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The_Unofficial_Guide_to_Managing_Rental_Property_----_The_Unofficial_Guide_to_Managing_Rental_Property6.pdf
Chapter 10
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G E T T H E S C O O P O N … Obtaining rental forms ■ What to include in
the rental agreement ■ Differentiating between a lease and a month-to-month agreement ■ Including legal clauses and disclosures ■ Protecting yourself by using addendas ■
Managing roommate agreements ■ Knowing when you need a co-signer agreement ■ Determining
whether to allow pets ■ Finding out about federal, state, and local laws and required forms and disclosures ■ Collecting security deposits ■
Calculating and collecting move-in funds ■ Doing a move-in evaluation ■ Understanding the
Service Members Civil Relief Act
Working Out Details with Your Tenants
O ne of the most important things you can do is to have everything — or at least as much as possible — in writing. Most importantly, your
rental agreement and any additional terms should be in writing. It must be signed in advance, prior to anyone moving in, by everyone on the lease to make it 100 percent complete.
The rental agreement spells out in writing just what is expected of both parties. With a strong rental agreement, you will have a much easier time dealing with your tenants. When you educate tenants on what is expected up front, you prevent misunderstandings
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that can later cause hard feelings — and even a trip to small claims court.
Most states do have a law that states you must have a written lease agreement for a period of one year or less. Even if your state doesn’t, written leases are highly recommended because they define everyone’s responsibilities and obligations. A writ- ten lease provides clarification and brings out discussion, if they don’t agree with any of your terms, before move-in.
Finding a good lease You should choose a lease that is professional and has been used for some time. Don’t simply go to the Internet and download a free lease agreement and expect that it has everything you need to cover yourself and the tenant. I have been using the same lease agreement for over 22 years and it has been modified and updated over this time. (Of course when laws change, the lease has to be amended.) However, after you have an agreement that has been reviewed by your attorney, the changes are simple.
Ending a Lease Early Leases are beneficial when dealing with problem tenants, nuisances, and all legal matters. The negative side of hav- ing a lease is that if you have a tenant who is just plain obnoxious or annoying, there is nothing you can do but wait until that lease expires. However, if your tenant is vio- lating the lease or not paying the rent, send letters and document everything. In the same way, if other tenants are complaining, ask those tenants to send you something in writing for your files. (Let them know that any letter they send to you will be kept completely confidential.) You need to document everything to build a case for an evic- tion. Even with letters and documentation, however, it can still be difficult in some states to evict tenants.
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Keep in mind that if you are using a professional lease from a forms company, part of what that company does is to keep up with current laws and continually make changes. I use a com- pany called Professional Publishing (www.profpub.com), and I pay for the ability to use the forms online. You can either down- load a program with all of the forms included or order a single transaction packet for leases or residential sales. You can also complete forms online by using www.TrueFormsonline.com. The company allows you to fill in the blanks, has ongoing updates, and keeps up with the current requirements. You can also obtain rental forms from several other companies. Go to the Internet and search on “rental forms.”
The difference between a lease and a rental agreement There is a difference between a lease and a rental agreement. A rental agreement is the basic agreement between you and your new tenants. A rental agreement can have all the same agree- ments and obligations contained in a lease. However, a rental agreement doesn’t bind the tenants to a specific time period the way a lease does. Rental agreements are generally month-to- month agreements as opposed to a lease, which is a fixed term. In some situations, it may be better to use a rental agreement and have the tenants on a month-to-month residency. This is especially true if you don’t know your plans for the property in the short term.
Perhaps you are considering selling your home. In some instances, like if there is a chance a buyer may want to occupy the
Watch Out!
If a tenant has a lease and not a month-to-month agreement, you cannot raise the rent or make changes to the terms during the lease term. You must wait until the lease term expires. If you plan to raise the rent or make changes, give notice prior to the lease expiration according to the laws in your area.
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property, you would want to consider a month-to-month agree- ment. Similarly, if it is the holiday season and not a great time to rent in your area, you may keep them on a month-to-month
until you are in a better market and can raise the rent. Sometimes, you would just have a six-month lease instead so it will expire in the summer rather than in the holiday season so if they move out it will be easier to rent again. This doesn’t mean you raise the rent or want the tenants to move at
the end of the lease. However, I would let the tenants know that after the six-month lease has expired, you will be planning to provide them an additional one-year lease extension if both par- ties agree.
After you approve your new tenants, it is important to have them come in right away to sign the rental agreement and pay a holding deposit or increase the deposit they may have given to you. This will eliminate the risk that they may change their mind. After the tenants sign the agreement, they are committed to move in or pay the rent until someone else is found. Sometimes there may be weeks between the time the applicants look at the property, you screen and approve them, and the time they move in. It is extremely important to follow through and have them sign, pay, and agree to the terms of your written rental agreement
“ I like to keep all mytenants on a month-to- month agreement so that they don’t feel locked in. If they want a lease, though, I give them a lease. I try to be flexible. ”—Patty F., investor
Moneysaver
By having your new tenant sign the rental agreement and pay a substantial amount of deposit in advance, you can save money and headaches if he changes his mind and decides not to move in after all. By having a signed agreement, you have a commitment.
