Bill Gray – The Landlord Doctor

Insider Advice on Collecting Tenant Debt and Screening Tenants

Posts Tagged ‘Court’

Failure to Comply With Tenant Deposit Notifications Could be Costly

Posted by Bill Gray on February 22, 2010

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A Landlord's Worst Nightmare

Imagine being forced to write a check to a previous tenant who still owes you money.  This is a very real possibility if you fail to comply with the law after the tenant moves out.  With the amounts and occurrences of tenant debt rising, having to pay a previous tenant who still owes you money only adds insult to injury.

In most states, landlords and property managers are required to notify their tenant if they do not intend to refund the tenants deposit after they move out.  States vary in the required timeframe and method of notification, but most do require it.  This notification is referred to in various terms such as SODA (Statement of Deposit Account), Deposit Disposition, Final Account Statement, etc.  Some states require the notice be sent via certified mail, while others accept First Class mail notification.  I advise landlords to mail this notice via Certified Mail, whether the state requires it or not.  Sending it Certified Mail provides you with a receipt proving you mailed it and complied with the law.

Failing to notify your previous tenant of how you intend to apply the deposit he paid you may end up costing yourself even more money!  Regardless of the unpaid rent, damages, eviction legal fees, etc., if you fail to notify the tenant as required by law in most states, the tenant can demand his deposit back.

Let’s say the tenant paid a $1,000 deposit on a twelve-month lease. Six months into the lease, the tenant skipped, leaving your rental trashed and owing you a month’s rent.  Once you calculate your losses, you determine that the tenant owes you $3,000.  After subtracting the $1,000 deposit, you are in the red $2,000.

If in this scenario you do not notify the tenant of how you intend to apply the $1,000 deposit toward the $3,000 loss, the tenant in many cases could demand his $1,000 back, regardless of what he owes you.  Yes, he may have to sue you to get the deposit back, but if you have violated the law, he most likely will win.

So, take a look at what your failure to comply with the law may cost you in addition to a big headache.  Immediately, you have cost yourself the $1,000 deposit plus any legal fees you paid to defend yourself in court.   A quick Google search will give you further proof, revealing a number of class action suits against landlords and property management companies who failed to notify past tenants of how the deposit was applied.

In many cases, you might not have a forwarding address to mail the notice to. Your only option is to mail the notice to the last known address, which is the address of your rental. Half or more of these notices will be returned to you as undeliverable or having a wrong address.  File the returned mail with the tenant’s file and save it.  You may need the returned mail as proof that you did attempt to send the notification.

Comply with your state’s deposit notification law.  Doing so may save you money.

The information contained in this article is provided for informational purposes only, and should not be construed to be legal advice.  Consult a local landlord-tenant attorney to discuss your specific situation.

Email me your tenant screening and tenant debt questions.

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

Copyright 2010 – Click here to reprint/re-post

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Accepting Late Payments Can Land You in Court

Posted by Bill Gray on February 11, 2010

There are many reasons why you shouldn’t allow a tenant to pay rent late, but the legal implications must always be at the top of the list.[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5D Unfortunately, by being the nice guy, or gal, and accepting late rent payments, you might be establishing grounds for a Fair Housing lawsuit.  Last year, I sat in on a seminar given by Milwaukee landlord-tenant attorney Tristan Pettit, where I learned that case law has been established that says you cannot accept late payments from one tenant and not accept late payments from another.

The Fair Housing Act makes it illegal to “set different terms, conditions, or privileges for sale or rental.”  By accepting late payments from one tenant and not another, you may be violating the law.

Any trip to court can be precarious and expensive in terms of time and money. You can never be certain of what the outcome of a court case or dispute is going to be.  Any good attorney will tell you that avoiding court altogether is always preferred.

To compound the issue of being sued for a Fair Housing violation, consider what you are doing to the terms of your lease by habitually accepting late rent. Let’s say your lease requires the rent to be paid by the third of the month. But for the last six months, you have accepted the rent on the fifteenth. Suddenly, in the seventh month you put your foot down and demand the rent be paid by the third, but the tenant ignores you and continues to pay the rent on the fifteenth. In the eight month, you file for eviction when the tenant again is late with his or her rent.

If the tenant were to hire a savvy attorney to represent them, the attorney could easily argue that you had amended the terms of the lease by accepting the rent late the first six months of the lease. Not only could this force you to continue accepting the rent, it could cause a counter suit.

Enforce the terms of the lease and require that the rent be paid on time—from each and every tenant.  Doing so may keep you out of court.

The information contained in this article is provided for informational purposes only, and should not be construed to be legal advice.  Consult a local landlord-tenant attorney to discuss your specific situation.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

Bill@thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

Copyright 2010 – Click here to reprint/re-post

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Non-Refundable Pet Deposits Can Actually Cost You Money

Posted by Bill Gray on January 31, 2010

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe way in which you explain, or don’t explain pet deposits can cost you profit.  If landlords could spend just one day as a professional collector attempting to collect tenant debt, one of the top objections they would hear from previous tenants is about pets and pet deposits.

