SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Evictions and Abandonment

What Is A No Fault Eviction?

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The term “No Fault Eviction” has become a rather hot term in the headlines lately. Teachers in San Francisco want protection from them. Across the Country in Boston tenant groups are asking the city to stop landlords from using them.

But what is a “No Fault Eviction?”

How do they work?

And why are people suddenly getting so upset about them?

A so called “No Fault Eviction” is an eviction where the tenant is evicted through no fault of their own. They paid their rent on time. They followed the rules. However, the landlord has decided at the end of the tenant’s lease term that he no longer wishes to rent to that tenant. He has chosen not to renew the lease or let it run on perhaps on a month to month term.

If the landlord chooses not to renew the lease, he will ask the tenant to vacate the property. Usually this is done by letter at least a month or more before the landlord wants to retake possession of the property. However this time frame could vary depending on state and local laws or the terms of the lease.

Most of the time, the tenant chooses to leave and find a new place to live. But sometimes they do not. They want to stay despite the landlord’s wishes. If that happens, the landlord is them forced to evict the tenant.

Not really a “No Fault” to me. The tenant has violated the landlord’s property rights by not leaving when legally asked to do so. The landlord owns the building, the terms of the lease are up and the landlord should be able to retake possession of the building.

So why are people so upset about this?

It is because of the recent rapid rise in rents.

Rents have been going up all over the country in recent years. Landlords are thus often able to raise the rents at their properties. In some areas, quite significantly, as much as 400%! That simply is too good of a story for some media outlets to pass up.

Incomes have not caught up yet. Thus many renters feel that they will have to leave their longtime neighborhoods. Or worse, might not be able to afford new housing. A concern for sure.

While the recent rent increases have many causes, many choose to blame the landlords and have been petitioning local authorities to enact laws to prohibit or restrict “No Fault Evictions.”

No one likes to go through an eviction. It is just not a pleasant experience for either side. I try to avoid them almost any way I can. Thankfully in my experience, most tenants have agreed to move when I asked them to. Then again, we have not had the significant price increases here in Memphis either.

But what have you experienced in your part of the world? Are your tenants refusing rent increases or refusing to move? Please let me know with your comments.

 

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When Tenants Overstay Their Lease

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Tenants move.  It’s just a fact of a landlord’s life.  As much as we might like them to stay (well most of them), they rarely do.

When they move, vacancies become a major concern.  The cashflow stops but the bills remain.  So, getting the unit re-rented as quickly as possible becomes a priority.

The best case scenario is to have a tenant move out one day and another move in immediately the next day.  Think about how great that is.  It is almost perfect as there will be little if any interrupted cash flow.  We have had the good fortune to have this happen a few times over the years.

But wait a minute.  No matter how well you might think you have things lined up, Murphy and his darned law is always right around the corner.  Things can go wrong and can go wrong pretty quickly.  The movers might be a day late to move your tenant out.  A new job may be eliminated meaning the tenant no longer wants to move.   A car can break down and a whole host of other things can go wrong.  Other times the tenant just does not get it together and actually move out.

What happens then?  What happens if you have scheduled someone to move in the next day?  Things can get sticky real quick.

Imagine for a moment that you are your new tenant.  You are moving from out of state and have all of your belongings in a truck, a truck that has to be returned the next day.  You have scheduled movers, utility connections, satellite TV installation.  Are you supposed to rearrange all of this?  Are you supposed to sleep in the truck?  What about all of the added expenses, not to mention the aggravation.

Your new tenant is going to be looking right at you for answers.  After all, you are the one breaking a contract by not having a place for them to live.  They will want to be reimbursed and accommodated for their hassle.  They will have a strong case and they know it.

Here is what to do.

First, try to leave a day or so wiggle room from move out to move in.  A loss of one day’s cash flow is not that bad and it may just give you the time you need for when Murphy shows up and starts making things go wrong.

Secondly, place a clause in your lease that charges the tenant $100 per day for any time they (or their stuff) stays in the property past their move out date.  In this way you are somewhat protected if you incur expenses due to someone not moving when they said they would.  Plus it really provides incentive for them to get out when they said they would.

The key is to be very clear about this provision when they move in.  Let them know you will charge it.  Get that motivation started the first day they move in.

Finally, apply the pressure to your old tenant.  Let them know they cannot stay and keep on them.  You may have to literally push them out the door.

Honestly, this scenario is hardly ever a problem, but it can and has come up.  So be a smarter landlord and be prepared for it.

 

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What To Do With A Financially Struggling Tenant

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Have you noticed the rising prices lately?  I have.  Gas, food, just about everything seems to be getting more and more expensive.  Rents have been following this trend, and while that may be good for us landlords, it is not so good for many tenants out there.

I have a feeling many tenants are getting squeezed more and more.  Not only do they have to pay increased costs for housing, food and fuel, think about those student loans and other debt burdens many of them have.  While we can debate the causes and solutions to all of these issues, the fact remains than a lot of people are living paycheck to paycheck and barely scraping by.

Tenants can therefore find themselves between a rock and a hard place.  Their paychecks are just not going as far as they used to and this past winter was brutally cold in many areas causing higher utility bills.  One step back, say a broken down car or an illness which causes lost work, can cause tenants to have to make tough choices.  Should they fix the car, keep the heat on or pay the rent?

