PART THREENURTURING TENANTS
With careful selection and planting, most tenants bear bountiful fruit. Occasionally, there are those who leave much to be desired. Even the most discerning and knowledgeable landlord cannot predict the future. Consequently, about one in ten tenants will develop financial or personal problems after they are placed. Some must be handled very gently and coaxed into shape, while others must be twisted and strung; but, they must always be dealt with firmly. In time, most of them will move on. Many will be placed in someone else's care and sadly missed; others will surprisingly disappear in the night, while a few may have to be coaxed into leaving. How you nurture them while they grow and mature, then finally leave you, will depend on your knowledge of their tendencies, the law, and your understanding of what is expected of you.CHAPTER EIGHT
DEALING WITH TENANTS
Dealing with tenants is one of the hardest and most controversial parts of landlording. Much of the advice offered today is promoted by "professionals" who have little, if any, direct experience dealing with tenants. No matter what you may have heard, you are not required to turn your property into a daycare center.
New Myths and the Landlord:
In the not so distant past the tendency was to view the tenant in a very benign manner. Many landlords were willing to subsidize the tenant's rent, as well as tolerate nonconformist actions, because lost revenues could be offset by rapidly-rising property values and substantial tax breaks. Consequently, many articles and books were written by people who praised the virtues of the friendly, outgoing, pleasing, smiling, always courteous landlord. He or she was to serve as maid, valet, baby-sitter, confidant, and unquestioning comrade to the tenant. We, like most landlords who have to deal with tenants, do not believe nor have ever adhered to this philosophy.
The new myth that the landlord should project an image of a subservient comrade is all for nothing. Throughout history the landlord has always been viewed as a greedy, grasping, and uncaring tightwad--probably more so today then ever. The landlord will always be seen in a bad light because he provides a rare commodity which appears to offer little for sizable monthly payments.
When tenants make payments on a car, it is there in the driveway ready to respond to their wishes and their vanity. When they buy food, they can exercise the next day, knowing where their money went. If they buy clothes, they can look in the mirror and marvel at their good looks. If they take a trip, they have fond memories. If they get high or loaded, they may have even fonder memories. But, many resent paying for something that isn't satisfying, gratifying, or theirs. To some tenants, paying rent is like paying taxes. They understand they must, but they don't want to.
You can preach to the average tenant from now to doomsday about your cost of utilities, taxes, mortgages, maintenance, and services, not to mention a return on your investment, and they will still believe they are overcharged. When graduating California college students were queried in the last decade, the overwhelming majority believed businessmen make from 25% to 50% profit on every dollar invested per year--can you believe it--graduating college students? Do you believe your tenants know any better? From talking to our tenants over the years, we found most believe we use 50% of "their" money to pay the bills and put the rest in our pockets. When one tries explaining the rental receipts in relation to the investment, one is met with scoffs. With that belief among tenants, and the likelihood that it will never change, the movement to change the landlord into a comrade is doomed.
In spite of this, there is still a movement among certain groups to create a servant out of the landlord. The result over the last ten years has been an ever increasing demand on the landlord's responsibilities. A growing number of tenants have come to expect unrealistic and humanitarian services from many landlords. Tenants paying low or moderately priced rent are now demanding first class services which they are not paying for and are not entitled to. Granted, the tenants' unions and government agencies have contributed to the problem, but their arguments to support such demands have come from an unexpected source.
Surprisingly, many landlords who own and operate upper income rental housing have advocated such a philosophy. Their tenants are paying prime rents and they do not want to lose them. As these tenants' children mature and leave home, they are bound to expect such services and treatment at the low or moderately-priced rentals they occupy. However, less than 8% of upper income families rent and although they have had an influence, they are not the main reason for this problem.
The main reason for this subservient myth comes out of many of the larger rental complexes with fifty or more units. As rental housing becomes more expensive, large complexes are the only rentals being built. Today, large complexes provide housing for one out of every four renters. Considering these complexes are normally in direct competition with one another, many of the owners and management companies claim a subservient resident landlord helps to rent their apartments. Yet, if one uses the property management companies' own studies, there is little to support such a belief. In the 1980's a book was published by a corporate landlord who controlled over 40,000 units. In his nationwide survey (somewhat self-serving) of over two thousand tenants who listed their reasons for choosing their new dwelling, there was not one shred of evidence that pointed to landlords as the reason for even one tenant choosing their apartments. Yet, his book insisted that a comrade type resident landlord was essential.
As shown earlier in our survey, "What Tenants Want In Housing," you'll notice no potential tenant looked for a rental with a chummy landlord. Even in our study on what tenants disliked about their former dwellings, when asked the question, "Reason for moving," not one listed the landlord. In addition, in all our years in the business we have never met a tenant who moved because of the landlord's personality--unless the landlord wanted him to move. Yet all property management companies still persist in demanding that their resident landlords practice a subservient manner and expect them to provide services the tenant is not entitled to. The reason for this policy among most property management companies is not due to the concern they have for tenants. It is due to the concern they have for themselves.
All tenants who live in a large complex with a resident landlord, have the right to contact the management company if they do not agree with the resident landlord's policy. However, the last thing the heads of most property management companies want is to talk to a tenant. In their plight to appease the tenants and safeguard themselves against them, irresponsible management companies have created lackeys out of their resident landlords, versatile in the field of quieting belligerent tenants who make unreasonable demands. The operators of these companies, who seldom deal with tenants in any manner, have no interest in the character of the tenants, in what is fair, or for that matter, the law. They expect their resident landlords to be on call 24 hours a day, and they expect them to adopt the attitude that the tenant is always right. They also expect them to take care of any maintenance whether it is the tenant's fault or not. (As long as it doesn't cost the company money.)
As an example, there is not one property management company, known to us, that doesn't expect the resident landlord (who is normally on salary) to unclog a tenant's toilet no matter what the time of day, the cause, or how many previous times it has occurred. Yet, all any landlord has to do is ask the tenant whether the bathroom sink and tub are draining properly. If the answer is yes, which it is in 99.9% of the cases, any landlord can tell the tenant the following:
Because of the way plumbing is arranged, the drains from the tub and the sink enter into the main waste pipe near the base of the toilet. If the tub and sink are draining it means the toilet is clogged, not the plumbing. Someone in your home either put or dropped something in the toilet that shouldn't have been put there. Sorry, but it's your responsibility.
That is the way plumbing is arranged in all buildings, from a single unit home to a 100 unit high-rise. Yet, the book mentioned above, as well as other property management books and courses, claim the landlord must do it for health reasons. Nonsense. In fact it is the tenant who created the health problem. In most states the landlord can give the tenant three to five days (under the common waste laws) to remedy the problem. Then, tell the tenant to move or evict him if he fails to comply. There is no law anywhere requiring you to repair problems caused or created by tenants or their guests.
In spite of this, if a resident landlord objects and tries to mediate fairly and make the tenants responsible for their actions, the company will receive calls. Too many calls will stop the landlord's progression to the top. Or he or she will be demoted or fired. In consequence, many good resident landlords, who have tried to do the fair and legal thing, have been driven out of the business and replaced by lackeys who have "yes sired" their way to the top and now write books and articles on dealing with tenants.
If this pampering hasn't affected you by now, it will sooner or later. Statistics show young, first-time renters are the ones most likely to rent at a large complex controlled by management companies. As these tenants mature and their need of recreational gimmickry and controlled activities diminish, they are inclined to search for a single house or a smaller multiplex operated by the owner. Then, the owner/landlord has to contend with a pampered tenant who doesn't understand what his/her responsibilities are. It is no wonder landlords of smaller properties are the subject of more complaints to state and city attorneys than any other profession except auto repairmen. Yet the biggest percentage of the complaints are unfounded because the tenant has come to expect services they are not entitled to.
In 1979, when we experienced our first "complex trained" tenants, we were shocked by their ignorance, unreasonable demands, and complete lack of consideration for our position. They thought nothing of calling us at 12 midnight and demanding we come over to their homes and repair a window screen because "bugs were getting in," or demanding we come to repair a curtain rod that one could see had been pulled down by a child tugging on the curtain. We have also been bothered at night and asked for a key since they had locked themselves out, or asked to come over to quell a neighboring disturbance. Our study shows complex-trained tenants are five times more likely to ask for services they are not entitled to.
No landlord, anywhere in the US or Canada, has to provide any such services. Also, if the tenant breaks, damages, or abuses something, it is not the landlord's responsibility to repair it. We have learned to demand that the tenants make the repairs themselves and have the work done in a professional manner, even if we can repair the item in ten minutes. Tenants must come to understand a landlord is not running a daycare center and that the tenants are responsible for their actions or negligence.
A few years ago, we gave a talk about this subject during an apartment association meeting. The small property owners and resident landlords were delighted with the presentation. The large complex operators were extremely upset with us for bringing up the subject.