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and addenda within a few of days of their approval. There is noth- ing worse than taking the property off the market thinking the property is rented, allowing time to go by, and then receiving a phone call saying that your new future tenants have changed their minds and will not be taking the property. You have now lost valuable marketing time and you could lose income if you aren’t able to rent the property to someone else right away.
Drawing up a written agreement A key factor in renting property is your written agreement. What some refer to as a “standard” lease or rental agreement can be found in stationery stores, office supply stores, the real estate section of any bookstore, and sometimes even through the local Board of Realtors. You can search online for forms that have usually been tried and tested. Of course, you can always go to a lawyer and have one drawn up for you, but that will not be inexpensive. After you have looked at several agreements to find the one that fits your property and that you feel comfortable using, you will see after reviewing them they all mainly deal with the same issues and potential problems. Be clear and concise.
The important thing is that you have a lawyer review your legal agreements, especially if they aren’t the standard agree- ments put together by a professional. There are different require- ments in different states and sometimes even in the local areas.
Keep in mind that preprinted agreements contain the mini- mum information required by law. In almost every circumstance, you will need addenda (see the “Addenda” section later in this chapter).
Bright Idea
Some professional property management companies provide a service in which you find the qualified applicant, but the management company processes the applicant, going through the complete screening and drawing up all the nec- essary paperwork so that you’re in compliance with all current federal, state, and local laws and regulations for a one-time fee.
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Agreements should be in plain language as tenants can claim they did not understand what they were signing. In particular, people get confused when you refer to the “lessor,” so at the beginning, use “landlord” and “tenant.” In the same way, if there is an important point or item in your agreement you want to be sure the tenants read and understand, ask them to initial those items.
If your tenants don’t speak the language the lease is written in, ask them to bring an interpreter with them when they come in to sign. Always have the interpreter provide his or her name and phone number in the event there are questions in the future.
Determine what names go on the lease agreement It is important to have a policy as to what names go on the agreement and who is required to sign. I require all adult occu- pants (defined as over the age of 18 in most states) to sign the agreement. It is good to know who all will be in the property, including children. Require all adult occupants to fill out an application and to sign the agreement paperwork — even ones who don’t have a job or any other income. Check with your attorney to make sure what is required in your state.
Make sure the agreement clearly states that each tenant is jointly responsible. Each signatory will be responsible for timely payment of rent and all other provisions of the entire agreement. It is a good idea to ask for the rent to be paid by one person instead of accepting different checks. This helps if you have to evict for non-payment of rent.
Bright Idea
Purchase a stamp that you can use to mark where you want the tenants to initial on the agreement. You can find these at a stationery store, and they are small and inexpensive. Stamp the places you expect them to initial and high- light where you want them to sign in advance.
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If is important for legal purposes to use the tenants full legal names but you can ask the tenants how they wish to be addressed. Some tenants want correspondence addressed to their legal names and some shorten their name or have nicknames or maiden names. You may want to use professional titles for some- one like a physician or dentist.
Make sure to spell all names correctly, checking and double checking for spelling errors, both to keep tenants happy and to make sure documents are legal. Don’t cross out your mistakes on the written agreements, do it right the first time.
Choose a lease term A residential agreement is either a month-to-month rental agree- ment or a term lease for a specific time period. The most com- mon lease periods are six months and one year; however, it could be for any time period, including two years or beyond. I always recommend not going over one year if possible. I like to have control over the choice to renew a lease with my tenants based on my walk-through of the property, the interaction during the term of the lease, the market condition, and my long-term plans.
All agreements need to be clear and state the amount of the rent, security deposit, and the total move-in cost. Make sure to
LandlordSource.com: Products for the Landlord If you’re going to own rental property, you need the right documents for your tenants to sign. I use a great source for tenant documents: LandlordSource.com. This company is a great place to find forms for leases, maintenance instruc- tions, addendas, check-in sheets, and more. These forms come in Microsoft Word and RTF formats, which means you can customize them with any wordprocessing software. Visit the Web site at www.landlordsource.com.
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require a written notice to vacate when the lease is over or even if the tenants are on a month-to-month agreement.
The agreement should identify the property by the legal street address, the city, county, and state. The lease term, if not a month-to-month, should include the start date and end date and the terms for renewal. Always include the monthly rent and the total amount of rent to be collected during the lease term along with where and how the tenants can pay their rent.