Let’s be honest here about this situation, paying the rent is likely to be dropped down the list after getting the car fixed and keeping the heat on.  On the one hand they have to get to work to earn the money to pay the bills so the car will get fixed first.  On the other hand you as the landlord also have bills to pay.  There is nothing I can say to the bank for example that will allow me to delay my mortgage payment.  So what should you do with a financially struggling tenant?

To answer that question, we have to back up a bit first.  We have to go back to your lease signing and move in process.  Hopefully at that time you set up a decent landlord/tenant relationship.  You were firm but fair in noting when the rent is due and what the consequences would be regarding missed or late payments.  Hopefully you also encouraged your tenants to discuss any future concerns or issues with you.  You told them not to stick their head in the sand if they ran into trouble, but to communicate with you about the situation.

So let’s assume they are communicating with you, then what?

Be Nice – Being a jerk is not going to help the situation.  Your goal is to ultimately get what is owed in the easiest way possible.  It is much easier to do that at this point with kindness and understanding.  You can reiterate your policies and concerns, but do it in a non-confrontational manner.

Determine the Nature of The Problem – Is the problem a onetime occurrence?  Will the tenant be able to catch up rather quickly?  Or have they lost their job with no immediate prospects.  The nature of the problem should determine your next steps.

Move Quickly and Decisively – Once the nature of the problem has been determined, you need to move quickly to resolve it.  If you think the tenant can get things worked out, perhaps setting up a payment plan is the way to go.  At least get a verbal commitment, better yet get it in writing through an e-mail.  Hopefully the issue is now resolved.

Move the Tenant Towards Action – If it appears the tenant is in a bad position with no end in sight; your best bet is to begin to cut your losses.  After all, you are not going to get blood from a stone so to speak.  Discuss with the tenant how they are going to resolve the situation.  Ask the tenant if they have somewhere else to go.  Ask if they can get a loan from their parents, friends or church.  The point here is to get them thinking of alternatives with the understanding that they are not going to be allowed to stay without paying rent.

Let Them Go – If their situation is truly bad, your chance of getting paid is tiny.  If the tenant can quickly find someplace to go, let them out of the lease.  Again your goal now is to cut your losses and get you property back and cash flowing again as quickly as possible

If They Will Not Leave – Perhaps offering some cash for keys will be the motivation they need.  Many times these folks are simply out of cash and cannot even afford a moving truck.  Why not rent the truck for them?  Why not give them a couple of hundred bucks to go?  It is much cheaper than going to court and much less adversarial as well.  If they take your offer, be sure to get a signed release to the rights of possession.

Still Won’t Go? Then Set a Deadline – Sometimes no matter what you do, the tenant will just stay in denial and decide not to decide.  This tenant will need the ultimate push, a firm deadline after which you will file for eviction.  Sometimes, the tenant will leave right before or after the eviction is filed.

If You Have To, Evict – I hate to do it.  It is an absolute last resort for me as it is expensive, messy and confrontational.  But sometimes there is just no other way.  However, we have rarely had to use this route, as the steps I have outlined above will usually resolve things.

Unless there is a drastic change in the economy in the near future, I expect everyone to keep getting squeezed more and more (including me).  I would bet therefore that dealing with financially struggling tenants is going to become a bigger part of the landlording business.

Cash for Keys

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Tenant screening is one of the most important things that a landlord can do.  You want to make sure that you selected people to live in your properties that can pay, will pay, will pay on time and will not tear up the place and cause trouble.  However, no matter how well you screen your tenants, every once in a while you will have a tenant that cannot pay.

Perhaps the tenant lost their job, or had some other unfortunate circumstance happen.  Whatever the reason, when you have a non-paying tenant you want to get them moved out and a good paying tenant moved in as soon as possible.  It is not that you are a mean person, but you have to eat as well and the bank really does not care that the tenant has stopped paying you, the mortgage payment is still due.

The first thing that most people think of when they have a non-paying tenant is the eviction process.  Yes, you can go that route, but it can be expensive, time consuming and just downright nasty.  It creates ill feelings on both sides.  Plus, crafty lawyers will be sending your tenants advertisements telling them how they can stop that eviction with a bankruptcy (and they can for several months!)

Rather than eviction, I prefer to use the cash for keys method.  What is cash for keys?  It is simple really.  You pay the tenant to move out and hand you the keys.

Why would anyone do that?  Shouldn’t the tenant be paying you the back rent?  After all, they owe you money.  Yes, that is correct, but by the time they get to the point where they cannot pay the rent they have likely exhausted their resources.  They may want to move, but do not have the money to do so.

So it seems to me that it is better to pay them a little bit of money, maybe even as little as $50 or even as much as $300 to get them to move their stuff out and give you the keys.  By using the cash for keys process you have control of the incentives.  You can even get the tenant to clean the place before they leave so they can get their money.  Evictions use the threat of the courts and we all know cash today is much more effective than the threat of a judge sometime down the road.

Plus, when using the eviction process you are going to have to pay a lawyer.  How much will that cost?  $300, $400?  Did you figure in the filing fees, process server fees, writ fees and set out crew fees as well?  Now which one makes more sense?

I know it can be hard to swallow giving money to someone who may owe you a substantial sum.  But the best thing for everyone is for the tenant to move on and for you to get possession of your property back so you can get it re-rented as quickly as possible.

One last thing, before you had them the cash for their keys, be sure to get them to sign a release to the rights of possession.  Otherwise you could be in for more headaches down the road.