Furthermore, the myth that a landlord should be a partner and friend with a winning personality and easy attitude, is as ill advised as it is unrealistic. Old politicians had a saying: "When you run for election, 40% of the people will be against you, 40% will be for you, and it is up to you to win the approval of the remaining 20% who really don't give a damn." We seem to live in a world today where many people can't or won't accept the fact that 40% of the people aren't going to like them no matter what they do, 40% will like them no matter what they don't do, and the last 20% don't give a damn. You are not running for office. You don't need your tenants' approval. They are living in your investment. If that 40% finds fault with you, which they will more often then they find fault with the unit, there's nothing you can do about it. However, if tenants step out of line, be firm with them. Don't make the mistake many landlords, including ourselves did at one time or another and be subservient to the tenant. You'll live to regret it. You must always have the tenants' respect. It is not important whether they like you or not.
If a problem arises between you and the tenant, don't take a defensive posture. The landlord/tenant relationship should never be "the tenant is always right." You are not a clerk in a store where an over demanding, unrealistic customer will walk out in ten minutes, never to be seen again. You must deal with a tenant over a period of many months or years.
Never become overly friendly. It is easier for them to ask for something and harder for you to say no. A willingness to listen and some common courtesy is more than enough to satisfy any tenant. If your tenants say "hello" to you, say "hello" back. If they want to talk, let them talk; listen--they will not only think you are wonderful, but intelligent also.
When dealing with tenants, a successful and profit-making landlord is one who understands his or her job is to make sure tenants abide by their legal agreements, and to ask them to conform or move if they don't. It you have a good lease which covers every foreseeable aspect, problems can be resolved by quoting parts of their lease (see chapter six).
Always remember who you are, and who they are. No matter what words certain groups try to insert to represent you and them, they are tenants and you are the Land Lord.
The first concern of any landlord is rent payment. Good rent payers make the nights go by less anxiously. Like most landlords, we have a tendency to tolerate more from a tenant who pays well than from one who pays late. It shouldn't be that way, but it is. Good rent payment is essential to the success of your investment.
Late rent payment and how to control it has been discussed since the Middle ages; yet, it is still the biggest headache for most landlords. Today many professionals offer advice on the late payer. If you follow their suggestions to send reminders on the 3rd, a phone call on the 4th, delinquency slips on the 5th, a friendly visit on the 6th, notice to pay or vacate on the 7th, a stern visit on the 8th, beg and plead on the 9th, and a forceful visit on the l0th, you will probably end up in the hospital, or more likely the nearest mental institution.
Other self-proclaimed professionals, who obviously don't deal with tenants, claim a "reward system" encourages prompt payment. Their systems include giving away everything from a free TV to free rent. One landlord of a large complex went so far as to offer a free month's rent for twelve consecutive months of prompt payment. In addition, all the tenants who won a free month's rent were eligible to participate in a drawing to win a two-week paid vacation. Although the idea started out well, things fell apart rapidly. When the year was over she noticed that rent payment patterns were back to where they had been before the start of the experiment. In light of this, a "punishment approach" was instituted. The result, to quote the landlord, was "more prompt payment." That landlord learned what any aspiring lawyer, since the beginning of time, learns in his first year of law school: The whole legal basis of contractual agreements is based on "remedy not reward."
Your rent collection policy must be in writing and it must contain late charges to insure prompt payment. Without late charges, there is no incentive for tenants to pay their rent as agreed.
If you use a store bought lease, have your rent collection policy written on a separate piece of paper and staple, glue, tape or pin it to your lease and have the tenant initial it. Many landlords frown upon bringing up such unpleasantries at move in time and suffer the consequences later. To cultivate good payers, it is essential they understand the payment policy clearly and the remedy for failing to live up to their legal obligations.
If anyone believes late charges do not work, they are misinformed. When we first started in the rental property business, we were filled with high ideals and aspirations about our fellowman. We soon became very disillusioned. Forty percent of renters will pay late unless you constantly "chase the rent" if there is no penalty for paying late. By instituting a penalty and enforcing it, you can reduce that figure dramatically.
We now come to a very controversial point: How much, is too much, for late charges? Ironically, until very recently, almost every state in the nation had laws granting a landlord at least two months' rent if tenants failed to abide by their legal obligations and pay their rent on time. There are still some states where similar laws are still in effect, but find a court that will enforce them. Consequently, since legislators have meddled with some laws and courts refuse to enforce others, you have a right to create your own rules for your property as long as they do not violate any existing laws within your state or locality. In addition, there are no states that we are aware of that limit late charges, other than stating they must be "reasonable."
So, what is a reasonable late charge? We look at it this way: Delinquency of rent is a cash loan and the landlord is not in the lending business. Consequently the landlord does not fall within guidelines of state or federal laws as to fair interest charges. What rightfully belongs to the landlord is being withheld. Consequently, because of the laxness of the judicial system with people who do not pay their obligations, the landlord in essence becomes a bill collector.
Bill collectors charge forty to fifty percent for their services because of the exasperating problems in tracking down debtors and putting up with their elusive ways, verbal insults, and possibly physical abuse. In addition, notices must be sent or served, and at times, legal papers must be filed, not to mention the unbelievable stress in carrying out such maneuvers. Instead of hiring a professional bill collector the landlord normally tries to collect. Thus, they find themselves in the same situation as a bill collector. They must confront the tenant. They must hand out notices and if necessary, file legal papers. The stress in confronting some tenants is formidable. Therefore, if late charges add up to less than 40% of a month's rent, you would think that one had nothing to feel guilty about. Naturally, we doubt that any landlord charges that much for late charges and we don't either; but we don't see why the "law" considers it "unreasonable?"
Nonetheless, The following clause has been a part of every lease agreement we have used, in one form or another, since 1979.
"RENT PAYMENT & LATE CHARGES: Rents are due ON or BEFORE the first day of each month. If tenant fails, for whatever reason, to pay rent by the first (1st) of the month, s/he must contact the landlord by that date and reach an agreement as to when rent will be paid. (Failure to do so will result in a major violation of this agreement and eviction proceedings can start against the tenant). In addition, a late charge of $10.00 will be placed on rents not paid by the first (1st), plus $2.00 a day thereafter until the date agreed on (after which time an eviction will start against the tenant if rent and late charges are not paid). checks returned by the bank will be subject to the same charges and conditions. Partial payments are unacceptable. NO EXCEPTIONS. __________ Int."
Before you conclude no one would sign something so harshly worded, let us reassure you. We have never had a tenant refuse a rental because of it. From professional people to welfare recipients, no one has ever balked at signing.
Notice that there is no grace period in our lease. Because all HUD properties grant a five day grace period, many people believe it is mandatory. It isn't. Don't make the mistake of granting one unless the laws of your area insist on it. Tenants will always assume the rent is due the last day of the grace period. Unfortunately, grace periods in some states are mandatory. If you live in any area where these foolhardy first grace periods cannot be waived, then the date in our example must be changed from the 1st, to the day after the state granted grace period. However, you may be permitted to include a clause within the rent payment paragraph to read:
If rent is received before the 1st, $25 will be discounted; if received
before the 5th, $15 will be discounted. However, a late
Note that the blank would be the last date of the state-required grace period. Naturally your asking price for the rental would be $25 more than what you would have asked. (Don't worry that you will have trouble renting the unit at the higher price because when you explain the process to the tenants they will always assume they will pay on time.) This discounted rent system should work well to encourage rent payment in areas that forbid late charges until the tenant's rent is long overdue. As an example, the state of Massachusetts forbids late charges "until 30 days after the due date."
If you live in an area where rent control or other laws forbid you from charging late charges or discounting rent, then explain to the tenants (in writing) that if they pay their rent late more than a couple times a year, you will ask them to move or evict them. Tenants should learn that laws which are meant to protect them can also cause them discomfort. No one lends money (especially unwillingly) without expecting compensation.
Returning to our first example where grace periods are not mandatory, note that our tenants are charged a progressive amount which makes it important for them to pay as soon as possible. Although many landlords favor a straight amount, there is no incentive for tenants to pay earlier once they are past the late date. Note also, that the progressive late charges ($2.00, or more, a day) are charged up to the day the tenant has agreed to pay. In this way the tenant cannot use as a defense (as was done in one state) that as long as they agreed to pay the late charge they are entitled to pay as late as they want (by the way, the judge agreed). Don't state, "late charges are $2.00 a day till rent is paid." It must be stated "...until the date agreed on." This brings us to the main point. When a tenant is late in paying, the landlord is expected to "chase the rent." He, as stated above, is expected to track down the late payer by knocking on doors and waiting in ambush. He is then expected to hand out notices and wait and see what happens--we find this reasoning absurd. It is not your responsibility to chase after tenants who do not honor their legal obligations. Tenants should understand it is their responsibility to contact you if a problem arises.
You will notice in the wording of our rent payment example, that the burden of payment is psychologically shifted to the tenant where it belongs. If tenants don't pay or call by the first of the month, or by the end of any foolishly-granted grace period, you are put into the position of demanding to know why they haven't notified you as their lease states.
This method works extremely effectively since most tenants being scolded about late payment cannot retort with: "I know I'm late, I'll pay the late charges and rent on the..." You can counter such comments with: "As your agreement states, you are to notify me." You can also explain to the tenants that by not calling, they are in "material noncompliance" with their obligations and if they fail to call in the future you will ask them to move or evict them.