Consider a co-signer agreement Oftentimes, you would like to rent to someone who doesn’t qual- ify based on your standards of qualification. Perhaps this person has never rented before and has no references, a new job, and/or bad credit due to a life situation, but everything else looks good. In this case, you can use a co-signer agreement in which someone who is local is willing to sign as a co-signer, knowing that he or she will be responsible if the tenant defaults in any way, including non-payment of rent or damage to your rental property that the security deposit will not cover.
The key is that you meet the co-signer and that he or she is local. However, this may not be possible if you have property around a university or military base, and you may still decide to proceed. You want to have the co-signer complete an applica- tion and provide you with the same information and items you required for the actual applicants. You need to run a credit report and go through the entire screening process as you did with the applicants. Make sure the co-signer has read the rental agreement, agrees to all the terms, and understands that he will
Watch Out!
Don’t let the co-signer sign the actual rental agreement and addenda. You should have the co-signer sign only the co-signer agreement. Make sure the co-signer completes the entire rental application and that you obtain a copy of the co-signer’s photo I.D.
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be held responsible during the entire term of the occupant’s tenancy, including any extension to the rental agreement.
Spell out late charges and bounced-check charges Spell out clearly when the rent is considered late and what the penalties will be. Let tenants know that the rent is due on the first and is late after midnight of the fifth day, if that is what you choose to do. Some people have the rent due on the first and late on the second. It is up to you as to how you want to set that up. Also, if tenants bounce a check, not only is there a bounced-check charge but also it makes their rent late. Usually, you have a late charge in your rental agreement along with a bounced-check charge. I always let tenants know when they complain about the amount of the late fee or the bounced check that it won’t matter if they are never late. Just don’t be late. Be reasonable, because if you have to go to court, you want the judge to view your lease as fair and your late charges and bounced-check charges as reasonable.
Always spell out exactly how many occupants you allow in the rental based on the rental applications you received. Be careful to refer to them as the number of people, not the number of adults and the number of children allowed in your rental property. This could be a viewed as a vio- lation of fair housing or discrimination based on the number of children living in the property (see Chapter 7).
Explain what utilities are (or aren’t) included Spell out what is included in the rent. Sometimes, in a large build- ing, the water and garbage is included in the rent. Sometimes in
“ Late fees aren’t cheapand they’re there to motivate my tenants to pay on time. If they pay on time and don’t bounce the check, the late fees don’t really exist. ”—Patty F., investor
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a single-family home, the pool service or gardener is included. Put those items in writing. Very rarely do I still see the cable for the television included, but some owners do include the water if they want to make sure the lawn is kept watered. Be sure tenants know when and whether snow removal will occur and who pays.
Most owners have the utilities put in their name between tenants for unit turnover and showings. So if the new tenants don’t change the utilities over to their names, you may end up paying some of their bills. Then you have the hassle of calling them and writing a letter to get reimbursed. To avoid this, con- tact the utility companies as soon as your tenant has the keys and let them know to take the bills out of your name. I would go over all this with your tenants while they are signing and let them know you have taken the utilities out of your name and that it is very important they call right away. If you really want to be thorough and not have to worry about it, you could go ahead and make the calls right there while your tenant is sitting with you doing the signing. You can cancel the utilities and hand the phone to your tenant to change them into his or her name right there on the spot.
Provide for pets Many rental properties don’t allow pets and don’t allow pets to be brought on the premises without the owner’s consent. However, if you are in a really soft market or if you have a nice large yard and want to allow a dog or even a cat, you need to state what type of pet and how many you are allowing in your rental agreement. You need to have a separate agreement that
Moneysaver
Give your tenants a list of all the important phone numbers. Especially the utility companies that they need to call to put in their name. You need to let your new tenants know they need to call immediately and put the utilities they are paying for in their name.
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describes the pet and gives the condition for having a pet. (See the pet addendum in Appendix 4).
Remember that birds, fish, miniature goats, and snakes are all considered pets. Decide ahead of time just which pets you are will- ing to allow. Check with your insurance company to see whether any kind of pets would violate your insur- ance. Some companies will not pay liability for certain breeds of aggressive dogs.
Other rules and regulations to include In the event that the rental property is a portion of a building containing more than one unit or has shared common areas, you need to have the tenant sign that he or she agrees to abide by all applicable rules, whether they are adopted before or after the date of the agreement. State that this may include rules with respect to noise, odors, disposal of refuse, animals, parking, and use of common areas. Let tenants know that they will be respon- sible for any penalties, including attorney fees that may be imposed by homeowner’s association for violations by either the tenants or the tenants’ guests. As a part of your rental agreement, have a copy of the association rules and regulations for your new tenants to read and sign. (See a sample in Appendix 4.)
