What Can a Homeowner Do About a Problem Tenant?

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What can you do with a problem tenant

The more time you spend in property management or rental ownership, the more experience you have with nightmare tenants. We don’t come across them frequently, but they are definitely out there. I’ve noticed an up-tick in conversation about bad renters, and quickly realized that there is a lot of misinformation out there. Let me help set the record straight for you: Legally, what can you do with a problem tenant?

First and foremost, your best bet is to avoid a bad tenant from the start. This means you need to screen. Check the prospective tenant’s criminal and credit background and contact all of their previous landlords directly. Sometimes, there are things that don’t show up on reports that you need to know. The more information you have, the more protected you will be.

Once you’ve found the right tenant, the next step to remaining protected is to have an air-tight lease. When the terms are clearly laid out and signed by both parties, there are fewer loop holes and gray areas. For example, your lease must include a “right of re-entry” or eviction clause in order to evict a tenant for a material breach of a lease, with the exception of statutory violations and not paying rent. This is something that will come in handy if you encounter a problem tenant. Even then, the process is long and convoluted.

Once the lease agreement is signed, it’s important to let your renter know you’re serious about the terms you both agreed to. Be strict with the rules. It may feel counter-intuitive to behave this way, but if you let a lot of little things slide, that opens the door up for bigger problems down the line. You should also charge lease violation and late rent fees consistently to help deter renters from making late payments or bending or breaking the rules.

Even with an extravagant amount of precautions being taken, you could still wind up with a bad renter. If that’s the case, you have a few options. If you have a month-to-month lease, you can give them a written 60-day notice to vacate. This is definitely the easiest option, but could result in 60 more days of non-payment or continued disruption of other tenants or destruction of property. Often, the problem tenant is locked into a 6 month or a year-long lease. If this is the case, your best option is eviction.

The Minnesota Housing Association says the following reasons are acceptable for filing an eviction action in the State of Minnesota. If you’re curious to learn more, you can read all tenant/landlord related legal guidelines in Minnesota Statute 504B. It can be found online at revisor.mn.gov.

1. Failure to pay rent. The tenant may redeem the tenancy at any time before possession of the premises has been delivered to the landlord by paying past due rent, costs of the eviction action, including the court filing fee, and other requirements under the lease.

2. Lease violations. The lease must contain a “right of re-entry” or eviction clause for the landlord to evict a tenant for a material breach of a lease, except for nonpayment of rent and statutory violations. This clause gives the landlord a right to evict the tenant for violating lease provisions like disturbing other residents, causing damage to property, unauthorized persons living on the property, or unauthorized pets. To be clear, this is the most difficult reason for eviction because it requires proof that isn’t always readily available. In the event the tenant sues you, it’s likely they’ll win for this kind of eviction because Minnesota is known to be a tenant friendly state.

3. Illegal activities prohibited by Minnesota Statute (504B). A landlord may evict a tenant, or assign the right to the county or city attorney, if the tenant engages in or permits activities named in the statute, such as:

  • unlawful controlled substances in the premises or common area
  • unlawful use or possession of a firearm
  • stolen property in the premises or common area
  • prostitution
  • criminal gang activity

This kind of violation also requires proof to warrant an eviction.

4. Holdover tenant. A holdover tenant is one whose lease has expired or where proper notice to vacate has been given, but the tenant remains in the rental unit without the landlord’s consent.

Eviction is a complicated process, but is unfortunately sometimes the only option available. For this reason, we offer a monthly Eviction Protection Plan to our clients — we handle the whole process and take on the responsibility. If you’re interested in learning more about this optional service, call me at 952-831-5300

Photo credi: Flickr.com

Ethics in Property Management: What You Need to Know

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business ethics property management

If you’ve been following the news this last week, you may have noticed that the property management industry has been getting some less than flattering coverage. Unfortunately, in a burgeoning industry, when one company behaves unethically it can tarnish the reputation and perception of the industry as a whole. Luckily, cases of bad business practices aren’t entirely common among property management companies.

