SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Landlord Law

Tenant Abandonment – Part 2

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You think your tenant has abandoned you.  The utilities to their home have been turned off.  You have not heard from your tenant in a few days after repeated tries to contact them.  Plus, you have entered your tenant’s place and nearly everything is gone.  You have followed all of the steps I outlined in my previous post, Tenant Abandonment and you are 99.9 percent sure they have abandoned you.  You are now ready for Part 2.

Which Way To Go?

You now have a choice to make.  Remember that the property is still legally in the tenant’s possession.  You can go one of two ways.  You can either follow the eviction process or you can follow the legal process for abandonment.

Personally, we try our best to avoid the eviction process.  Eviction is costly and takes time.  You can’t even represent yourself if you hold your properties in an LLC as we do.  Sometimes though, as I will discuss, it may be the way to go.  Whichever way you decide to go, get competent advice for your particular location and situation as laws are going to vary from place to place.  Here in Memphis, Tennessee the abandonment process is pretty simple.  It will get you possession your property faster, without going in front of a judge and much of the time, without all of the expense.

The Tenant Abandonment Route

When going the tenant abandonment route, the first thing you have to do is wait a little.  You have to wait until the tenant is 15 days late with their rent payment.  Then, you post a notice stating that you intend to reclaim possession of the property due to abandonment on their front door.  You also send the same notice to their last known address.  What is their last known address?  It is your property.  I know, I know, your tenant is likely to never see it since they are not picking up the mail anymore but you have to go through the motions because that is what the law requires.

This notice must include three items.  One, your (landlord’s) name, address and telephone number where you can be reached.  Two, A statement indicating that you believe the tenant has abandoned the property and that you intend to retake possession within ten days of posting the notice.  Three, if the tenant does not contact you then everything will be removed from the property and the property will be re-rented.

That’s it.  No courts.  No Lawyers.  No legal fees.  Just a little bit of your time, a few sheets of paper and a stamp.

During this 10 day wait period, you should be advertising the property and lining prospective tenants up.  Can you show the property to these perspective tenants?  Perhaps.  We have a clause in our lease allowing us to do this anyway, but I might tread carefully and ask what an attorney in your area thinks.

Regaining Possession

Once you have waited the required 10 days, you can then go in and remove anything the tenant left behind and prepare your property to be re-rented.

Here is where it might get a bit tricky and push your decision towards the eviction route.  Yes, after 10 days you can go in and remove anything the tenant left behind, but you can’t just throw it away or place it on the curb.  You have to store it for thirty days and allow the tenant to recollect the stuff if they return and want it.  The amount of stuff left and your ability to move and store things (we have a little space to do this) will affect which route you decide to take.  Hopefully, your tenant has only left behind a few broken pieces of easily movable furniture and an old box of cereal or two.  Otherwise you may have to hire some folks to move everything, rent a truck and storage space.  After all of that, it may just make more sense to evict and throw the stuff on the curb.

However, leaving lots of stuff behind, at least in our experience, is not typical.   Most of the time, what is left is just junk and I have never found anything of value as they always take the alcohol and the TV.  Whatever is left and whatever you do, it is best to take a video of your abandonment process in case you need to defend your actions later on.

The Sum Up

That is the process to regain possession after tenant abandonment.  It is fairly quick and simple. Every tenant and every situation is different though, you will have to weigh the costs and your time factor in each case.  But the abandonment procedure is often the way to go.

Tenant Abandonment

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Tenants are the lifeblood of the landlording business and proper tenant screening usually goes a long way towards avoiding most tenant problems.  Notice I said most, not all.  No matter what you do, tenants are going to cause you problems some of the time.  One of those problems is tenant abandonment.

What is tenant abandonment?  Its when your tenant voluntarily leaves your property, without telling you, with no intent to return or fulfill the terms of the lease.  Your tenant just up and goes, often in the middle of the night and often leaving a pile of stuff behind.

Why do tenants abandon their homes?  There are many reasons for abandonment and most of them are reasons that neither you nor your screening process could have seen coming.  They may have lost their job and are too embarrassed to face you.  They may have broken up with their girlfriend and become depressed.  They may have fallen off the wagon and gone on a bender.  Whatever the reason, you are faced with a vacant unit, lost rent, a mess to clean up and you need to get the cash flowing again.

What are the steps a smarter landlord should take?

There are many, too many for just one post actually.  So the next few posts will deal with tenant abandonment.  How you as the landlord should determine if your tenant has actually abandoned you.  What the legal steps are that you must take once a tenant has abandoned you.  And finally, some things you can do to prevent abandonment from happening to you.