Ordinances and statutes You need to state in your agreement that tenants will comply with all statues, ordinances, and requirements of all municipal, state and federal authorities now in force, or which may later be in force, regarding the use of your rental property. Put in writ- ing that the tenants will not use the premises for any unlawful
“ Some of my best ten-ants have had pets. I find that tenants with pets tend to stay longer than other tenants. Just be sure an increased security deposit covers any potential damage. ”—Will F., investor
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purpose including, but not limited to, using, storing, or selling prohibited drugs. If the premises is located in a rent control area, the tenant should contact the rent and arbitration board for his or her legal rights.
Assignment and subletting You should get in writing that the tenants agree not to assign the agreement or sublet any portion of the rental property without prior written consent of the owner.
This is important to spell out. You may even want to have your tenant initial this paragraph after reading it.
Maintenance, repairs, or alterations A good agreement contains repair-notification requirements and provisions requiring the tenants to obtain permission before installing fixtures or making improvements. It usually states the tenants are required to maintain the rental in clean and sanitary condition and will immediately notify the owner of any damage to the rental or its contents or any inoperable equipment or appliances. Put in your lease that tenants will not paint, paper, or otherwise redecorate or make alterations to the property without the written consent of the owner. If there is a gardener, state what he or she will do, and what day the gardener will be on the premises.
Don’t let tenants do repairs themselves. Sometimes, you will have tenants who are painters or workers in other trades who want to trade their work for a portion of the rent. The problem is that you constantly have to be checking to make sure the work is done correctly. So tell them that the rent stays the same, but that
Watch Out!
It is a good idea to have in your agreement that the owner’s insurance doesn’t cover the tenant’s personal property. You may encourage your tenant to look into obtaining renter’s insurance. Tenants often think the owners insurance covers their belongings if anything should go wrong. Not true.
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when some specific repairs come up, they should notify you, and you can work out something — in writing — for each situation.
Inventory Be sure to list any equipment or personal property that you are leaving on the property. Have the tenants sign the inventory checklist concurrently with the lease. List the number of keys given to the tenants and what they go to, and how many garage door openers they are given as well.
Entry and inspection Put in your agreement that the owner and the owner’s agent have the right to enter the premises at the following times:
■ In case of emergency
■ To make necessary or agreed-upon repairs, decorations, alterations improvements; supply necessary or agreed ser- vices; show the premises to the prospective or actual pur- chasers, lenders, tenants, workers, or contractors
■ When tenant has abandoned or surrendered the premises. A good rule to follow is to give at least 24 hours prior writ- ten notice to tenant, including the date and approximate time and purpose of entry. Be sure to follow the laws in your county and state for notice to enter. Some states don’t have laws covering entry. Other states have very specific laws stating the type of entry and when it can be done.
Remember that the tenant has a right to quiet enjoyment, so refrain from making the agreement so broad that you are going to be entering every week or every month.
Always leave a business card or a note that you were in the property if you entered when no one was there. Be careful of entering if only a minor is present in the unit.
Indemnification Include the following wording: “Owner will not be liable for any damage or injury to tenant or any other person, or to any
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property, occurring on the premises, or in common areas, unless such damage is the legal result of the negligence or willful mis- conduct of the owner or his or her agents or employees.” This is commonly called a hold harmless clause. If the agreement you are using doesn’t have one, your attorney probably already has a canned version you could use. Or, look at other agreements and pull one out of there.
Physical possession Always address what happens if you can’t deliver possession right on time; that is, stating that “if the owner is unable to deliver possession of the premises at the commencement date set forth above, the owner will not be liable for any damage caused, nor will this agreement be void or voidable, but the ten- ant will not be liable for any rent until possession is delivered. Tenant may terminate this agreement if possession is not deliv- ered within ______ days of the commencement of the date stated above.” Three to five days is a reasonable number to put in the blank for the number of days.
Default clause You should have a default clause in there to address the “what if,” such as the tenant failing to pay rent when rent is due or to perform any provision of the agreement after not less than three days written notice of such default given in the manner required by law. Use wording like, “The owners, at their option, may terminate all rights of the tenant, unless tenant, within said time, cures such default.” Make sure you follow your laws regard- ing these types of notices — always.
Security deposit Let the tenants know in the agreement that the deposit will be used to cover any damages they, their pets, or their guests may cause, as well as any late fees or unpaid charges. In some states, you can also deduct for cleaning, changing the locks, and
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preparing the unit for rent. Tenants should be informed that they cannot use their security deposit as last month’s rent.
You need to check with your local ordinances regarding pay- ing interest on the security deposit. Some areas require you to pay interest on a tenant’s security deposit. You also need to check with laws in your state to find out how much time you have before you must return the deposit and an accounting of the money if you deducted any amounts. California requires owners to return the deposit within 21 days of the tenant’s moving out, and to attach copies of all invoices for any charges. In Mississippi, you can charge for cleaning, damages, and unpaid charges and have 45 days to return the deposit. State laws vary a lot.