With this type of policy, it is rare to have tenants ever "forget" to call in the future if they have a problem. It also encourages them to pay as agreed since most people, from the lowest to the highest walks of life, do not like to be put on the defensive.
When a tenant does call, do not pay much attention to "poor mouth" irrelevant stories. Sympathize with the tenant but demand to know EXACTLY what day you will receive payment, plus late charges. Also, do not fall for the old trick that the 1st was a Sunday or the bank wasn't open. Rents are due "on or before the first." It is the tenant's responsibility to be aware of these days, not yours. Unfortunately, some areas have twisted or enacted laws to the contrary. Before you accept such information as fact however, remember, if your lease states "on or before the first," it may have precedent over other laws. Read the landlord/tenant laws of your area.
Of any policy we have tried in the last nineteen years, this psychological shift to the tenant, along with the late charges, works better than any other rent collection policy that we are aware of. It encourages many to pay rather than face the embarrassment of notifying you. In addition, it causes the late payers to contact you, rather than be scolded for not calling as they agreed. In most cases, if you explain the clause to the tenants in detail when they are moving in, they will remember, and 95% will call if there are any problems.
We should point out that if your tenants pay by mail you could provide self-addressed envelopes in a manila envelope. Your rent payment policy can be written on the manila envelope so the tenants are reminded of their responsibilities. Also explain that you expect to receive the check by the first. In this way they cannot try to sneak the check through without paying late charges. We have taken checks back to tenants who tried that more than once and refused to accept their payment unless they included the late charges.
Remember, some good tenants may have problems and/or truly will forget. We have found a call, or better yet (to put them in the position of calling you) placing a business card or note on their door with, "RENT. You must call if paying late," works very well. It is surprising how quickly most tenants contact you and apologize.
However, as the months pass, there is always that small percentage who constantly "forget." You would use the "business card or note" approach the first time; but, if they forget more than once within a six-month period, they must be handled more firmly. We use the following:
To __________________________________________ :
REMEMBER. As your lease agreement states in #3 "If rent is not paid by the 1st, YOU.. must contact the landlord." This is the ____________ time you have failed to notify us in ___________ months. You must contact us TODAY.
Your cooperation is essential.
Notice there are no pleasantries as suggested by self proclaimed "professionals" such as: "Have you forgotten?" or: "Your cooperation is appreciated." Never use such pleasantries when dealing with people who are in violation of their legal obligations. If any tenants fail to respond to the note, we start a legal action against them immediately. We have found without exception that every tenant who failed to call after receiving the "reminder," had beastly intentions that would have affected our profitability.
Once the tenant contacts you, it will be your perception, personality, and knowledge of the tenant which will determine how long you are willing to give him or her to pay up. There is no such thing as a definite deadline to use on every tenant. We have never balked at letting well-paying and seemingly honest tenants pay as late as the fifteenth of the month. If they have resided with us a year or longer and have never paid late, we will even forgo late charges the first time. But, they are told if it ever happens again they will pay the late charges no matter what the excuse.
At this point, some landlords (and especially professionals) may scoff and wonder why the tenant was not served with a "Notice to Pay or Vacate" where required by law. Many landlords are not even aware of such a notice, yet most states require them before you can start an eviction. These notices notify the tenant that action will be taken within three to ten days, depending on your state. The notices can be purchased at any office supply store and must either be hand delivered to the tenants, sent by certified mail, or one must be pinned to their door and another sent through the regular mail. If you are not aware of the requirements of your state, obtain the information. The notices are worth their weight in gold when used properly. A notice to "pay or move" should only be used when you have no other recourse. It is the first legal step in all but a few states that notifies the tenants they are in possession of your property illegally because of their failure to abide by their legal obligations. However, never, never use this (or any) notice unless you intend to carry it through. If you fail to take the action that has been threatened, you will lose your credibility.
Suppose you gave a tenant the notice to pay or vacate and he calls or tells you he will pay the day after the elapsed time. What would you do? There is the problem. Soon the tenant learns not to even read your notices, Tenants who lived previously in large complexes where resident landlords were taught by "professionals" to "be quick with the notices," ignore the notices completely because they have learned all property management companies will let them pay when they have the money, no matter what the notice says.
We have had tenants who tried to pay after the expiration date. We never accept the rent even one day after. We give them the name of the lawyer we use and tell the tenant to contact her. (Having a lawyer at this point is not necessary but we will explain later why we use one.) Normally we instruct the lawyer to accept payment plus the late charges. Also the tenant must agree to pay the lawyer fee incurred up to that point. It usually amounts to less than 50 dollars (more about that later). However, if it is a tenant we would like to get rid of, we will not accept the rent since our state (like most states) does not require that we must. It is a very quick way to get rid of a bad tenant. Unfortunately, there are states which require landlords to accept the rent at this point. By using the lawyer, tenants realize the scope of their sins and are more inclined to pay better in the future.
To protect yourself against any tenants who may try to take advantage of your good will in letting them pay late, we explain when they call that they will be given a notice to pay or move which will take them up to the time agreed upon. As an example, if you lived in a state where the law requires a three day notice to pay or vacate, and the tenant calls and agrees to pay late charges but can't pay till the eighth, you can always explain you will be sending or handing him a three day notice on the fifth. In this way you get the notice requirement and the days it allows out of the way and are ready for an eviction if necessary.
We use the following notice:
NOTICE TO MOVE OR PAY RENT
WITHIN ________ DAYS after service of this notice, you are required pursuant to law to vacate the premises at the above address for the reason that you have defaulted in the terms of your agreement and have failed to pay rent as agreed. Past due rent of $____________ for the month of _________ plus late charges of $ _________ now totals $ __________.
Understand that if you do not move or pay all rent and penalties within ___________ days, you will be deemed guilty of an unlawful detainer and legal action will be initiated against you.
Served this ___________ day of ___________, 20 ___.
Note: Our move or pay notice is worded, notice to "MOVE" or pay rent. It has a better effect on the tenant than most notices which state they owe rent--they already know that. Whether you prefer our kind of notice or one of your own, always include the amount owed. Most state laws require it, Always list the amount of rent and the late charges separately in case you have to use the courts. (Judges pay close attention to late charges). Also include your address. Some state laws require it because the tenant "may not know where to pay rent"--can you believe it?
Never accept partial payments; never. In every case when we granted such assistance it became a habit and the tenants fell further and further behind. They also didn't feel they should pay late charges (the courts agree). When tenants see you are firm about payment, they will not ask for liberties in the future and they try to test you less.
If you are wondering how these combined procedures (complete explanation at move in time, psychological shift, and late charges) work, the following should be self-explanatory: Of the 307 tenant families who resided in our properties during a five year period, only nineteen were given notices to move or pay. Of the nineteen, nine paid within the time limit, four moved out around the deadline (due to their security deposit we didn't lose any money), and the remaining six had to be served with legal papers (discussed in chapter 11). Therefore, less than 2% (two out of a hundred) of our tenants could be called "deadbeats," as some landlords label them. No other rental policy we have ever heard of has a better record.
However, our policy of not demanding rent on the due date, if the tenant agreed to pay late charges, results in some tenants paying late now and then. We also had twenty-two tenants who consistently paid late during this period, but always called and paid as agreed. Over our five year study it is interesting to note that the late charges collected more than covered any legal fees or other monies owed due to vacating problems. Our first day late charge at that time was only $5.00 (plus the $2.00 a day). Another amusing item: The six tenants who required legal action had been consistent late payers. Without realizing it, they paid for a large portion of their own evictions. The justice of this rent collection policy cannot be overstressed. It is the people who fail to abide by their obligations who pay, not the good tenants who would normally have to pay for these expenses with higher rents.
The common rent collection failures we have observed over the years are because most landlords do not explain their rent payment policy, do not have it in writing, do not enforce their policies and do not take threatened action. By combining these policies and reversing the psychological emphasis back on the tenant where it belongs as to whose responsibility it is to notify whom, any landlord can have as good a record.
One more point about rent collection: How late should you agree to let tenants continuously pay late as long as they call each month and pay late charges?
We will not go beyond the fifteenth for most tenants. Experience has taught us the biggest majority never get caught up if they constantly pay more then fifteen days late. Furthermore, it becomes cheaper for tenants to move in many cases if they fall more than three weeks behind on their rent. In some rare situations, where tenants run into a financial problem after their record has shown they are good and honorable people, we have agreed to let them pay twenty-nine days late with the understanding they get caught up within two months.
If you follow the above procedures, with modifications to suit your state laws, situation and personality, the possibility of chasing the rent is reduced drastically. Your property should also reach projected profitability since late charges normally cover legal and eviction costs incurred over the long term. Unfortunately, landlords cannot put a price on the stress they must suffer due to tenants who do not fulfill their legal obligations--40% of a month's rent in late charges can sound very reasonable when dealing with some tenants.
Asking Tenant to Conform:
The next biggest problem the landlord faces is insisting tenants abide by their other agreements. No matter how carefully you choose your tenants, there are always those who cause discomfort to you, or to others. There are always tenants who never take care of their outside areas, sneak pets or guests into the unit, make excessive noise, or insist on sharing their music with the neighbors.
