Tenants, who to choose

In a perfect world you would have lots of tenants with great credit, no criminal history and a spotless rent record. Sadly reality has to rain in on our parade, making the perfect tenant a rare animal and not the norm. This is even more true now with the economy the way it is. And for anyone living under a rock the last couple of years, I mean its completely horrible.

So before you write off tenants with black markets in their past, its a good idea to take a look at exactly what they are. For example I wouldn't write off someone who has a minor shop lifting charge when the were 19 if it was 10 or 20 years ago. After all, how many people did stupid crap in college. Most of us were just luck enough not to get caught. It is highly likely that the one incident was enough to scare them back on the straight and narrow, so why penalize them for something stupid they did in their youth, especially if everything else is spotless. You could be losing a great tenant.

Credit is a major sticking point for most landlords, with good reason. I mean who wants to rent to a tenant who has a habit of not paying. No one with any sense. Having to evict and take someone to court to get late rent is no walking in the park, so most landlords would prefer to avoid it. However that being said, it never hurts to take a closer look at why someone's credit isn't overly high.

After all lets face it, how many business have let go of employees to stay afloat or just gone under completely? A whole bunch, and finding a new job is a painful slow process for most people now a days. This could easily make it impossible to pay bills, especially large ones like mortgage. As that was the only issue and the tenant had a steady job and had been there for sometime, why let the fact that they haven't yet had enough time to erase the past from their credit stop you. Especially if their credit was good before things went down hill.

That being said, avoid people immediately tell you a sob story. The more dramatic and heart wrenching it is, the more likely it is to be a scam. Make sure you do your research, don't assume what the potential tenant is telling you is the truth. Happy tenant hunting.

Renters doing background checks

As I landlord I’ve been doing tenant screening for years. Been with http://www.tenantverification.com for most of it. And during all of that time only two applicants have ever request information from me to run their own search.  Research is just as important to do if you’re the renter as it is for the landlord .

Don't assume landlord's insurance covers all damage

Posted 03/22/2012 by Janet Portman

Q: I read a recent New York Times article about renters insurance, which quoted an insurance professional who warned that if a tenant's possessions are damaged, "the landlord's policy is not going to cover your damages." But the article says there's "an exception to that ... if the landlord was 'aware of a prior hazardous condition, failed to correct it in a reasonable time frame, and your property was damaged.'"

I'm confused -- as a landlord, am I insuring my tenant's property if it's damaged as a result of my carelessness? --Paul B.

A: Your confusion is understandable. In a sense, this insurance professional was right: Tenants in this situation might get some money from the landlord's carrier. But it's not correct to conclude that when landlord carelessness is involved, the landlord's policy will "cover" the tenant. Once you see how these claims work, you'll see what I mean.

Here's a typical scenario:

Suppose Sam's computer, which he left on the kitchen floor while it was recharging, is ruined when the pipes burst under the kitchen sink, causing a flood. Sam's landlord had supposedly fixed the leak just that day, but a plumber later confirms that the landlord did a shoddy job. It's pretty clear that the landlord was careless.

Sam's landlord has property insurance, but that insurance covers only the landlord's property; it wouldn't extend to Sam's computer. The landlord also has liability insurance, which covers the landlord when his carelessness results in damages or injury.

If Sam the tenant has renters insurance ...

Here's how things would play out if Sam has his own policy. Sam takes pictures of the floor and his computer, gets a statement from a computer repair shop and the plumber, and submits the claim to his insurance carrier. The company pays Sam; most companies do not dispute these claims unless they have solid reasons to suspect fraud. Sam buys another computer. (Hopefully, he's got "replacement value," not "actual cash value" coverage, which results in enough money to cover the total cost of a new computer.) Sam's carrier can go after the landlord (known as "subrogation") to get reimbursed, but because this is a small claim, it probably won't. Even if it did, Sam wouldn't be involved.

If Sam has no renters insurance ...

In the absence of his own policy, Sam wants the landlord to pay for the results of his shoddy repair. He sends documentation of the damage to the landlord, demanding reimbursement. Sam cannot make a claim on the landlord's property policy, because that policy did not insure Sam's stuff.