Holding over This is an important clause that should be in your lease; it doesn’t have to go in a rental agreement, though, that doesn’t state a term. My lease states, “Any holding over after the expira- tion of this agreement, with the consent of the owner, will be a month-to-month tenancy at a monthly rent of $_______ payable in advance and otherwise subject to the term of this agreement, as applicable, until either party terminates the tenancy by giving the other party written notice by law.” I put in the blank “to be determined.” I have seen some landlords fill in an automatic increase so that everyone knows what the rent will be after the first year.
Time Time is of the essence in any agreement, and words to this effect are usually on the agreement, letting all parties know that the clock is ticking. Time is important because if the signed lease agreement doesn’t come back within a day or two, you could end up not renting the property for several weeks.
Attorney’s fees Some rental agreement address attorney’s fees; the agreement I am currently using states that the prevailing party will be entitled
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to receive from the other party a reasonable attorney fee, expert witness fees, and the cost to be determined by the court or arbi- trator. Some states will not allow you to require a tenant to pay for your attorney’s fees.
Fair housing Always address fair housing in your agreement. You read in Chapter 7 how important it is to know your state and federal fair- housing laws and to abide by them. The lease I use states that the “Owner and Tenant understand that the state and federal hous- ing laws prohibit discrimination in the sale, rental, appraisal, financing or advertising of housing on the basis of race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, age, mental or physi- cal disability.” Again, find out what your state requires for fair housing.
Megan’s Law In some states, you must have in writing that a person has the right to go to the local authorities to find out whether there is a registered sex offender within the area in which they will be renting. You as the landlord/owner don’t need to do this, nor would I recommend you do this. In California what you put in your lease would read something like this:
Notice: The California Department of Justice, Sheriff’s Departments, Police Departments serving jurisdictions of 200,000 or more and many other local law enforcement authorities main- tain for public access a data base of the location of persons required to register pursuant to paragraph (1) of the subdivision (a) of Section 290.4 of the Penal Code. The database is updated on a quarterly basis and a source of information about the pres- ence of the individuals in any neighborhood. The Department of Justice also maintains a Sex Offender Identification Line through which inquiries about individuals may be made. This is a 900 tele- phone service. Callers must have specific information about the
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individuals they are checking. Information regarding neighbor- hoods is not available through the ‘900’ telephone service.”
Disclosures required by law The federal government, most states, and some local authorities have disclosures that must be made by law to all tenants. They could be on mold, water quality, munitions, farming, mediation, rent control, and so on. You can go to the Internet, enter a search for “residential rental disclosures.” The larger municipalities will have a section on their Web sites for landlords or tenants that pro- vide the information needed to be disclosed on the agreement.
Addenda Some forms are required by the federal government, the state in which your rental property is located, and sometimes in your local area, too. Be sure to check with your attorney as to what must be included in order to be in compliance with all regula- tory organizations. You want to be sure you are always in com- pliance. The following sections get you started.
Lead-based disclosure Giving out the booklet and having tenants sign the lead-based paint disclosure form is a federal requirement. It is very impor- tant to know if the property was built before 1978. If it was, you must give your tenants the federal booklet and have all of them initial and sign the disclosure agreement. (See the form in Appendix 4.) Just having one person sign doesn’t protect you. The EPA (Environmental Protection Agency) regulates this law and provides a booklet called Protect Your Family From Lead in Your Home. Just go to the EPA Web site, www.epa.gov to order or to download free.
Notice regarding hazardous material This is something that you may consider as an addendum. This states that various materials utilized in the construction of improvements to the property may contain materials that have
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been or may in the future be determined to be toxic, hazardous, or undesirable.
Mold notification addendum Mold has become a huge area of liability for owners. You need to be proactive in making sure you have no mold in your rental; professional companies specialize in testing for mold. It is a good idea to have an addendum addressing mold (see the sam- ple in Appendix 4).
Roommate addendum You should have a detailed roommate addendum that clearly spells out that the tenants are jointly liable. (See an addendum in Appendix 4.)
Pet addendum This is important. If you are going to allow pets at your rental property you need to have a pet addendum. You need to have a description of the type of pet. Sometimes your tenant will have an older dog that is calm and you think will not cause any prob- lems. Perhaps that pet goes to “doggy heaven” and they go out and get a puppy. This is a real problem, as puppies can do a great deal of damage not only in the house, but also in the yard.
If you are in a soft market, allowing pets may just get you a tenant faster, but be prepared with your written addendum. Make sure you get an additional deposit, but don’t call it a pet deposit. Simply add it to the total of the security deposit. For example: If the deposit would normally be one and half times the rent without a pet, you may consider taking two times the rent for deposit if the applicants have a pet. During your reference check,
Bright Idea
Take a photo of the pet at the time of move-in and put it in your files in case you go to the property and there is a different pet there. By taking the photo, you may deter the tenants from getting another animal without telling you.