There are certain situations when it is best to overlook the offense. As long as you are not receiving complaints and the tenants' actions are not affecting the profitability of your rental, ignore them. This philosophy takes years of controlled self training and can make your job much easier. Still, there are certain things you have to prevent.
If your rental is a single unit, there is a tendency to overlook a lot more than when two or more tenants share the same building. After all, a tenant playing loud church music all night may cause a well-paying tenant to move, or one tenant may pick up bad habits from another.
One summer, one of our tenants parked his boat in the parking lot of one of our fourplexes. Since we never had any problems with the parking, we overlooked it. Within two weeks the parking lot contained the boat, a large inoperative truck, a camper, and an old junked car that looked like a leftover from a demolition derby. When inquiring about what was going on, it was evident, "If he's allowed, I'm allowed,"
Landlords have only three courses open to them in controlling tenants: Ask the tenants to conform, move, or evict them. In most cases we have learned not to ask or tell a tenant to do anything unless the offense warrants eviction.
When you have a problem that tenants cannot work out among themselves, or that could affect the profitability of your property, you must approach the tenant and ask the reason for the action. If you have chosen your tenants with care, very few will balk at agreeing to remedy a sensible request. The most important thing is to get the tenant to agree to a deadline. If you are not the forceful type, or you do not want to upset the tenant, you may add the notion of a deadline as an afterthought. For example, when the conversation is almost compete you could add: "Oh, can you tell me when the dog will be gone?" Or: "When will the car be out of here?" Or: "You will tell your children about it today, won't you?" In this way you get the tenant to agree with you. Now, whether the tenants' feel you are right or not, they in essence have agreed to remedy the problem. We were able to get all four tenants to remove their vehicles in this way. However, if the tenants' fail to remedy the problem or refuse, never ask them twice.
To handle such problems it is advised that every lease or rental agreement have every conceivable incident covered. Your lease should contain as many general statements as possible to encompass as many unforeseen incidents which may occur. In this way, sections of the lease can be quoted to the tenant if talk does not have the desired effect. If the tenant fails to remedy the problem after your talk, or if the tenant refuses your request, you can write him a short letter bringing up your conversation and his response. As an example, one of our past tenants put up a storage shed without our permission. It not only looked bad, but would have ruined the lawns, We wrote the following letter:
In our conversation on 4/3/93 I informed you that the storage shed you erected beside your house had to be removed. You told me that it would be gone by the tenth; yet, it is still there. Because your rental agreement states in number 8 n, "The tenant...agrees not to place fixtures, signs, fences, etc. in or about the premises," you must have the shed removed in three days. Your cooperation is essential.
Note: If the tenant had not agreed with you during your talk, the line concerning that matter would be eliminated. Note also: Although nothing in our lease specifically stated "sheds," it is taken for granted since we don't allow fences, signs or fixtures.
Unfortunately, as with paying rent, some people are notorious for their lack of punctuality. It may take longer than the time asked in your letter. Unlike rent payments, however, it is best to give tenants till the beginning of a new week since it will give them a weekend to remedy the problem. There is also something about the written word--ninety percent of the time the problem will be resolved because of this letter.
The same procedure can be used because of uncut grass, unruly children, minor damages, unauthorized pets, etc.. If the tenant then fails to remedy the problem, or any other violation that is a part of your lease, in many states you can use a "Notice to Move or Conform."
If the violation is stated in your lease, you can insist they comply or move in a fraction of the time required by a basic termination notice since it is considered "noncompliance" with the lease. A basic termination notice usually requires a full month, therefore, you do not have to give a full month's notice. (Be warned, in some states, such as New York, you can give a tenant a ten day notice "demanding that they live up to the terms of the lease," but then you must still give them another thirty days to move.) The importance of the lessor time period is that if you give the required full rental period, it must be served in all but a few states prior to the beginning of one rental period, telling the tenant the problem must be corrected before the coming rental period is over. Consequently, there is a tendency for many tenants to withhold the rent and start looking for another place. Therefore, before you mail a notice of this lessor time period, or even a letter as mentioned earlier, make sure it is shortly after the tenants have paid their rent. In this way the tenant must conform weeks before his next rent payment is due. Since asking a tenant to move or conform is equivalent to warning an employee he may be fired, even the best tenants can become belligerent. However, within the remainder of the month they usually calm down and remedy the problem.
The Notice to Move or Conform is as powerful as a Pay or Vacate Notice. If the tenant does not remedy the condition or move as specified, you have the right to start an eviction. However, and this is very important, if your lease does not contain any clauses pertaining to the problem, or it is not covered under your landlord/tenant laws, and the tenant refuses to remedy the problem, you have no legal basis to ask the tenant to comply, unless you "change the terms" of the lease. For example, if there was nothing in our lease concerning placing signs, fences, etc., your only recourse, in most states, would have been to notify the tenant that the presence of his shed was unacceptable by sending a written notice before the first of the month, stating that after the last day of the coming month, sheds will no longer be permitted on the property. If the tenant has not removed the shed by that time (at least 31 days), only then can you insist on its removal. It should be mentioned here that if you use a year lease, the "terms of the lease" can be changed in 31 days, in most areas, if the tenant pays monthly.
A shed on the lawn may not seem that important, but suppose your lease made no provisions about pets, guests, or using your lawns for a auto repair lot? The notice to conform is very useful. Use it when necessary.
If there is a serious problem that demands immediate action, then a different approach is necessary. If the tenant's actions are creating a nuisance (loud noises that have the neighbors up in arms or dogs that bite), or common waste (children B-B gunning your windows, or garbage all over the place) you can, just as with payment of rent, pursue a three to ten day notice to cease or vacate in most states. These violations are usually covered in the landlord/tenant laws of all states and it is very easy to get rid of a troublesome tenant before the next rent payment is due.
Contrary to what many landlords believe, if you have a well-written lease, most laws in your state can work in your favor if you know how to use them. If you do not have a current copy of your state's landlord/tenant laws, or an interpretation, obtain one. Read them over. You will save yourself many future problems and expenses. Getting tenants to conform is normally fairly easy if you are aware of your rights. Obtain the information. In addition, contact your local apartment association--they know more about your rights than most lawyers.
Tenant Versus Neighbors:
People are by nature adverse to strangers living in their midst and although moral and religious teachings have expanded man's tolerance of his fellow man, problems are inevitable. When dealing with tenant's complaints about their neighbors, you must always keep in mind the old saying: "I love the people of the world, it's just the son-of-a-bitch next door I hate."
When a landlord is asked to intervene between tenants and neighbors, the majority of the complaints will be about noise. Even if your rental is a single unit, you may hear complaints from the people at neighboring properties or your tenants may complain about them. As stated in chapter seven, during the initial occupancy you must insist the tenants try to work the problem out themselves.
On the first complaint you should play the sounding board, listen and sympathize with the offended party. Never make the mistake of seeming to side with them. Most will tell the other party you agree with them. Just listen. The fact that you do is sometimes sufficient. The tenant can get it off his or her chest. Unless the complaint is major, or your property is in jeopardy, do not take any action. Tell the complaining tenant to try talking to the other party. Then wait and see what happens.
We knew of a landlord who received a call from a tenant one night complaining about a party going on in the next apartment. The landlord foolishly went to the property and confronted the offending tenant. An argument started and a week later the partying tenant moved. This tenant had lived in the unit for over a year, paid his rent as agreed, took good care of his side of the property, and the complaint against him was the first ever. It was his birthday. Any good tenant is entitled to one good party a year. The neighbor who lodged the complaint should have been asked if the noise was a common occurrence. If not, she should have been told to wait till the next day and have a talk with the offending tenant. If the complaining tenant wanted an immediate solution, she should have been told to call the police. Never confront the "offending" party on the first complaint and never call the police for the complaining tenant. You must educate your tenants to understand they are grown-ups and must try to reach an understanding with the violator themselves. As stated earlier, you are not running a daycare center.
There are times when complaining tenants, especially men and younger renters, will not approach the offending person and the complaints continue. Or, the tenant has tried to talk to the offending party and the problem still persists. In that case, or if unrelated parties complain, then, and only then, should you intervene.
When we approach an offending party we do so as a detective, trying to gather facts and weed out the subjective element. Don't accuse the offending tenant of anything. State the problem and listen. Many times the tenant is not even aware anyone is complaining because the complainer who claims to have talked to the offending party never has. Often, the offending party is not even aware that their actions would annoy anyone. If the offending tenant has done something wrong, the fact that you are aware of it is normally enough to remedy most problems. Unless something is really amiss, just ask for the tenant's cooperation and hope for the best. In most cases that will be the end of the problem. If complaints continue, then one must try to evaluate what is really happening. Never make the assumption the complaining tenant is completely truthful and the other tenant is a no good rogue--many times the rogue is the person complaining. If a tenant keeps complaining, but you cannot find anything out of order, tell the complaining party to keep a record of every incident they found offensive with the time and date and a brief description of the disturbance. (You will need the complaints in order to ask the offending party to conform or move.) The majority of complaining tenants will not do it and the complaining usually stops. If you feel the complaining tenant has good cause for his complaints, then follow the procedures in: "Asking Tenant to Conform."