“The urine spots on the carpet are covered by my pet deposit” is one example of a tenant either intentionally or unintentionally misunderstanding the pet deposit.  Many pet deposits are non-refundable.  If this is not fully explained at lease signing, most likely the tenant will believe that the pet deposit is no different than the standard deposit he placed on the rental unit.

Most tenants understand that when they pay a rental deposit any damage they cause to the unit will be deducted at move out from their deposit.  If the non-refundable pet deposit is not fully explained, the tenant considers it the same as the rental deposit.

So when Fido has several accidents and soils the carpet, the tenant often will guesstimate that his pet deposit will cover the cost of cleaning it.  In reality the cleaning cost is deducted from his refundable deposit.  Imagine the difficulty a professional collector has on the telephone trying to explain the difference between a non-refundable pet deposit and refundable rental deposit.

This is not to say that a certain percentage of previous tenants have a convenient memory when it comes to the terms of the lease.  But I do believe that a good share of landlords do not take the time to fully explain the terms.  An initialed and signed pet addendum will go a long way in settling disputes after move out.

Use a clear, understandable pet addendum and explain it clearly before the new tenant initials and signs it.  Doing so will save you profit by reducing tenant debt when the tenant moves out.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

Forum www.theinformedlandlord.com

Copyright 2010 Click here to reprint/re-post

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Rising Tenant Debt Challenges in a Down Economy

Posted by Bill Gray on January 6, 2010

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DOur country’s current economy has had a severe impact on the real estate and housing market.  The nightly news covers the blight of communities impacted by a high number of foreclosures and the emotional stories of people who are facing such a crisis.  Unemployment, lack of medical insurance, and the credit crunch caused by sub-prime mortgages add to the crisis, making the current real estate market grim.  As a result, the downturn of the economy has also significantly affected landlords and property managers, presenting them with an unprecedented number of challenges.

As ‘The Landlord Doctor,’ I’ve reviewed over 70,000 cases of tenant debt, encompassing more than $200 million dollars.  Every day, I witness the negative impact of our economy on landlords and property managers across the country who seek my advice and instruction in reducing or collecting tenant debt.  As I sit on boards of professional associations and talk to the people who attend my conferences, I’m astounded by the increased spark of questions and concerns raised by landlords because of the economy.

As more people are displaced from their homes, those questions and concerns will continue to rise.  The need for extensive tenant screeningcollect tenant debt will increase as people become victims of the economy, and the need to will be a pressing issue for landlords.  There has already been a tremendous increase in landlords seeking my assistance in these areas, which is why I thought I’d share two common questions which have been posed in the past few months.

“My tenant is three months behind on rent. He’s always been a good tenant, but has lost his job. What should I do?”

First, like you, I sympathize with your tenant’s situation. However, three months is a long time to receive free housing. Remember, while you’re trying to be a nice guy, being a landlord is still a business. My experience shows that once a tenant is allowed to become two months in arrears on their rent, the odds are slim that they will become and stay current. In fact, these tenants usually owe much more than two months rent when they leave. When you first become aware of a change in their financial situation, make it clear that while you empathize with their dilemma, you cannot afford to allow the rent to go unpaid.  Be straightforward from the onset, notifying the tenant that carrying a balance due on rent is not an option. Additionally, a good attorney will advise that past case law has indicated that routinely allowing tenants to pay late sets a precedence which could force you to continue accepting late rent payments. Even worse, allowing one tenant to pay late, while refusing other tenants the same latitude, may cause a Fair Housing lawsuit, as all tenants must be treated equally.

“My tenant skipped out on their lease and damaged my rental. How can I collect what they owe?'”

This situation can be more complex. While it’s certainly something no landlord wants to  encounter, it happens.  Though this situation is more common during tough times, efficient property managers have learned to minimize it by applying good business practices from the time the prospect walks through the door, until he or she moves out of your rental. If it happens, I recommend that you take pictures and document all damages.  Follow your state law regarding proper notification to the tenant about the application of their deposit. Insofar as collecting the debt, you have three options:  1) sue the debtor in small claims court; 2) hire a collection agency (only an agency that specializes in tenant debt), or report the debt to all three credit bureaus and attempt to collect it yourself.

While I know that each of those situations has its own unique set of circumstances, a common theme prevails—an increasing number of landlords and property managers are experiencing a rise in cases of tenant debt.  These new challenges should make us more aware of the need for prevention, education and remedies in screening and the collection of tenant debt.

Use this difficult time to hone your skills as a property manager and your focus on the details. Improve your business practices by making small changes and improvements.  As a result, you’ll decrease incidences of tenant debt and increase your profits.  These are critical areas landlords must address to survive in any economy.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

Bill@thelandlorddoctor.com

Copyright 2010 Click here to reprint/re-post

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USA Today – The Landlord Doctor

Posted by Bill Gray on January 4, 2010

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DDecember 30th USA Today published an article titled “Apartment renters win as vacancy rate climbs”, when he wrote the article author Paul Davidson asked me what effect concessions are having on the tenant delinquency rate.  My quote is included in his article.  The bottom line is that concessions may help rent empty units, but tenant debt continues to rise.