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ask the current and previous landlords whether the applicants had a pet, if there were any problems during their tenancy or any damage when they moved out, or that the owner may have noticed while at the property.
If the tenants have a dog, require your new tenants to obtain renter’s insurance. The renter’s insurance policy generally will cover if the dog bites someone or does damage. There are sev- eral types of dogs that you should not allow on your property. You can usually get a list of these aggressive breeds from your insurance company.
Some property owners require a copy of the registration papers and list of shots for the animal to ensure that it is healthy.
Authorization for automatic payment from bank account This is a form (see Appendix 4) that allows the rent to be paid automatically on the due date specified. Tenants complete the form and enclose a copy of a voided check. Each month, the rent is automatically put into your rental property account. This makes it so much easier for both you and your tenants, which is why many people are collecting rent this way now. Of course, the tenants must have the funds in their account for this to work. (Usually, the bank will make two attempts, and then notify you that the funds were not available.) You would need to con- tact your tenants immediately and go through the process for non-payment if you do not receive the rent on time.
Keep in mind that it is extremely important to have every- thing in writing, especially for automatic payments.
Watch Out!
If the tenant’s rent check was returned in error, the bank will usually cover the fee and provide the owner or property manager with a letter of proof. If there is no proof, the tenant is responsible for the bounced-check fee and the late fee.
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Other addenda Consider additional addenda, including the following:
■ Deductions to the security deposit, listed in detail
■ Smoke detectors in working condition; it is the tenant’s responsibility to maintain the smoke detectors and replace the batteries. Smoke detectors must be working at all times.
■ Renter’s insurance — require it!
■ Utility changeover, making sure that tenants change all utilities over to their names effective the first date of their tenancy; I recommend that you provide your tenants with a list of all of the phone numbers for all of the utility com- panies and the garbage company if they are required to pay garbage.
■ Vehicle care, including where to park and whether tenants can work on their cars in your parking lot or on your rental property grounds; state that all cars must be opera- ble at all times and the registration must be current. I also don’t allow my tenants to wash their cars at my rental properties.
■ Notice to vacate and/or breaking a lease
■ Move-out procedure
You can see samples in Appendix 4, but always have your attorney review any forms or additional terms and conditions prior to using them.
Meeting your tenant for the signing of all documents After you have approved your tenant and called the tenants to agree on their move-in date, set a date to meet for reviewing and signing the agreement. This should happen relatively quickly (within a couple of days). Usually, when you take the applica- tions and processing fee, you also take a holding deposit. This
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indicates that the applicants are serious and want the rental, providing everything checks out. After you call the applicants and tell them they have been approved, set up your date within just a day or two and cash their holding deposit. Let the appli- cants know that when they come in to sign, you will need an additional holding deposit that will go toward their security deposit and their total move-in costs. At the meeting, be pre- pared with all the copies necessary for them to sign. Have a copy for each person if you aren’t in a business office or a place to make copies. Make sure you mark the original and have marked each place on each copy where you need an initial and or a sig- nature. Be sure you retain the original.
The ideal situation is to have all parties there at one time to sign the documents so that you can explain everything once and ensure that everyone is on the same page. It rarely happens that way, but it is worth a try. Sometimes, you may have to e-mail or fax the agreement to someone, especially if he or she is relocat- ing from a different area.
It is very important to makes sure you take the time to review each page of all of the documents, especially your rental agree- ment. By having the tenants initial in certain places after you have reviewed the items, it helps show that you went over the items and that the tenants read and they agreed at that time.
The security deposit You need to know how and when to collect a security deposit, as this is an important step in managing your rental property. Don’t accept partial security deposits when new tenants are moving in. When it is time for your tenants to move in and you
Watch Out!
Never give the keys to the tenants to move in prior to collecting all signature from all tenants on the agreements and collecting all the move-in money in a cashier’s check or money order. Remember: Keys equal control.
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are ready to give them the keys, you should have the first month’s rent and the security deposit in full. Set this standard at the beginning and stick to it.
Never accept a personal or a post-dated check, and keep to your policies even if the tenant has a long sob story. Don’t make an exception, because it will only get you in trouble. And don’t allow the tenants to make payments on their security deposit. It is very difficult to evict a tenant who did not pay the security deposit in full. Your security deposit is a guarantee. You should collect a large deposit according to your laws and what the market will bear. My standard is to collect one and half times the rent for the security deposit, standard being the key word. When there are any variances to our standards, I look to my state’s legal limit for the security deposit I may collect for an unfurnished rental. Variances that would require two times the rent would be:
■ Tenant has a pet.
■ Tenant that has a waterbed.
■ The application needs a co-signer.
■ Tenant doesn’t quite qualify financially but is very close.
■ Tenant has no landlord references and has never rented before.