If more than one tenant resides on any of your properties, parking is another complaint one hears often. In many cases, since vehicles are an extension of most people's personalities, their vehicles are the target of other people's complaints. As with complaints about noise, whenever possible have the tenants try to work it out themselves. If that proves futile, do not try numbered parking. It does not work. Arriving guests pay little attention to numbered parking and if one tenant even parks in someone else's spot for five minutes, problems are bound to follow. Also, by numbering parking spaces you are almost required to get involved. No matter how adequate your parking, we have found that a phrase under rules and regulations such as: "All tenants are entitled to only one parking space per unit," forces tenants to work out the parking themselves. We do not intervene unless inoperative, oversized, or seldom-used vehicles are creating problems.
One more amusing item: Tenants rarely complain about people they like or are related to, no matter how disruptive. Yet, if a disliked neighbor's friend stops over with their dog , or they hear the slightest noise, you will hear about it. Many of these people are the same ones who claim to love all the people of the world.
Tenants' Children and Company:
There are always tenants who don't seem to understand they are responsible for their companies' behavior. There are also tenants who seem to have no control over their children. There are also many complaining neighbors who have their own idea of what code of conduct visitors or children should adhere to.
When dealing with complaints about children, listen closely to the complaining parties' objective statements. Their complaint may have more to do with their opinion than anything else. If you judge the complaint valid (after the complaining tenant has talked to the parents), a talk with the parents yourself normally resolves the problem if handled with tact.
With teenagers it is best to talk with them first. The majority have adverse feelings about causing troubles for their mothers (to a much lesser degree their fathers). Telling them that you will evict Mom to get rid of them, has a lasting effect.
As for company, the tenant must understand they are responsible for them. Don't ever talk to the company yourself. You have no control over them. Talk to the tenant and explain if their company (or children's company) keeps creating problems, you will have to ask them to move to avoid further problems with their company. We have it written very clearly in our lease agreements that: "Tenants are responsible for their companies' and children's behavior...." If the tenant can't or won't accept their responsibilities, start your conform procedures explained in: "Asking Tenant to Conform."
About 10% of tenants will have unauthorized roommates who stay for extended periods from time to time. We overlook it if problems do not develop. To maintain your integrity, be sure to act "ignorant" of the situation. We have found it usually doesn't last long and the guest normally leaves in two to three months. Never insist a newcomer sign any lease until you are sure you would want them as a tenant. It is much easier to insist that tenants control their company than for you to control a tenant you haven't chosen.
The largest number of unauthorized guests occurs with unattached women, with or without children, moving men in with them. Normally the relationship causes few problems since all new love affairs have a settling effect on both sexes. In 75% of the cases, the male guest departs in two to three months seeking greener pastures and things return to normal. If the stay continues past the three month break-in period, they usually set up a permanent household. If the guest has been there for that long without any problems, have him sign the lease if you like. (In many areas, you can also insist they move if you like.) When female tenants have other women, related or not, share the unit, the stay may have a tendency to last longer but should be handled in the same manner. With male tenants the problem is less of a factor, not only because single men make up less than 40% of single person households. (If you figure in the additional 10 million unattached women with children, single male-headed households are outnumbered 3 to 1.)
With male tenants, the problem isn't that they move someone of the opposite sex in with them which has a settling effect, but they tend to move in other males who have an unsettling effect on the property. You must watch this group closely since the newcomer may feel he does not have to abide by the rules, If problems develop, explain to the tenant you will have to ask him to move (so that you can get rid of the newcomer) if he doesn't bring the newcomer under control or move him out. Remember, never talk to any newcomers yourself; you have no control over them. If any problems develop, follow your "conform" procedures, fast.
Ironically, many tenants we sent notices to about their company, later told us they were glad for the letter. They were looking for a reason to ask the guest to move.
Another situation when your attention may be brought to bear is when a tenant is having trouble with his/her spouse. We advise whenever possible, to stay out of it. Police departments all over the country advise it is one of the most dangerous and explosive situations. Do not get involved.
If the unit is part of a duplex or larger multiplex, and the problem becomes heated and is bothering other tenants, you could mention it to the most dominant of the two spouses causing the problem, but only after the problem has died down. If complaints continue, write a letter and let them know you will start legal action. In some states you can use the three-to-seven day nuisance notice to get them out.
If combating spouses break-up and the one remaining wants the locks changed, there are three reasons for saying NO. First: We have never seen a door that an irate male spouse could not break down. Second: Scorned women have a tendency to break windows to enter, Third: If you change the locks, and the spouse who has "left" comes around and asks for a key, and his or her name is on the lease, you must give it to them until the end of any paid up rental period. Only when the rental period is over, the person who stayed behind can have the lease updated to exclude his or her former partner. The only exception is if the spouse in possession of your rental has a court order which states that the other spouse is to be excluded, then you should change the locks. Still, what happens if some irate male shows up at your door and wants a key? In all cases, try to stay out of it. Give the remaining spouse permission to change the locks themselves. Have her (or him) give you a key after the problem dies down. In this way you will not become involved.
We had a tenant in a triplex who used to slap his spouse around almost every Saturday night. The neighbors started complaining so one of us had a talk with the tenant. We told him, in front of his spouse, that if he wanted "to keep slapping her around" he would have to do it quietly or he would have to move. Whether he was embarrassed and stopped, or whether he slapped her around quietly, we do not know, but the complaints stopped. We assume the former because when they moved, after a two year stay, there was very little damage to the unit. Although some readers may take offense to the above politically incorrect statement, we believe a landlord's job is to make sure tenants pay their rent, do not disturb others, and do not damage the property. There are over 900 federal, state and local agencies to help people with problems. It is not your job to worry about troubled or eccentric behavior which does not adversely affect your investment. It is not your business to convert your property into a mental facility for peculiar personalities. If we become overly concerned, we ask them to move. If the problem persists, we evict them.
It should also be mentioned again that couples who are breaking up should be watched closely. Rent payments seem to become their last priority.
Tenant Wants Something:
No matter how good the shape of your rental or how lovely you consider it, there are always tenants who want you to repair or replace something; or worse, they want to "improve" the property themselves. Some may want new flooring, some will insist you need a new windows, some will insist the refrigerator is not working properly, others will want to paint the place a different color, while others will want to install something.
If tenants living in a single unit want to set up a swing set for the kids, why not? But if they live in a duplex or larger, unless they have separated yards, there can be problems. Over the years we have learned to say No to almost all requests. Believe it or not, giving them permission to alter or improve something seldom increases the length of the tenant's stay. Furthermore, repairing a tenant's "improvements" after they leave can cost you plenty. The only thing we let tenants do is repair their damages.
The best part about saying no (besides getting easier every year), is that if you have a change of heart you can always go back and tell the tenant, yes. They will think you are the most wonderful person in the world. On the other hand, if you said yes, then changed your decision, you will be considered the worst landlord who ever lived. Another thing, don't ever say: "Let me think about it." Tenants will always look forward to a positive decision and start making plans. The results are as bad as saying yes and recanting.
Some landlords find it difficult to say no. They pass the buck to their partners or spouses. Don't do it. You will lose credibility if you do. Also, tenants understand that partners who are in agreement are more formidable. If you do feel obligated to offer a reason, pass the buck to where it belongs. If you let them make changes, nothing but problems normally occur in the future.
The biggest request tenants make is for repairs. Although mentioned earlier, its importance cannot be over stressed. The repairs are not your responsibility if the tenant, his company, children, or even his visiting enemies caused the problem. Do not listen to so-called experts who have little understanding of vague laws. You are not responsible for tenant negligence, no matter who tells you otherwise.
To show what we mean by vague laws, one can find a prime example in, of all places, Alaska.
The 1989 Alaskan Consumer Protection Section published a newspaper style pamphlet. Under "landlord's duties" on page six, is the following statement: "These are the things tenants can expect their landlords to do, as required by the law.. .Keep in safe and working condition all electrical, plumbing, toilet.. and other appliances or facilities supplied by the landlord." Toilet?
Does that mean in Alaska your eighty-year-old grandmother (who, after the death of her husband, hung on to her double house so that the rented half could subsidize her meager income) has to go next door and unclog some big, twenty-five year old, lout's toilet? Hardly. Because further along on the same page under "tenant remedies" it states a landlord must only repair what "is not the tenant's fault."
Again, you are not responsible for tenant negligence or carelessness anywhere in this country or Canada. Unless you have superb tenants in all other aspects, insist they remedy, repair or replace what their negligence or carelessness has created.