As a consumer, it can be hard to decipher which companies are acting in your best interests, or strictly in their own. However, it is endlessly important to ensure that the property management company you choose to work with not only abides by legal standards, but high ethical and moral standards as well. It comes down to the idea that just because you can do something, doesn’t mean you should. There are several reasons why this rings true across industries and relationships, the risks of associating yourself with unethical or unreliable vendors or organizations are very real.

Guilt by Association

When you choose to do business with a company, especially when it comes to property management where the company represents you as the homeowner, it’s important to ensure that their organizational values align with your own. In business, as in real life, guilt by association is a real thing. Working with a property management company with questionable business practices is a lot like washing a brand new red shirt with your white socks. The red from the shirt bleeds all over the white socks, changing the way they appear to others. In this instance, low ethical standards are the red dye. You could potentially tarnish your reputation if you employ a management company that isn’t exactly on the up-and-up.

Financial Risks

Your home is one of the biggest investments you’ll make in your life. As with anything that you spend a considerable amount of emotional and financial resources on, you shouldn’t hand it over to a company you can’t trust. Even if they offer guarantees and assurances, chances are unless they abide by a strong ethical code, they’ll find a way to legally get around it in the interest of making more profit. Be sure to do your homework when choosing a property management company to work with, evaluate their claims and do some background research.

Additionally, hidden fees and up-front charges are often the hallmark of questionable business practices. When you’re working with a service-based company, it doesn’t make much sense to pay them up-front with the promise of continued dedication to your property. If all the money from the transaction is made up-front, where’s the incentive to truly care for your investment?

Safety, Protection, and Trust

When a business only holds themselves accountable to their interpretation of legal standards without showing much concern for the ethical implications of their actions, it’s ultimately the consumer who suffers. A huge part of doing business with another person or company is the element of trust. Companies that don’t have strict ethical standards simply aren’t trustworthy.

For the most part, laws are put into place for the protection of the consumer. However, laws are often up for interpretation. There are also some things that are technically legal but truly unethical. Working with a property management company that dedicates itself to the best interests of their clients is absolutely essential — there is a lot at stake on the part of the homeowner.

At Simply Residential Property Management, we dedicate our time to providing the best service we can to our clients, while representing them and their best interests. Integrity is a key pillar in the foundation of our organization and we take pride in the fact that we work well within legal and ethical standards. If you want to learn more about the way Simply operates, or you want to hear more about the services we provide, I’m here to help! Send me an email and let’s chat: amanda@simplyres.com.

The Facts About Security Deposits

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In the nearly ten years I’ve been in the property management business, I’ve helped my clients circumvent the myriad of lawsuits that seem to stem from one simple location — the security deposit. Of all the litigation that could possibly arise from the landlord/tenant relationship, this single factor has caused the most grief for the former. The argument mostly comes down to what is considered normal wear and tear, and what is considered excessive damage. Who is responsible for these damages? Luckily, we have the experience to protect the best interests of our clients. Here’s what we do to ensure that your investment, and your reputation, remain in good condition.

As a rule, property owners are responsible for normal wear and tear. This means that as a landlord, you may not use your tenant’s security deposit to perform routine maintenance or repair damage related to normal use. For example, if it’s your policy to paint or clean carpets between each move-out and move-in, that can’t be taken out of the renter’s’ security deposit. The trick with this language is that it’s fairly open for interpretation — just like there’s no baseline ‘normal’ standard for most things in life. A good metric is to consider whether the damage was caused intentionally or through reckless behavior, or if it’s simply from normal use of high-traffic areas. For example, small nicks and chips in paint on the wall, small holes from nails and pins, loose grouting and bathroom tiles, faded or thin carpet from foot traffic, or sun-faded curtains or lampshades are considered normal wear and tear. These things would have happened no matter what tenant was in your home, to a certain extent.