■ The tenant has poor credit but everything else checks out perfectly.
■ Tenant has a prior discharged bankruptcy but all else is in place.
■ Tenant is new to this country.
Watch Out!
The funds for the rent due at the time of move in and the full security deposit should always be collected in a cashier’s check or money order. Don’t accept a personal check when the tenants are paying the balance due prior to receiv- ing the keys and moving in.
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A security deposit should be referred to as just that. Don’t complicate things by breaking it down by cleaning deposit, pet deposit, key deposit, and last month’s rent. Keep it all in the same category and label all “security deposit.” The legal limits of what you can collect refer to the entire security deposit, no mat- ter what you call it.
Increasing the deposit You may find yourself buying a property with tenants already in place. Chances are, they may have lived in the property for years and have a very small security deposit. You may also have a ten- ant living in your current rental property who has been there for quite some time. This may mean that you need to be sure to keep up with the security deposit amounts over the years.
As the new owner of the property, you may consider setting up a payment plan to collect the amount of the deposit you want, within your standards and the law. Be sure you also follow your signed rental agreement.
Paying interest on the security deposit Several states and local ordinances have specifics, detailed require- ments regarding what you can and must do with a security deposit after it is collected. Be sure you know the laws and requirements in advance so you know how to handle the deposit.
There is no law that says you can’t pay interest on the security deposit. On the high-end rents, this can be a substantial amount of money. Offering to pay interest can be a positive way of begin- ning your landlord/tenant relationship. It may also give you the competitive edge over other landlords and available units.
Watch Out!
In most states, a non-refundable deposit is illegal. Instead, inform tenants during the lease signing that the security deposit belongs to them. Your goal is not to keep the money, but to receive the property back in the same con- dition in which they received it.
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Last month’s rent For many years, the standard for move-in was to collect the first and last month’s rent, plus a few hundred dollars as a deposit. Over the years, owners and property managers have moved away from this. Tenants often gave notice and because they had the last month’s rent paid, they left the place in horrible condition. The small amount of security deposit remaining would not come close to covering the cost of the damages and cleaning the property when the tenants moved out. Instead, make sure your rental agreement clearly states, “The security deposit is not to be used as last month’s rent.”
Special circumstances for the military The Soldiers’ and Sailors’ Relief Act of 1940 gives certain rights to military personnel in regard to their lease commitments.
There is a lot more than just rental provisions in the Soldiers’ and Sailors Relief Act of 1940, but here are some basics that apply to rentals:
■ A tenant does have the right to terminate a lease upon receiving orders, but normally is required to give a 30-day notice.
■ A tenant and/or his dependents cannot be evicted during this time, unless it can be proven that military service doesn’t affect their ability to pay rent and if the rent doesn’t exceed $1,200.
■ Additionally, there must be a court order to evict a tenant, and a stay can be granted to the tenant. Normal eviction proceedings don’t prevail under these circumstances.
■ This doesn’t excuse the tenants from paying rent, but can give them relief if there is difficulty paying.
■ This act applies to both reservists and active military and can be applied after the lease is negotiated and after orders are received.
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In addition, in 2003, President Bush signed into law the Service Members’ Civil Relief Act, which amended the Soldiers’ and Sailors’ Civil Relief Act of 1940:
■ The type of member covered was expanded to include some non-military citizens.
■ The minimum amount of rent was increased to $2,400 per month.
■ The landlord now cannot subject the property to distress during this time.
■ Protection now extends to dependents as well.
■ Penalties were increased for not adhering to the law.
The best course of action is to support your tenants and work with them to resolve the situation to everyone’s satisfac- tion. Work out a payment plan, if needed, and cancel the lease only when necessary. Only by working together can landlords and tenants make the best of a difficult situation. You can obtain more information on the Soldiers’ and Sailors’ Relief Act of 1940 by searching the Web for “soldiers and sailors relief act.” Doing a similar search, you can find information about the Service Members’ Civil Relief Act.
Calculating and collecting move-in funds After you decide on the move-in date, you need to calculate the total amount due prior to the tenant’s receiving the keys and moving in. If the tenant is moving in on the first day of the month, it is quite simple: You collect the entire rent in advance for that month, plus the security deposit, less any holding deposit you may have collected in advance.
If the tenant moves in during the month, prorate the rent. Take the total rent, divide it by the number of days in the month to obtain the daily rental amount, and then multiply this by the number of days he or she will be in the property for that month.
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Facts about Carbon Monoxide Carbon monoxide (CO) poisoning is often called “the silent killer” because it is a colorless and odorless gas. It comes from incomplete burning of carbon-containing solid, liquid, and gaseous fuels.
Often, it cannot be detected until it is too late. Early symptoms can be nausea, headache, dizziness, and flulike symptoms. However, most of the time, it is not detected at all and death occurs without any noticeable warning. It is one of the leading causes of accidental death in the United States and is one that can be prevented.