Some landlords have no problem demanding that tenants take care of their responsibilities inside of the house. However, many wonder what to do about damages that occurred to the outside of the property when the tenant claims no knowledge. Some areas even insist it is your responsibility if it can't be proved the tenant caused the problem. As an example, suppose your tenants who happen to have two children, claim they have a broken window, but they know nothing about it. Before making the repair, make sure the window was broken from the outside in. If it is broken from the inside out, there is no question that it is the tenant's responsibility. It is usually very easy to determine if you look carefully. If you feel something is amiss, question the family. It is unbelievable how many seemingly good people will lie to save a few dollars. If the family still denies that they have any knowledge and you are not sure, make everyone in the household, sign a statement that they know nothing about it. It is amazing how many guilty people will refuse to put their denial in writing. If they refuse "on principle," you can refuse "on principle" to have the problem repaired and wait and see where things go from there.
What happens if you refuse to repair or replace something and the tenant goes somewhere to complain?
In some cases you will be contacted by a tenant organization. At other times, city attorneys and an occasional Assistant State Attorney General even gets into the act. Although not as forceful as the tenants' groups, many State Attorney's Offices deliberately try to put you on the defensive, hoping to resolve the matter as fast as possible. They would use the same tactics if they had a car owner complaining about auto repairs. They hope you will "fix" the problem even though the responsibility may not be yours. If you refuse to make any repair you feel was caused by tenant negligence, in most states "the tenant has the burden of proof in a judicial action to enforce a right resulting from the landlord's failure to repair or remedy a condition." If you believe you are right, fight for your rights.
When petty thefts occur around a property, most tenants understand it is not your responsibility, especially if the items were not locked up or put away. However, when a unit break-in occurs, especially in multiplexes, the tenants will often feel the landlord is responsible to some degree. You're not (unless you foolishly assured the tenant that you supply security).
What the tenant doesn't realize is around 80% of all home thefts are committed by someone who has been in their home. The thief knows what he is there for. Ironically, the thieves are usually friends, friends of their friends, ex-spouses, or relations. Naturally, no one wants to believe such a thing. When you tell tenants the facts, they become very upset. Nevertheless, we tell them. In many cases they find out later it is true and reluctantly admit it, still believing it is a rare occurrence.
What we don't tell them are some interesting facts we have learned over the years. Although we found no statistic on the subject, we find where teenagers reside the chances of that rental being "ripped off" is far greater than other units. The reason is the friends of the teenagers will stop by when no one is home and at times take anything not bolted down. (Many seem to feel that stealing from a friend's parents is nothing to be ashamed of.) Most parents do not like to believe such a thing. They have paranoid visions of professional thieves roaming the area. In reality 75% of all property crime is committed by youths between twelve and eighteen. Eighty-five percent of all home or apartment thefts occur between 8am and 4pm (especially when school is out for the summer). Strangers, in most cases, do not lurk around at these hours. We have known of very few home thefts committed by complete strangers. Most theft is committed by people who have been in the home previously, or by a friend of people who have been in the home previously. To a lesser degree, some homes or apartments are entered by a neighbor or a neighbor's friend.
Also, in a major American city, a "sting operation" was set up by local police who acted as a fence to catch home burglars. When the operation concluded, they found 15% of the "stolen or missing" items recovered were sold to the fence by a member of the household, usually teenagers. We did not give the name of the city since our experience in various areas around the country convinces us that the problem is nationwide, a fact few parents like to face up to.
Another thing should be said about crime. When many landlords hear the words "low income" or "poverty level" ($16,700.00 for a family of four on 1/1/2000), they conjure up visions of un-trustful or thieving people. Consequently, they do not like to rent to people who fall within these economic lines, even when they believe the tenant can afford the rent. Many people take it for granted that poverty breeds crime. If this is correct, then why are the majority of the people, in the worst poverty stricken areas of the US, law abiding citizens? Contrary to what many socially conscious people believe, a person's moral beliefs are what make him a criminal, not his income. If screened properly the majority of low income people also make good tenants.
Dealing with tenants is one of the most grueling segments of landlording. A large percentage of renters are younger and/or less educated than homeowners. Nurturing them can be extremely frustrating. They take credit for their actions when everything is going well and blame others when things go wrong. In dealing with them, you must make them see they are responsible for all their actions. If you can turn your head and smile occasionally, your job will be much easier.
1. Don't try to be a buddy to your tenants.
WHY TENANTS MOVE
According to one professional property management study, landlords are responsible, to one degree or another, for 70% of move-outs. Why? Because of their lack of attention to the needs of the tenant. Nothing could be further from the truth.
The following percentages are an unrelated composite of 205 of our applications which contained a "reason for moving" entry, plus the more personal reasons given by 211 of our vacating tenants over the same period. These percentages represent the tenants' primary reasons for moving.
1. Upward Mobility.............................20%
(1) Upward Mobility:
Just slightly edging out the second most cited reason, 20% of tenants move because they are moving up in the world.
As many tenants living in multiplexes mature and their earnings increase, they prefer a single unit rental, Tenants will also move to better multi rental housing, or they will move from a lower-priced neighborhood to a higher-priced area. A smaller number move because they purchase their own house, townhouse, condo, or mobile home.
(2) Outgrow Space:
The second biggest reason tenants move (20%) is normally the first reason that homeowners move--they outgrow the space. The growth of a family because of new or growing children is the prime motivation. Many couples will move into a one bedroom and start looking for a two bedroom in eight months. Couples living in a two bedroom with one child may move to a three bedroom before the birth of their second child. Also, as tenants slowly start to acquire more possessions, or the acquisition of large bedroom or living room furniture, they may make a decision to move. Unlike many homeowners who are tied to their mortgage, tenants will move the moment that they feel they need the extra space.
(3) Partnership Related:
The third biggest reason which causes 16% of all tenants to move is the loss or gain of a partner. This could be the breakup of a live-in couple, married couple, friends or relations sharing the same unit. When one is gone, the other cannot afford the unit alone or leaves shortly after for personal reasons. This category also includes singles, especially women, who will move with the false assumption they can get away from ex-lovers who show up in the middle of the night beating on their doors. Some tenants vacate because they marry and move in with their new spouse. In some cases ex-spouses reunite and have no need for two dwellings any longer.
(4) Job Related:
The fourth reason for turnover is job related. We were quite surprised to find only 10% of tenants move due to their jobs. With the turnover rate for workers in American companies around 4% a month, we expected job-related moves to be much higher. Nonetheless, 10% was the figure in both studies. The tenant will relocate because of his job or will relocate if s/he finds a dwelling closer to his present job. Many tenants will even accept poorer housing to be closer to their jobs. Rarely, however, will tenants move if they lose their jobs. Moving is an expensive proposition. The only exception is younger renters who can return to their parents' home.
(5) Superficial Change:
The fifth reason tenants move, only 9%, is due to superficial reasons. One "professional" study attributed 60% of turnover to this category. We can only assume their tenant selection policy is an extremely poor one.
The majority of tenants within this category were under thirty years old. Some were looking for excitement and felt it could be found in new surroundings. They will pay higher rent and settle for worse conditions if the place has superficial amenities in vogue as the seasons change. Swimming pools in summer, and indoor activities which mix the sexes during the colder months are prime reasons for their moves. Six months later they will move to the place across the street because they like the looks of a girl, or guy, who lives there. Then, three months later, they will move again because rules at their present place may not allow four-legged pets. Interestingly they will also move because the place does not provide or allow continued action.
We had a young couple living in one of our sixplexes move because they claimed the place was "too quiet." Three years later the lone woman moved back with us. She wanted a quiet place to begin raising her small child. Her ex is still looking for action.
The average landlord with a small property should have little reason to worry about attracting the largest part of this unwanted and unprofitable traffic.
(6) Cheaper Rent:
Yes, tenants will move to cheaper housing. Although this category only contributes 7% of the move-outs it is nevertheless a factor. Some move to save for the down payment on a place of their own, or they want to save for something special. Others will move due to financial troubles of one kind or another. A smaller segment is due to the shock a hefty rent increase.
Five percent of tenants will admit that noisy or bad neighbors are the prime reason they move. From talking to tenants over the years, however, we have found many, especially males, will bend the truth to retain their self-respect and will not readily admit such a thing. Yet, 25% will admit privately "bad' or "noisy" neighbors were a major factor in their decision to move. Of our tenants who came from large complexes, almost 40% stated that neighbors played a major role, In one nationwide study, when people were asked to give "reasons" why they moved, 72% noted "neighbors."
To give an example what bad neighbors can do, we observed a "trashy" white family move into a lower middle-class mixed neighborhood and cause the financial value of the surrounding properties to fall by 15% within three months' time. Good tenants, whether white, red, yellow or black, will not live next to "trash," whether they are white, red, yellow or black.
This 13% includes, but is not limited to, tenants who leave to return to their hometowns or states, first-time renters moving back home, evictions, skip-outs, a death in the family, and occasionally renters who move because of a nosy or incompetent landlord.
We find nothing to support the theory that the landlord is responsible for most tenants moving. Less then two percent of our tenants ever mentioned or cited the landlord as even a contributing factor in their decision to move (unless the landlord wanted them to move). Tenants from larger multiplexes controlled by property management companies often complained their landlord practiced a tenant selection policy that only included a tenant's ability and willingness to pay. Maybe the biggest percentage of that claimed 70% who move because of the landlord, are in reality moving because of the property management companies' selection policy.