How do you determine if your tenant has abandoned you?

First, landlords need to understand that tenant abandonment is a legal issue.  This is because your tenant technically still has legal possession of the property.  Thus, there is a legal process that all landlords have to follow to stay out of hot water.  I’m in Tennessee so I’ll be speaking with regard to the rules in my state.  Your state may be similar, but it may not.  So use this post as a general guide and then seek competent legal advice.

Second, you have to verify and document that your tenant has truly abandoned the property.  In other words, make sure they did not just leave in a hurry to go take care of their ailing mother in another state for an extended period of time.  This process may take a little time and investigation.  Begin to keep a written file of everything you suspect.  Document everything!  It could prove extremely helpful later on.

How do you verify that your tenant is truly gone?  It can be harder than you think and you have to be somewhat of a detective to add up the clues.  This is because some people are (or can become) unkempt, unorganized and perhaps having a rough go.  While conditions can point towards abandonment, they may not completely confirm it.  You have to build your case by putting the clues together to legally protect yourself.

What are the clues to tenant abandonment?

One obvious clue is unpaid rent.  If the first of the month comes and an otherwise timely tenant is late, that is a good sign.  Another clue is the inability to contact them.  If they do not respond to your calls, texts and e-mails, they may be gone.  The utility connection is a major clue.  If the utilities have been turned off, or have been placed back in your name (either way you should be notified by the utility company), your tenant has likely left the building.

However, these clues alone do not prove abandonment.  A bit more investigation is required.  It is time for step three, to grab the keys and go to check out the property.

When you get to the property, look for more clues.  An overflowing mailbox is a pretty good clue no one is there to check it.  Piled up newspapers and packages are also part of the story.  Look for the tenant’s vehicle.  As part of your tenant screening and lease signing process you should have gotten the tenant’s vehicle information.  Is the vehicle on the property?  If the property is a multi-unit property, knock on some of the neighbor’s doors and inquire about the tenant.  Even of your tenant sneaks out in the middle of the night, other tenant’s may have seen or heard them leave or perhaps can tell you that they have not seen them in a long time.

Finally, enter your tenant’s apartment

At this point, it is time to enter you tenant’s apartment.  Do not have any reservations about doing this.  You have tried to contact them and they have not responded.  Every sign you look at is telling you there is something wrong.  Hopefully they have just left, but what if they passed away inside?  You have every right to check and make sure your property is secure.  If you can, take a witness with you and better yet, take a video upon entering with your smart phone.  Protect yourself legally.  You do not have possession, document everything!

Upon entering it should be pretty obvious if your tenant has flown the coop.   Is most of the furniture missing?  If there is still furniture, are the valuable items such as the television gone?  Are the clothes gone?  Check the fridge.  Is there any fresh food in it or is it all rotten?  Is there any sign at all that someone has been coming or going?

If it definitely looks as if your suspicions have been confirmed and your tenant has abandoned you, leave everything alone for now.  Make sure the property is secure and will remain so.  Lock up and head back to the office.  It is time to either file for eviction of begin the legal abandonment procedure.  That tenant abandonment procedure is what I will discuss in my next post.  Stay tuned.

Are Your Properties In An LLC? Evicting A Tenant? Read This First

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Many of us landlords hold their rental properties in a Limited Liability Company (LLC). Doing so can make very good business sense as a landlord can separate their business property (rentals) from their personal property (home, cash, stocks, cars, etc). This separation can significantly reduce a landlord’s personal risk if you get sued by a tenant. Plus it can be a great estate planning tool.

How?

An LLC is legally a separate entity from you. You can actually think of your LLC as separate person from you. It has (or it should) have separate bank accounts, separate credit cards, separate loans and even a separate address. The LLC therefore actually owns your rental properties, you do not. You just control and direct the LLC. Thus, if a tenant or anyone else for that matter falls on a property owned by an LLC you control, they can only sue the LLC, not you. This is what is known as the “corporate shield” between you and the LLC (This shield can get pierced if you are not careful, but that is a post for another day).

Unfortunately, even the best landlords with the best screening techniques will have to evict one of their tenants at some point. Tenants sometimes just go bad for reasons beyond your control. If you happen to hold your rental properties in an LLC, you personally cannot represent your LLC in court during the eviction process. You must have a lawyer represent your LLC during the eviction process.

Why?