Alternatively, tenants are responsible for excessive damage. This damage is typically caused by abuse or negligence. In these cases, it’s perfectly acceptable to withhold some or all of the tenant’s security deposit to reasonably cover the cost of repairs. A few examples of excessive damage include large holes in the walls, broken windows, removed or missing fixtures, water damage on the walls from hanging plants, doors removed from hinges, or appliances malfunctioning from improper use. While much of this may seem like common sense, I’ve learned through experience to not take chances when it comes to ensuring that your property is protected.

Minnesota happens to be a tenant-friendly state as far as the courts are concerned, so it’s important to be extra vigilant. Especially with the language written in the state statute:

“The landlord may withhold from the deposit only amounts reasonably necessary:

  • (1) to remedy tenant defaults in the payment of rent or of other funds due to the landlord pursuant to an agreement; or
  • (2) to restore the premises to their condition at the commencement of the tenancy, ordinary wear and tear excepted.
    • (c) In any action concerning the deposit, the burden of proving, by a fair preponderance of the evidence, the reason for withholding all or any portion of the deposit shall be on the landlord.”

For this reason, your best friend will always be ample evidence of the condition of your property. The burden of proof is on the owner. That’s why I always advise our new clients, or current clients bringing us new properties, to take photos independently of the condition of their property before anyone else has the chance to touch it. Of course, we always take photos of the property before any tenants move in, sometimes even upwards of 100. That’s also the time when we do a walk-through before the tenants move in. We have a thorough, room by room, floor to ceiling checklist that allows us to document the condition of your property in its entirety, and the tenant signs off on it. We repeat that same process when the tenants move out. This way, the risk of a lawsuit or complaint is mitigated. Even in the event charges are brought about, you’ll have enough documentation to make a strong case, including documentation that the tenant was present and agreed with the damages listed in the walk-through process. Additionally, doing walk-throughs with the tenant sometimes helps add a level of accountability that can dissuade them from doing something irresponsible and potentially damaging to your property.

Since protecting the best interests of our clients is our number one priority, we offer quarterly furnace filter changes and property walk-throughs, so we can help identify any potential lease violations or maintenance concerns before they become irreparable. Prevention, in our opinion, is always better than avoidable and expensive repairs. If you want to hear more about this optional service, contact us today at 952-893-9900!

[Image credit: Tax Credits]

3 Key Benefits of a Property Management Contract

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property management contract

As consumers, we’re used to seeing ‘no contract’ as a benefit. Many of us even have our own horror stories about service contracts we’ve signed in the past — whether that’s for cell phone service, massage or beauty services, joining a gym, or simply getting water delivered to your office. Believe it or not, there are certainly still situations in which a contract is not only helpful, but necessary. It’s important to think critically about this concept when you’re making purchasing decisions — the first question you need to ask yourself is who is truly benefiting from the lack of contract, the consumer or the vendor?

When it comes to big purchases and big decisions, especially in the case of investments, you should take every precaution to ensure you’re protected. Your home is arguably one of the most important investments you’ll make, and it’s always in your best interest to protect that investment as well as you can. If you decide to work with a property management company and don’t sign a management contract, how can you really know that they’ll live up to your expectations and fulfill their duties and commitments? Before you make that decision, I want to tell you about three key benefits of entering into a contact with your property management company.

Protection

There’s a strange phenomenon between some property management companies that operate in Minnesota where they charge rental property owners the first month’s rent when they begin managing a new property as a placement fee. That’s not typical for the industry. Without a contract, especially if you’re paying up-front fees, what’s the company’s incentive to truly take care of your property? If you don’t sign a mutual agreement, you’re unprotected and so is your investment. Just like any big decision you make, especially one that relies on the promise of future services, it’s good business to get it in writing. You can hold your service provider accountable for the promises they make when you have them in writing, which leads me to the second benefit.

Accountability

Some property management companies run their sales process like politicians run their campaigns — they’ll tell you what you want to hear, but there’s no actual obligation to deliver. When you enter into a contract, the benefits and services promised are guaranteed in writing. That allows the property owner to hold their management company accountable for what they said they’d do. If you don’t sign an agreement, it doesn’t matter what was promised to you. If it’s not in writing, it doesn’t count — plain and simple.