A few years ago we had a family in one of our sixplexes who created a disturbance almost every weekend over a period of six weeks. After fruitlessly trying to get them under control, we had to start an eviction because of neighbors' complaints. A large complex called to check on the family. We explained they were being evicted for disturbing other tenants. The "rental agent" asked how the family paid their rent. We answered truthfully. They were excellent payers, which is why we tolerated them longer than we should have. The complex accepted them and they moved there the following day.
In a single unit rental, there is little if anything a landlord can do to prolong a tenant's stay. In a multiplex, about the only thing you can do is choose good tenants and get rid of troublesome tenants quickly.
THE VACATING TENANT
Regardless of whether your tenants are the cream-of-the-crop or leave much to be desired, sooner or later they will vacate. It is at this time most ill feelings arise between landlords and tenants. Knowing what to expect and how to deal with it can reduce the apprehension and eliminate problems.
How Long they Stay:
Turnover is the ratio between your tenants who move out during a year to the number of units you own. As an example, if you had 10 units and five tenants moved out in a year's time, your turnover would be 50%. If you have 4 units and only one person moved that year, your turnover would be 25%. If you had whatever number of rentals and all the tenants move that year, your turnover rate would be 100%.
America is a very mobile society. Overall, almost half of the population is living in a different dwelling unit than where they lived five years ago. In the last decade while homeowners have increased their stay on a property from five to almost seven years, renters, who used to settle down in one place for three to four years, now move more often than ever. The national turnover average for all rental properties is just over 50%. That means the average stay for renters is slightly less than two years. Single unit dwellings have the longest stays while larger multiplexes, with their dense and teaming life styles, have the shortest stays. Some large complexes, especially in the southern CA, have turnover rates in excess of 150%.
Our turnover rate over our five year study was 47%, which means that our tenants stayed, on the average, around two years and two months. On average, families occupying three bedroom rentals stayed three months (10%) longer than families occupying two bedroom rentals. Female-headed households tended to stay two months (7%) longer than male-headed households, even if the male was married.
Of our renters under twenty-five, 61% stayed less than two years versus 52% for older renters. For tenants who stayed less than one year, 30% were under twenty-five versus 22% for the older group. The average stay for tenants who stayed less than one year was slightly over seven months.
For all groups the average length of stay was as follows:
Less than one year... 23%
Although our percentage of tenants who stayed less than one year may seem high, the national average is slightly higher. In addition, we rent on a month-to-month basis. Since we have little trouble renting our dwellings, we will also let tenants move any time they want, They must agree however, to pay rent on the unit until it is rented, or until the expiration of the Vacating Notice a tenant is required to give. (More about this in Notices and Deadlines.)
We found no solution in picking long-term tenants. Of the 10% of our renters who stayed for five years or longer, they covered a wide range including young singles, childless couples, working women with children, and the elderly. As stated earlier, however, only 44% of our tenants with children moved in less than two years versus 60% for tenants without. Of our renters who stayed longer than three years 66% had children. Tenants with children do stay longer.
There are many ideas concerning turnover and how to reduce it. The advice offered by most professionals is an increase in services. Owners of smaller properties believe that slightly lower rents will decrease turnover. Unfortunately, neither idea bears fruit.
In January of 1980, all of the properties under our control had not had any extensive renovations performed on them for over ten years. We started a three year renovation plan to bring them "up" to their original shape. We began by replacing carpet, tile, or linoleum. Walls and ceilings were painted, papered, or paneled. Counters, cabinets, doors, and woodwork were replaced or refinished. Plumbing and electrical fixtures were replaced where needed.
Repairs and replacements were done on any exterior surfaces where the weather had taken its toll. One by one all eighteen properties were painted to fit the neighboring surroundings. Since most tenants are not noted for their care of the lawns, some properties were given extensive landscaping while the remainder were put back in order by a hired landscaper.
During this time we were fortunate to find a reasonably-priced and versatile maintenance man. We instituted a "same day remedial action" for any tenant request no matter how trivial. We never questioned the tenant's negligence if the damage was minor. We even had drains unclogged for them. During this time, we kept extensive records on the movements of all tenants.
Turnover rate the first two years of 1980-81, dropped 3% from a normal rate of 46% for previous years (hardly reason to spend large sums of money). At first glance it would appear this drop was in response to the services offered. Actually, it was our rent increases. They were lower than comparable properties. Therefore, we attribute most of this drop in move-outs to fluctuations in rental prices and not because of services offered. This was substantiated the following year.
During 1982, while the renovations were at their zenith, we increased our rents the same percentage as comparable properties. At the time we believed that slightly lower rents encouraged renters to stay longer; therefore, our rents were about 10% lower than most comparable properties.
At this time, the local economy experienced a slump and the normal vacancy rate jumped from 7% to 11%. The management companies in the area panicked. Television and radio campaigns flooded the air waves and huge advertisements filled the newspapers. Everywhere one looked, huge signs were going up in front of these complexes touting the virtues of their amenities. Most complexes started giving away free TV's, free cable, free first month's rent, paid moving costs, and some even did away with their security deposits. Others cut their rents by five percent. The small property owners got caught up in the frenzy. They cut their rents. They gave away similar enticements.
Before the year was out, our turnover jumped to an unbelievable 61%, 18% higher than any previous year. Yet, this was during a heavily extensive renovation program, coupled with immediate maintenance repair, and lower rents. In spite of this, the overwhelming number of tenants moving out, moved to higher-priced properties providing equal or poorer services.
The following year (1983) our renovation program was completed. The panic was almost over. We raised our rents 6%, the highest jump in two years. Neighboring properties held the line. We reverted back to normal maintenance routines and started making tenants repair or pay for damages or maintenance due to their negligence. Our turnover rate dropped back to 46% that year. In 1984 it dropped to 41%. In 1985, with no change in our, "your old enough to take care of yourself policy," our turnover rate was 40%, the lowest ever. In addition, our rents were the highest they have ever been in relation to other properties.
As the management professionals say, lower rents do not reduce turnover; however, we found that increased services, hop-to-it-maintenance, major renovation programs, and a smiling disposition DO NOT reduce turnover either. Tenants will move when they are ready to move and except for choosing other good tenants, there is almost nothing you can do about it.
When tenants are ready to move, they are required to give you notice they are going to move, just as you must give tenants notice if you want them to move. Ironically, if you fail to deliver your notice in the proper manner of your state, you can find yourself in all kinds of legal trouble. The tenant, on the other hand, can notify you over the phone or stick a note under your door. As long as they give the required amount of time, there isn't a court we know of that won't consider it "legal notice."
Nevertheless, if the laws of your state require the tenant to give a notice of a full rental period when they are going to move, the tenant must let you know by the last day of the month that they will be moving out by the end of the following month. They are responsible for the full month's rent even though they may move out the first week. For states requiring a twenty-day notice, the tenant must let you know on or before the tenth of a thirty day month that they will be moving before the month is out. In either case, if the tenant notifies you even one day late, they are legally responsible, in most states, for the following month's rent also.
Although our state has similar laws, we have never tried to enforce them. As mentioned in the last section, we will let tenants move anytime they want as long as they agree to pay till the unit is rented or till the expiration of their legally required notice. Some areas already have laws that require such a policy, but we do it for a different reason.
We have found that if we explain the law to the vacating tenants and tell them we will rent the unit as soon as possible if they leave it in ready-to-rent condition, they understand we are being very reasonable and in all but a few cases, they leave the place in exceptionally good condition. Consequently, there is very little work to do and there is no "down time."
As you are probably aware, many tenants are not out by the date they claim they will be out. If you have new tenants waiting to occupy the unit, they may start complaining. To complicate matters further, some states require you rescind the deal with the new tenant and return all monies if they are not able to move in by the date you stated. Therefore, it is best to keep in close touch with the new tenant if problems develop. If you experience this situation, your only recourse is to stall the new tenant. There is almost nothing you can do under the law to remove the vacating tenant. What legal recourse you have is as time consuming as it is impractical.
When this situation arises and the vacating tenants seem to be dragging their heels, we simply inform them the new tenant is waiting and they will be responsible for any costs incurred. This will usually speed things up. In the meantime keep in contact with both new and vacating tenants so further problems do not develop. You do not want the new tenant driving up to your rental with a commercial moving van to find the old tenant still living there.
Keep in contact with the new tenants and explain your plight. Assure them that their landlord also has little recourse to do anything either. Major problems should be averted. One landlord suggested that if major problems develop, agree to pay for an inexpensive motel and/or storage facilities if the new tenant's patience is at an end. The cost may be deducted from the old tenant's security deposit. By keeping in close touch with both parties we have never had such a problem; however, if you are challenged on the withholding, there may be problems depending on the wording of your lease (see Ten Parts of a Lease).
What happens if the present tenant is out but the place hasn't been cleaned? Should you rent the place as is? We advise against it. Our experience has proven nothing but trouble follows. Although many states have laws stating that tenants must clean the place when they vacate whether they took it dirty or not, nothing but ill feelings arise. Worse, more problems arise when you have to pay for repairs you cannot prove were caused by the old or new tenant. As stated earlier, provide the tenant with a clean place. You will save yourself countless problems in the future.