The landlord then has three options: Pay Sam; refer the claim to his carrier, which will treat it as a claim against the landlord's liability policy; or ignore Sam. If he doesn't pay voluntarily but refers the claim, the carrier will get in touch with Sam and probably settle. But if he simply ignores Sam, Sam will have to sue the landlord to get his money. Even then, the landlord is under no obligation to involve his insurance company, and may choose not to in order to keep his record clean.

If Sam wins in small claims court, he will get a judgment that he will have to collect. But if the landlord won't pay, he can't just present the judgment to the landlord's insurance company. Instead, he will have to attach the landlord's bank account or garnish his wages.

So you see, Sam may eventually get his money from the landlord's carrier, but only if the landlord chooses to involve the insurance company, and only if they settle or Sam wins in court. That's a far cry from saying that the landlord's insurance will "cover" damage to the tenant's property caused by the landlord's carelessness. The bottom line: It's a lot easier to have your own coverage and let the insurance companies sort it out.

Q: The lease I've been asked to sign has an odd clause concerning attorney's fees and costs in case there's a lawsuit. It says that the loser will pay the winner, but only up to $1,500. Is this legal? --Geoff S.

A: Lawsuits between landlords and tenants can arise over the meaning and implementation of the lease, or over issues that aren't covered by the lease. A lawsuit over the landlord's retention of the security deposit is an example of the first kind; a tenant's claim that the landlord charged her more rent because of her race is an example of the second.

Whether your landlord's attempt to limit the loser's liability for court costs and fees will hold up depends on the kind of lawsuit at issue, and on what your state law has to say about the matter. Let's take a look at each situation.

Lawsuits over the lease

Some landlord-tenant disputes arise when one side claims that the other isn't abiding by the lease terms, or is implementing them in a way that is contrary to the spirit of the lease. For example, a landlord might claim that a tenant is failing to take reasonable care of the property, in violation of the lease clause that requires such care, and terminate accordingly. The tenant contests the ensuing eviction lawsuit, and one side wins. In this situation, your lease's cap on the loser's liability might hold up, as long as there's no state law or policy that would lead a judge to strike it down.

But suppose the lawsuit is over the tenant's use of a rent-withholding remedy, which was followed by the landlord's decision to take away the tenant's parking privileges. The tenant, claiming unlawful retaliation, sues and wins. Will the cap be applied? That depends on whether the anti-retaliation statute itself requires the loser to pay the winner's costs. When retaliation is involved, many statutes include this type of provision.

For example, California law specifies, "In any action brought for damages for retaliatory eviction, the court shall award reasonable attorney's fees to the prevailing party if either party requests attorney's fees upon the initiation of the action." (Cal. Civil Code § 1942.5(g).)

The statute in Illinois does not provide for these fees (765 Il. Comp. Stat. § 720/1), but Texas law does (Tx. Prop. Code Ann. § 92.333).

So, if your state's anti-retaliation statute requires the loser to pay reasonable fees, but the loser's attorney fees exceed $1,500, will a court uphold the lease's attempt to vary the statutory rule? It depends. Sometimes, courts allow landlords and tenants to vary the rules, but often they don't.

For example, courts won't uphold a lease clause that relieves a landlord of the duty to maintain fit housing.

Lawsuits that arise independently of the lease

Now, suppose you're dealing with a legal spat that does not have its origin in the lease, such as a discrimination lawsuit. It's doubtful that a hearing officer or a judge would apply a lease clause that attempted to limit the liability of the losing party. Often, the antidiscrimination statute itself specifies that the loser will pay.

And from a practical point of view, such a limitation would limit the number of cases brought to challenge illegal landlord acts, which is not what state legislators want.

Here's the problem: Imagine a winning tenant whose attorney has billed for many thousands of dollars, as is common. If the losing landlord is responsible for only $1,500, the balance will have to come from the winning tenant. If the award to the tenant in the lawsuit is modest, the lawyer could end up with most of it. Knowing that this may be how things turn out, tenants may be discouraged from bringing such suits, which is not what legislators intended when they wrote laws proscribing discrimination.

For this reason, a court might refuse to apply a lease clause that limits the loser's liability for the winner's fees.