It is not because it is difficult or complicated to file an eviction or to go in front of a judge.   In fact, with a little coaching, almost anyone can do it. The problem stems from the fact that the LLC is legally a separate entity from you. It is legally another person. So if you file for eviction and go to court to represent “your” LLC, you are technically representing someone else in court. By representing someone else, you are practicing law without a license.

Judges generally do not like folks in their courtrooms practicing law without a license. When they realize that you are, they will throw your case out. That may have been just an honest mistake on your part, but if you thought you were going to save money you were wrong. You are now actually even deeper in the hole because you have lost even more rent. Plus you have lost time. And as they say, time is money.

I know, I know, all of this may seem like splitting hairs and technicalities. Lawyers are also costly and evictions are generally pretty easy to do. But lawyers live for technicalities and this component of the Lawyer Employment Protection Act is just something you have to follow if you hold your properties in an LLC.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Contact Kevin here.

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The Best (or Worst) Landlord Laws?

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I have always said that smarter landlords have to be very familiar with their state and local landlord laws as they can vary widely from place to place. As an example, check out this article about the landlord laws in Arkansas.

It is amazing that someplace just over five miles away can be so radically different from what we deal with here in Tennessee. Give it a read. I think some of you in more restrictive parts of the country will be fascinated.

 

Rent reforms 

Arkansas’s landlord tenant laws work well for honest landlords, too well for slumlords, and they don’t work at all for honest tenants.

By Ellie Wheeler

Arkansas’s landlord tenant laws work well for honest landlords, too well for slumlords, and they don’t work at all for honest tenants. Disputes between landlords and tenants are inevitable, and Arkansas needs laws that capture the worst players on both sides without abandoning good tenants or overburdening good landlords. The goal should be fixing the stark lack of legal balance that heavily favors landlords. Arkansas is the only state where not paying rent on time can land you in jail, and the only state where landlords are not required to uphold basic living standards of their properties.

Read the rest of the article here.

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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Do You Now Have To Rent To Felons?

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HUD recently announced some new guidelines that have been causing quite a stir in the landlording world.   You might think the stir was all caused by the catchy title, “Guidance on Application of Fair Housing Standards to the Use of Criminal Records by Providers of Housing and Real Estate Related Transactions.”  Instead the stir was caused by the misconception that HUD was telling landlords they could no longer discriminate against those with felony convictions. That those with murder, rape or child pornography convictions could no longer be denied housing on that basis alone.

That would certainly cause quite a stir, but it is not the case.

However, these new guidelines from HUD do mean that landlords will have to rethink and retool their rental standards.

Vena Jones-Cox over at regoddess.com did a nice job of explaining the new guidelines and what they mean to us landlords. With permission, I reprint her analysis below.

“So Now I Have to Rent to FELONS?” What the new HUD rule actually says about applicants with criminal records

On April 4th, HUD released a statement entitled “Guidance on Application of Fair Housing Standards to the Use of Criminal Records by Providers of Housing and Real Estate Related Transactions” that immediately set the landlording world abuzz with the news that we could no longer “discriminate” against felons.

Like most incursions by the government into our private property rights, this one spawned a great deal of wrath, and a lot of angry speculation and half-truths regarding what the statement actually “means”.

First, to be clear, this is NOT a new “law”.

It’s what is euphemistically called “guidance” by HUD, which, in this case, is acting as the arbiter and policing force behind fair housing law. So while no actual change to federal law has occurred, we can assume that, going forward, this “guidance” has the force of law, at least insofar as fair housing testing and enforcement is concerned.

In other words, while congress has made no law, and the courts have made no decision in regards to this new policy, it IS one that HUD will use to prosecute housing providers that “break” it.

Second, in order to understand why HUD thinks that whether or not you rent to felons is a discrimination issue AT ALL, it’s important to understand the “Doctrine of Disparate Impact”.

Back in 1968, when the Civil Rights Act defined housing discrimination as the “refusal to sell or rent a dwelling to any person because of his race, color, religion, or national origin” (other categories of “protected classes” were added later in both the Federal and State and Local laws), discrimination was understood to be an intentional, if not overt, act.

It was widely recognized that housing providers, sellers, agents, and lenders who intended to keep members of certain classes out of housing didn’t always just say “No Chinese Allowed”—instead, they engaged in subtle behaviors like “steering” (“I think you’d be happier in this neighborhood over here than in the one you said you wanted”), claiming units were rented when members of one class called but available when others did, and other discriminatory conduct.

What these had in common with more run-of-the-mill “We don’t rent to your kind”  acts was that they were all intentional efforts to keep certain people out of certain neighborhoods or properties based on their membership in a protected class. As such, they clearly fit into the definition of “discrimination”, and thus were violations of the law.