Carbon monoxide can stem from faulty fireplaces, water heaters, gas appliances, space heaters, charcoal burning devices inside buildings, running car engines enclosed in a garage, and more.
One way to expose this deadly gas is to install a battery-operated carbon monoxide detector that meets the requirements of the current UL standard 2034 or the requirements of the IAS 6-96 standard and emits an alarm. These plug into an outlet and are relatively inexpensive. When the battery beeps, the occupant should not ignore it.
However, relying on a CO detector is not the solu- tion. Instead, take preventive measures. Make sure the gas dryers and other gas appliances are well ventilated to the outside, check fireplaces for proper operation, advise resi- dents against using charcoal devices or camping equip- ment inside a property or leaving their car running inside a garage, and notify the gas company if you or the tenants detect any indication of a gas smell.
Many states require carbon monoxide detectors for new construction, and there are a few municipalities in some states requiring them in rental properties. As CO-related accidental deaths occur in rental housing, more legislation is expected. Meanwhile, the bottom line is prevention.
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For example: If the rent will be $1,000 per month and the tenant is moving in on the 10th of March, count the 10th and count the number of days in March the tenant is responsible for the rent. In this case, there are 22 days of rent, so take $1,000 divided by 31 days in the month of March, which is $32.26 per day. Multiply this by 22 days. The prorated rent would be $709.67. Charge the ten- ants the prorated rent and collect the balance of the security deposit in full, prior to giving them the keys to move in.
A word about prorating rent. Some states define all monthly charges to be prorated on a 30-day basis. In the example above, the daily rent is $33.33 and the prorated rent would be $733.33.
Keep in mind that whomever holds the keys has the control! As long as you have not given the new tenants the keys, you are still in complete control. Make sure you have all the move-in money in a cashier’s check or money order, and that you have all the signatures you need before giving tenants keys or garage door openers to move in.
Creating a move-in evaluation You and the tenants should fill out a written move-in evaluation prior to the tenants’ moving in. I do the move-in evaluation as the very last thing prior to meeting the tenants and collecting the entire move-in monies in exchange for the keys. When doing the evaluation, make sure to write down all details of the condition of the property and be sure everything is in working order. Check the appliances, turn on all lights, make sure there are working light bulbs, make sure everything is clean, verify that all locks have been changed, be sure the property is ready to move in. Taking pictures is a good idea, and some people even take a video.
I then give the tenants a copy of the move-in condition report along with a blank one and tell them to send back any additions or changes they find within 30 days of their move-in. Otherwise, the move-in evaluation I gave them is the official record that I use at the time they move out.
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Having a written move-in inspection completed in detail along with photos comes in handy if there are any problems when the tenants move out.
Tenant welcome handbook I have a great handbook that I give to all my tenants as a part of their move-in package that reviews and goes over lots of my poli- cies. It includes:
■ Contact information
■ Maintenance guidelines
■ Care and use information
■ Utilities and service directory
■ Local police and fire department phone numbers
You can review the one I use in Appendix 4 and have some- thing similar you give to your tenants upon the exchange of the keys.
Just the facts ■ A rental agreement and addenda should always be in
writing.
■ Don’t write your own lease; use a form.
■ Purchase your rental agreements and lease through a provider that keeps up with the laws.
■ Have your attorney review your lease and addenda.
■ Any adult over 18 most be on the rental agreement and sign and agree to all terms as well.
■ You can choose to have your tenants sign a lease or keep them month to month.
■ Use a month-to-month agreement when you’re unsure of you plans for the future of your rental property.
■ Have the agreement signed within a couple of days of approving the application.
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■ Absolutely don’t let the tenants move items in early unless they pay the deposit and rent and have signed everything.
■ Understand the Service Members’ Civil Relief Act and the Soldiers’ and Sailors’ Civil Relief Act before renting to someone who works for or is a member of any of the armed forces.
■ Be fair when charging late fees and bounced-check charges, but be sure these fees are spelled out in your written rental agreement.
■ If you allow a pet, include a pet addendum and ask for an extra amount for the security deposit.
■ After the co-signer reads the entire rental agreement, he or she should sign only the co-signer agreement.
■ Lead-based paint disclosure is always required on residen- tial properties built prior to 1978.
■ Always collect a cashier’s check or money order for the final move-in money prior to providing the keys to the tenants.
■ Always perform written move-in inspections and consider taking pictures.
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Prandi, M. (2005). The unofficial guide to managing rental property. Retrieved from http://ebookcentral.proquest.com Created from apus on 2020-06-15 15:06:07.
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Prandi, M. (2005). The unofficial guide to managing rental property. Retrieved from http://ebookcentral.proquest.com Created from apus on 2020-06-15 15:06:07.
C op
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5. J
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