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Article from www.tenantverification.com

Beware of tenant repair duties in lease

Posted 05/04/2012 by Janet Portman

Q: The lease for our single-family house specifies that we will do "routine maintenance." The landlord claims that this includes fixing the roof and doing exterior painting. We had no idea that he saw it this way; we were thinking drain repair and so on. When we refused to re-roof the garage, he told us he'd sue us for the water damage that will result from a leaky roof. Can he? --Mark and Linda

A: Your question illustrates the dangers of handing over maintenance duties to tenants without a clear understanding of what those duties involve. Fortunately, the problem is relatively rare, because most states do not allow landlords to contract away their duty to maintain a fit and habitable rental. Of those that do, the statutes limit the practice to single-family homes, and typically require that the duties be spelled out in writing and that the arrangement be a fair bargain (in other words, the tenant must be paid for the labor or get a good deal on rent).

The landlord must treat the arrangement separately from his other duties as a landlord. This means, for example, that if the landlord is unhappy about the job the tenant is doing, he cannot retaliate by shutting off the water.

Even in states that allow landlords to delegate legally required upkeep, few do so. Most owners are not willing to entrust the integrity of their property to tenants who may not know much about property maintenance, and have less incentive to do things right than if they owned the property themselves.

Let's assume for now that your state allows the landlord to pass along the obligation to maintain the property, and you decline to re-roof the garage. If your landlord sues you for the resulting water damage, the burden will be on him to convince the judge or jury that you broke the maintenance agreement. And he could have a hard time doing so: The agreement, which the landlord wrote, is so vague as to be meaningless. A judge may well conclude that the landlord had a chance to write it correctly, failed to do so, and cannot now complain about the consequences.

Your landlord will be similarly out of luck if he tries to get his insurance company to cover the damage. Property damage policies cover damage that results from a sudden event, such as water that pours in after a tree has fallen on the roof. Deferred maintenance that causes water damage over time won't be covered.

Before it comes to that, get together with your landlord and revisit the delegation issue. Although the lease was signed some time ago, there's no reason why the two of you can't amend it now and fix it. Make sure that if you want to take on minor repairs only, their precise nature and extent is described thoroughly in the lease, and that you are fairly compensated for your efforts.

Q: I've always told my tenants that their rent check must be postmarked by the first of the month (rent is due the first). I've just hired a property manager, who says I should instead require receipt of the rent on the first. What do you think? --Peter A.

A: I'm with your property manager. "Due on the first of the month" means in your hand, or in your bank account if there's an electronic transfer of funds. If tenants are mailing a check, it's up to them to mail it in time to be received by the first.

Here's the practical problem with your approach: Not only will you receive the rent a number of days after it's due, but you also will have given your tenants an unintended grace period when it comes to failure to pay the rent.

Suppose, for example, that a tenant insists that she mailed the check on the first, and that date happens to have fallen on the Saturday of Labor Day weekend. Because Monday is a federal holiday, the earliest the check will arrive is the following Tuesday, a full three days after the first. In fact, if she missed the last pick-up on Saturday, it will not have been processed until Tuesday ... and you can't expect to get it until Wednesday or even Thursday. So you wait until Thursday or even Friday, and don't give her a three-day notice to pay or quit until Friday or Saturday. She's managed to not pay rent for an entire week, and has another three days to come up with the rent -- 10 days after it was due.

But suppose she moves out instead? You have to take those 10 days' worth of rent from her security deposit. That leaves the balance to cover damage beyond ordinary wear and tear. If the cost to repair damage exceeds the balance of the deposit, you'll have to either sue for the remainder or swallow the loss.

Had you insisted on actually receiving rent on the first, you could have served your notice on the second, and the tenant would have had to pay by the end of the day on the fourth. If she moved out instead, you'd take only four days' worth of rent from the deposit, leaving more to cover damage.

Of course, the delay caused by your approach will delay any eviction proceedings too, which you'll need to begin if the tenant neither pays nor moves out. It's far better to file an eviction lawsuit early on, when the unpaid rent is lower, because that rent will also come out of the security deposit, leaving less to cover damage.

I hope all of this convinces you to write your future leases to require that you receive the rent by the first of the month. Putting the risk of mail delays on the tenant is the only sensible way to go.

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Article by Tenant Verification