However, as time passed (and both overt and covert real discrimination lessened in the U.S.), fair housing “thinking” began to evolve to include the idea that even completely unintentional acts, if the effects of those acts served to limit the housing choices of protected classes, could be discriminatory, illegal, and punishable by law.

One of the early situations to which the disparate impact doctrine was applied was in occupancy limits. Landlords who created policies that limited the number of people allowed in a unit—for instance, “I won’t rent my 2 bedroom apartment to more than 3 people”, were accused of discriminating against families with children because, obviously, such families would be more impacted by such a policy than families without children

The fact that the reason behind these policies has to do with the economics of owning rentals (more occupants use more utilities and do more damage) does not stop them, under the Doctrine of Disparate Impact, from being illegal.

While the idea that you can be prosecuted for unknowingly and unintentionally discriminating might seem dangerous and unfair, the Supreme Court did uphold it in a 2015 decision, saying that the Civil Rights Act does govern any and all policies that create “artificial, arbitrary, and unnecessary barriers” to housing based on “statistical disparities”.

So what has disparate impact and statistical disparities got to do with felons?

Please read the rest here.

My Tenant Said What?!?

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Can what your current tenants say to potential tenants cause trouble? You bet it can. In this recent news story from New York one of an apartment owner’s tenants (who was also his son-in-law) answered the door for a prospective tenant. Upon seeing that his potential future neighbor was pregnant he allegedly said “no babies” and shut the door.   That is a big no no as familial status is a protected class. Landlords cannot discriminate against children, even unborn ones.

The landlord was fined $5,000, but appealed. The NY Supreme Court eventually reversed the fine because it stated that the son-in-law was not acting under the authority of the landlord. Apparently he was just stating his own opinion and had no part in the tenant screening and approval process.

If you ask me, this landlord was lucky to get out of the fine, but I’m sure his lawyer was not cheap and the stress was not pleasant either. I hope he gave his son-in-law a slap upside his head.

So, what can you as a landlord do to avoid such a situation? One, do not let tenants act under your authority. Just asking a tenant to “show this apartment” because you do not have time could be asking for trouble. You never know what they might say or do. Two, emphasize in your literature, on your website and to all of your tenants that you do not discriminate against the protected classes. Hopefully the word will sink in.

But what if there is a chance encounter with an existing tenant who says something stupid? What then? Unfortunately it could lead to a lawsuit as anyone can sue anyone else in this country. However, it seems that the courts will side with you if your tenant was acting alone. Proving that however may be a bit expensive and time consuming.

After the Fire: Leases and Tenants

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I have been writing about a major fire I recently had at one of my properties. I wrote about the initial shock and finding out the day after that my property was a complete loss and in need of a complete rehab. Most thoughts that next day were focused on getting the property rebuilt and up and running again. But there were tenants that had to be dealt with, and the fire had raised some interesting legal issues.

We had of course signed leases with our tenants. These leases ran for one year. One of the units in the burned tri-plex had just moved out at the end of her lease. There other two were however somewhere in the middle of their leases. They technically still had possession of their units. What where their rights? What where mine? Surly they would move, but what if they did not? Would I have to go through the eviction process to get them out?

Fortunately, the Tennessee Landlord Tenant Act contains a provision for just such an event. Tennessee Code Annotated Section 66-28-517 states in part:

66-28-517.  Termination by landlord for violence or threats to health, safety, or welfare of persons or property.

  (a) A landlord may terminate a rental agreement within three (3) days from the date written notice is received by the tenant if the tenant or any other person on the premises with the tenant’s consent:

(1) Willfully or intentionally commits a violent act;

(2) Behaves in a manner which constitutes or threatens to be a real and present danger to the health, safety or welfare of the life or property of other tenants or persons on the premises; or

(3) Creates a hazardous or unsanitary condition on the property that affects the health, safety or welfare or the life or property of other tenants or persons on the premises.

Since one of my tenants, by throwing a lit cigarette in the trash, had created a “hazardous or unsanitary condition” on the property, I could terminate the leases by posting a written notice, which I did immediately.

That does not mean I went in and started throwing things out. Some tact was required here, after all, some of the tenants were a bit shell shocked and needed to go through and see what they could save. But I was also firm. The place was literally a wreck, dangerous and getting more dangerous every day. They had to move quickly to get what they wanted. Anything they did not want they were free to leave.

Hopefully you will never have to go through such a situation, but if you do be sure you understand your rights and your tenant’s rights. I would bet most state laws have similar provisions to cover similar situations. Check them out and get to know them.