Normal Wear and Tear:
Although you are permitted to charge the tenant for any dirt and damages left behind, all states forbid any charges for "normal wear and tear."
Normal wear and tear is one area where what is normal to one person is abuse to another. Since few states have ever defined normal wear and tear, there are many disputes about this aspect when the tenant is moving. Tenants not only have their deposit to worry about but their reputation. Fortunately, the state of Nevada offers a fine definition:
"Normal wear means that deterioration which occurs without negligence, carelessness or abuse of the premises, equipment or chattels by the tenant, a member of his household or other person on the premises with his consent" ("chattels" means movable items, like appliances).
But, if the average life expectancy of the average carpet is five years in a rental and eight years in a home, and you rent a unit with new carpet and the tenant moves out in four years and the carpet is junk--is that normal wear and tear? Before you take the tenant's deposit and send him a bill for another $300.00, you better understand the consequences.
Normal wear and tear is normally what some ex-attorney (who spent a large portion of his life ignoring justice for the sake of law) now sitting behind a "bench," says it is. More than likely the judge has no knowledge that the average interior of an owner-occupied home will last at least fifteen years, without any major renovations, while the average rental unit has been kicked, battered, shattered, and pounded into oblivion twice within that time.
During a fifteen-year period, the average rental will have the carpet changed three times, linoleum twice, and the walls will have been painted at least nine times. Doors, counter tops, and many broken windows will have to be replaced. In addition there will be repairs and replacements of broken toilets, sinks, light fixtures, heating equipment, cabinets, curtain rods, refrigerator-yes, refrigerator. A refrigerator that will last in an average home for 18 years won't last for ten in a rental.
Yet, the "Judge" will probably tell you the carpet that lasted for four years, or the refrigerator that lasted for eight, is "normal wear and tear." His assumption is made by citing that people moving in and outof apartments create this short life expectancy. How in heaven can a refrigerator have less than two/thirds the life expectancy due to people moving in and out when the refrigerator isn't moved? For the same reason as everything listed above. A large number of renters abuse or neglect anything that isn't theirs.
Nonetheless, if the average tenants lived in your unit for the average time (two years) and you found one broken light shade, two missing light bulbs, one slightly damaged kitchen drawer, one damaged curtain rod, fifteen nail holes in the wall, sink stopper missing, and two hour's cleaning, but on the whole the rest of the apartment was cleaned and looked well, what would you consider normal wear and tear?
We charged for the light shade, the missing sink stopper and two hour's cleaning. If those same tenants had lived there for only a year, we would have charged them for everything. If they lived there for three years, we would charge for just the cleaning--accidents happen, the dirt is theirs.
So, what is normal wear and tear? It all depends on your personality. However, if you do withhold someone's security deposit and s/he takes you to court, remember: The man behind the bench has the final say. Your only defense is a signed condition report when the tenant moved in.
Most renters are very poor housekeepers and give little attention to anything not theirs. As an example, the average life expectancy of carpet in a rental is around five years, seldom more that six, while even the cheapest carpet in an owner-occupied home will last for eight years or more. Carpet does not wear out by rubbing feet on the fibers--it wears out by rubbing dirt between the feet and the fibers.
The average tenant's unit may look clean, but on the whole it is not. Shower stalls, under sinks, ovens, under stove burners, cabinets, drawers, under appliances, window frames, curtain rods, closets, ceilings, light fixtures, radiators, baseboards and floor coverings are something that many tenants never think of cleaning. You might notice that almost all items mentioned are above or below eye level or are hidden. What many don't see doesn't seem to bother them (only tall people clean the tops of refrigerators). However, when you check-in the new tenants, they always seem to be looking up or down (no furniture to look at). They expect a clean place. You must provide it for them. The easiest way to accomplish this is to have the vacating tenants clean the place and the only way is the promise of their deposit. We have found few people will clean a rental if they have nothing to gain. But, almost everyone will clean, and clean well, to get their money back.
If you expect to have the tenants clean the place properly, there is only one way. You must provide them with a super clean place. Our experience has shown that a clean place, coupled with the tenants' desire to have their deposit returned, will insure an exceptionally clean unit nine out of ten times. Most tenants have an inner understanding of when they are being treated fairly and will try their best to leave the place as clean as they possibly know how.
As mentioned earlier, if you rent a clean unit, point it out and have them sign a condition report. When they are ready to move, give them a cleaning instruction sheet to jar their memory. In the four years in our study that we used this system, of the 157 vacating tenants (excluding evictions) all but 14 (9%) cleaned their units with exceptional care. Of the fourteen, three professional people refused to get their hands dirty on their own dirt and told us to deduct the money. Most of the remainder were charged two to five hours cleaning time. A few left the place filthy, but as stated earlier, only one adolescent ever called and asked about the charges.
Before we started using the condition report shown earlier, and dropping off a cleaning instruction sheet to vacating tenants, our number of uncleaned units was three times as high. Interestingly, a large number can be attributed to the mid-life crisis. Tenants vacating around their thirtieth birthday, give or take two years, was one group that stood out. They represented 31% of our dirty rentals, although they only accounted for 12% of our tenants. Also, there is no truth to the old wives tale that women are cleaner than men. They are about equal when it comes to cleaning their units when vacating.
Damages are very easy to see: gashes in doors, broken windows, gouged linoleum or tile, holes in walls, ripped out hardware, busted drawers, broken fixtures, etc.. When one or two things have been slightly damaged over an average stay there is nothing to get excited about. Accidents will happen and you can deduct the charges. Again, an interesting note: The worst damaged rentals were households dominated by males around thirty (give or take two years). These overgrown boys have a tendency to take out their frustrations on the unit. Hollow core doors take a beating from this group, especially in the bedroom where their frustrations seem to reach a peak.
When an apartment has damages obviously caused by gross negligence, have no mercy on these people. Get a witness in the unit to verify the damage. Take pictures. Keep bills. If the deposit is not enough to cover expenses turn their names into collections agencies if they fail to pay. Tell other landlords their names. Sue if possible--some states require they pay double. Try to have them arrested (some states allow this).
Withholding Security Deposits:
The worst thing about security deposits is they create more ill feelings between landlord and tenant than any other item. Attorney General's Offices around the country will tell you the amount withheld from a security deposit is the number one complain about landlords. Considering all the other segments of landlord/tenant relations there is definitely something wrong.
The reasons are twofold. First, the use of the security deposit is not explained, in writing, to the tenants when they move in. Second, there are just too many dishonest landlords who deliberately cheat good tenants out of their money.
We have read all or part of every Landlord/Tenant Act from every state in the US and the Provinces of Canada. More has been written about security deposits than anything else in the last ten years. Some states have landlord/tenant acts going back to 1947 where the only thing changed or amended is the security deposit statute. In every consumer pamphlet in almost every state the first thing covered is how tenants can protect their deposits.
We understand that many classless operators masquerading as good tenants try to get back money they don't deserve. But, as can be seen with all the new legislation, bad tenants aren't the only ones complaining. The tenants who told us their stories of landlords withholding their deposits unfairly were mostly decent people. It appears to us many dishonest landlords are cheating ideal tenants. Maybe these dishonest landlords feel that these people are easier to "push around." It is one of the sad ironies of life. People who should be rewarded for their decency are the ones who pay, while the ones who create the most problems are usually granted favors.
In many states, if tenants can prove their deposit was withheld dishonestly, they can recover double or triple damages. We feel this is fair. If you hear tenants talking about such landlords, tell the tenants to have no mercy on these people. Get proof. Contact free legal agencies. Turn their names over to consumer protection agencies. Join tenant organizations. Sue if possible--some states require they pay double. Try to have the landlord arrested.
Actually though, the biggest reason for tenant complaints about their deposits is due to their misunderstanding of what deposits can be withheld for. If one follows the procedures explained in chapter six, there should be little or no problems.
When withholding deposits you should, and in some states must, itemize what you deducted. We recommend using a move-in report as was shown and explained in chapter six. You can enter any deductions the tenant may owe after comparing the move-in with the move-out portions and writing a brief description on the bottom along with your deductions. If something is damaged but only slightly, it can be deferred, but the tenant can still be charged. If you feel a better description is necessary, use the back of the form or an additional piece of paper. A good move-in move-out form is essential in informing the tenant what was deducted from his deposit and it creates a written record for any monies withheld.
Many states require a sort of condition report already, and many more are following suit. In addition, many states already have laws stating that you must send a statement to the tenant's new address within 14 to 30 days itemizing all deductions. If you are even one day late, you are required to refund all of the deposit. Some states require you to pay double if you fail to send the itemized report by the deadline. Whether the tenants skipped-out, were evicted or even failed to provide you with a forwarding address does not matter. You must send the check-out report to their last known address, which would be your property. If it comes back to you, keep the envelope unopened.
Tenants who move and make a good effort to leave your property in good shape should be treated with understanding and fairness. Over 15% of our tenants are repeats or tenants wanting our larger rentals. In addition, over 50% of our new tenants were recommended by old tenants. Treating tenants fairly, pays.