Link to Article: “Apartment renters win as vacancy rate climbs”

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

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Ten Common Landlord Mistakes

Posted by Bill Gray on January 3, 2010

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Effectively Dealing With Tenant Delinquencies And Eviction Proceedings

By Jon L. Farnsworth, Esq.

(Editor’s note: This article was initially published in the September 2009, Minnesota Real Estate Journal, and has been edited and reprinted with the author’s permission.  While the article mentions Minnesota law, and includes commercial leasing issues, the discussion points are generally applicable in other states and to residential lease matters.)

The poor state of the economy threatens tenants’ ability to satisfy their lease obligations. Unfortunately, landlords are feeling pinched by tenants’ mounting delinquencies.

Some tenants lack the cash flow to make lease payments, while other tenants voluntarily withhold rent for business reasons (i.e., conserve cash flow; obtain a lease modification with more favorable terms for the tenant; etc.). This article summarizes ten common mistakes made by landlords when dealing with tenant defaults and eviction proceedings as well as offers insights of how to effectively manage tenant delinquencies.

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Landlords Who do Not Screen are Shooting Themselves in the Foot

Posted by Bill Gray on September 23, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DemailOf the 20 to 30 emails I receive per day from landlords with tenants who owe them money, 5 or 6 are from landlords who did not screen their tenants before they rented to them and are now upset that the tenant burned them.  I shake my head when I read these requests for help.

For whatever reason, the landlord rented to someone who “looked okay” and then got upset when the tenant burned them.  Would these landlords buy a used car sight unseen?  Or show up at a dog shelter and say, “give me any dog, I don’t need to see it or know anything about it.”?  Of course they wouldn’t.  As absurd as this sounds, it is basically how they run their rental business.

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SUING AN EX-TENANT FOR PAST DUE RENT: What Factors To Consider

Posted by Bill Gray on September 14, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DTristan R. Pettit, Attorney at Law, Milwaukee WI –       Tristan’s Landlord – Tenant Law Blog www.petriestocking.com/blog/

Your tenant has already vacated your rental unit – so there is no need to file an eviction action — but they left owing you money.  Is it worth your time and effort to sue them in order to obtain a money judgment?  This is probably the third most frequently asked question that I receive when talking to landlords (the first two most asked questions in case you are curious are (1) which notice do I use when? and (2) how do I evict my tenant?).

There is not a simple answer to this question.  It depends . . . on many things.  Many variables need to be taken into consideration before deciding to spend the time and effort to sue an ex-tenant.  Let’s consider what some of those variables are.

1.     How much money does the tenant owe you?

Is the amount that is owed to you worth the time, energy, and cost to attempt to collect it?  You will need to purchase a small claims summons which will cost you approximately $100.  You will need to personally serve the ex-tenant with the assistance of the Sheriff or a private process server — typical cost between $35-$100.  If you are representing yourself you will spend time away from work and therefore lose some wages.  If you opt to hire a lawyer to represent you, you need to consider how much you will have to pay the lawyer.

There is no magic dollar amount that makes suing a tenant worth it or not worth it.  The “breaking point” as I like to call it, will be different for different people. Read the rest of this entry »

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Landlord Tenant Lease – Is Yours Legal?

Posted by Bill Gray on September 10, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DWhether your lease is actually legal is a loaded question.  What is legal?  Legal is whatever will hold up in a court of law on any given day, in front of any givenFlexLease judge.  Is there such a thing as an iron-clad lease?  I don’t think so.  Widely-used lease texts and formats may be utilized by many landlords and property managers for years, only to be determined by a judge down the road that these have been used in error.

I sometimes hear from landlords, “If it is in my lease and my tenant signed it, then it must be legal.”  Sadly, this is far from the truth. Just because your tenant agreed to whatever terms you put in your lease, does not make it a legal contract (lease) that will withstand judicial scrutiny.  Any contract is open to dispute; just take a look at the backlog of civil suits.  Disagreements over contracts happen every day, all over the country.

“Okay, Bill, now that you have suggested I may be using a lease that will not hold up to judicial scrutiny, what do you suggest I do?”  The best anyone can do in composing any type of legal contract is to write one that has the best “chance” of holding up in court: it is all about minimizing risk.

My advice to you is to hire the best landlord-tenant attorney in your area and have him/her review your lease periodically.  Laws and case law change often.  State

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An Organized Landlord Has Less Tenant Debt and More Profit

Posted by Bill Gray on August 22, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DMessyFilesAn organized landlord is a more profitable landlord.  I have reviewed many thousands of tenant debtor files, and one thing is certain; by looking at a tenant file after the tenant moves out, I can usually tell you fairly accurately how the property is being managed.  A well-organized landlord who documents everything has less tenant debt, and, as result enjoys more profit.

Organize your files logically and consistently.  At least half of the files I review are little more than a pile of unorganized papers thrown into a file folder; and often very important documents are missing

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