 

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Can A Landlord Make A Tenant Move For Any Reason?

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Non-payment of rent is just one of many reasons a landlord may want their tenant to move out. Perhaps they want to upgrade the property.   Perhaps they want to sell the property. Or perhaps they just do not like the tenant and the drama they bring to your business. So, if you fall into one of these categories, can you as a landlord make a tenant to move for any reason at all, whatever it might be? It’s a good question, one that you should know the answer to. However, like with all questions related to being a landlord, the answer is not very simple.

In a nutshell, the answer is “it depends”. It depends on two items.

First and foremost it depends on the lease you signed with your tenant. A lease is a contract and usually has a specified time period as one of its clauses. Many times that time period is for one year but it can be anything, such as a day, a week, a month or a decade. If you have a year lease with a tenant, you cannot make that tenant move out before the end of that year unless they are breaking the terms of the lease. Not paying rent is the best example of breaking terms.

But suppose you want to upgrade the property and would prefer the units be vacant, can you make them move out before their lease is up? No, you cannot. You really cannot make the tenant leave if they are fulfilling the terms of the lease before one year is up. But once that year is over, then you can ask them to move, and they have to.

With a shorter tem lease, say one that is a month to month term, landlords of course have a lot more flexibility. The lease basically expires at the end of every month, so a landlord can choose not to renew, effectively forcing their tenant to move.

The second item to answer the question is your state and local laws. Here in Memphis Tennessee you can pretty much just tell the tenant that you are not renewing the lease at the end of its term. You do not have to give any reason. This is effect in the same thing as asking them to move for any reason at all. But not all state and local laws are as generous as those here in Tennessee. Some states are much more restrictive and some cities, such as New York with rent control, can make things really difficult. So you need to know and understand what your rights as a landlord are in your local jurisdiction.

So, can you make your tenant move? Yes, but it will depend on the term of your lease, where you are in that term and what your local laws are. Can you make your tenant move at anytime you want for whatever reason you want? No. Your tenant will have had to break a major clause of your lease before you can force them out. And then it is generally only with a court order.

Filling Out A 1099? Get A W-9 First

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It’s a new year. And while a new year can bring many good things, it also brings thoughts of something looming right around the corner, April 15 and income taxes. I despise taxes as much as the next person. But I despise even more all of the paperwork that goes along with them. Unfortunately, if you are going to be a landlord, you are not going to be able to avoid some of this paper work, especially if you hire folks to perform various services for you.

You see, the IRS has basically made us their enforcers. Anyone that we pay over $600 to in a calendar year has to be provided a 1099 (with some exceptions for corporations). That means your yard guy, the lady that cleans your apartments, the plumber, your electrician all have to be provided a 1099 with a copy sent to the IRS.

I have written about 1099 forms before, so I will not go into that again. But when you go to fill out those 1099’s, especially if it is the first time you have to do it, you may realize that you do not have all of the information you need. Because the 1099 form not only requires you to report the amount you paid someone, but you also have to report their name, address and social security or tax ID number. Where do you get that information?

You get it by using a W-9 form. The W-9 form is called the “Request for Tax Payer Identification Number and Certification” form and can easily be downloaded from the IRS website here. The W-9 form is a very important form to get completed by anyone (with some exceptions of course) who does work for you. The W-9 form requires a service provider to give you all of the information you need to properly fill out and send a 1099 form.

I require anyone that I have hire to do work for me complete a W-9 form before any work even gets started. In fact, it is usually a part of our contract signing process (You do use contracts with you contractors right?). In this way, I am assured I have the information I need so I do not run afoul of the IRS. Once you have this form, keep it on file, FOREVER. Why? Well, you really never know if the information you have been provided is correct or if they are committing tax fraud. If they are committing tax fraud, you can show the IRS the information you were provided and then you will usually be in the clear. But if you do not have a properly filed out form on file, your troubles may escalate.

What if someone refuses to fill out a W-9? Well, I usually will not hire them. But you can hire them if you want to. When it comes to paying them however you have to withhold 30% of the amount they are to be paid and send it in to the IRS. Much like an employer does with a portion of an employee’s paycheck. It will them be up to the person you hired to get that 30% as a tax refund if it is due to them. What about the W-9? You can simply write refused on it and file it away. But personally, I would stay away from such folks. No need to be on the IRS’ radar screen anymore than you already are.

Remember, I am not a CPA, I am just a landlord with some experience. Please ask your own professional advisers for tax advice.