Clarity

Deciding to rent out your property can be confusing, especially if it’s your first time. There are a lot of considerations that need to be made and some that aren’t immediately apparent. Your management contract should function as a guide through the process — what concerns can arise and how they’ll be dealt with. This will also help you decide what maintenance you want your renters to be in charge of, like mowing the lawn or removing snow, and what you want to take care of yourself or have your management company handle, like blowing out your sprinkler system or changing your furnace filter. When these considerations are put in writing, there’s no room for confusion.

While not being locked into a contract may be a benefit in some situations, it’s irresponsible to not sign one with  your property management company. Especially if you’re paying them up front costs for the promise of future services. In many cases, you’re not going to encounter trouble, but is it really worth the risk of being unprotected in the event something goes wrong? Personally, I’d rather be protected.

If you want to hear more about our property management services, give me a call and let’s chat: 952-831-5300!

Terms of the Lease: The Written and the Not

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property management lease laws written and unwritten

There are great words to live by, great beliefs to hold, and great principles to battle for. And the difference between the victim and the victor is experience-based wisdom: Which words, beliefs and principles do we fight for.

Most persons have a general understanding of contract law: Make an offer, accept it, include consideration (something of value to each side) and poof! the promises in the contract are enforceable in a court of law. This idea is classic, foundational and undisputed. Anyone who challenges this idea is working an unfair, unjust, or otherwise inappropriate agenda. Right?

Another classic tenet in the law is: For every rule there’s an exception. It is knowing these exceptions that make property managers and tenants look like magicians.

Lease agreements are interpreted and enforced under contract common law. The common law rules have certain exceptions, such as contracts of adhesion in which terms can be stricken if they were not negotiated, one side lacked power to negotiate, and the term is deemed outrageous. More tricky, the common law can enforce like a contract in a situation where there is no clear offer, acceptance, consideration or agreement.

Common law gives tenants certain rights, most notably the right to the use and enjoyment of the property. Use and enjoyment may be the key consideration the tenant receives for the agreement. If the landlord’s through an action or failure to perform a duty inhibits the tenant’s ‘use and enjoyment’ rights, the tenant could claim a material breach of the contract.

The common law also is bedfellows with statutes. The legislature can create, and has created, laws that trump common law rules for particular purposes. For instance, employment statutes changed employment common law to give employees the right to a minimum wage, safe work conditions, protections against discrimination, and other rights. Similarly, antitrust laws that stemmed a business’s ability to contract with competitors over prices, output and discrimination.

In the realm of rental properties, statutes may exist at the State and municipal levels that can trump the written contract, including: Housing code and repairs, rights to view screening reports, prohibition against oral agreements for rentals over a year, and a hearing before eviction. (Warning, that list is not complete.) The landlord cannot contract against the statute—such an agreement would be illegal or unenforceable.

There also is the impact of other law, such as torts. Although the tort may not invalidate a contract, the tort and contract theories often walk hand in hand. If not, the damages of a tort suit may swallow the damages under contract law.

Then there’s the… other stuff. Experience. For instance, I once recovered insurance proceeds on a claim that arose after the business did not renew the rider coverage. That means that the insurance company paid even though there was no policy to cover the claim. A keen business person holds knowledge of the law in one hand, experience in the other, and balances the can-do versus should-do with ethical judiciousness. (Yes, there was a good reason and argument to get the insurance coverage).

When your property agent suggests patience, hardness, conciliation, or enforcement, the reasons behind the decision will be layered, likely complicated, more strategic than certain, and never based solely on the words in the lease. The lease is a solid starting point. Often something cannot be done unless it is in the lease. Just because it is in the lease, however, does not guaranty that it can be done.

[This post was written by Mike Schechter for Simply Residential Property Management. Mike is an in-house legal counsel for several businesses and a professor of business law at St. Cloud State University. He can be reached at: mike@schechtercounsel.com.]