer term, those properties will appreciate rapidly when the market rebounds. (And c’mon — in all the negative press, name one single pundit who’s said it’s never coming back!)
Seems like the best of all worlds if you’re an investor.
Comment
Once upon a time, well, not that long ago, most of the landlords I knew used a couple of tried and true ways of filling a vacant unit: print ads and yard signs.
In college, I worked part time in the classified ads department of a major metropolitan newspaper. There was no such thing as taking Friday night off, because that was the last opportunity for people to get their Sunday ads in before the deadline. We were there until 9 and the phones never stopped. After all, didn’t everybody consult the Sunday classifieds when the were looking for apartments? Cars? A used drum set?
We’ve all heard how the daily newspapers are struggling to stay afloat. The Internet has become the “go to” place for many of us for news, weather and a calendar of happenings.
I learned this the hard way. That’s where renters are looking too.
For weeks I advertised a unique property in the local paper: to the tune of $100/Sunday (and they wonder why nobody’s advertising). On a good week, I’d get two calls. I spent hundreds of dollars trying to chase down a tenant. Nothing. Not only was I out the ad money, I was out rent too.
Out of desperation, I tried Craig’s List. I had over 30 inquiries in a matter of hours. Close to 100 overall. And it was free. The downside? Fielding all of those e-mails (the property wasn’t right for everyone).
Since then, I’ve spoken with a number of friends and clients who own income property. They’ve all had remarkably similar experiences.
The lesson? Why pay for terrible when free works better?
