Tenant Risk Assessment

Tenant screening is risk assessment, pure and simple. In landlording, high risk does not equate to high reward. Quite the opposite is true. With high risk tenants you may find yourself spending more time, more energy, and more money to either salvage the tenancy or end it at an earlier than expected date. Why waste your resources on a marginal tenant or install a tenant with a history of risky behavior?

Each day a rental unit stays vacant eats into your profits, but a single bad tenant can result in substantial losses. The goal therefore is to minimize the costs of installing a tenant and to eliminate installing a potentially bad tenant.

Whether you conduct the tenant screenings in-house or utilize a tenant screening service, risk assessment is an important tool for profitability and asset protection. The size of the landlord’s business does not dictate what types of screening or the number of screenings that should be conducted to thoroughly evaluate an applicant. An independent landlord with one rental unit is usually more susceptible to business loss caused by a bad tenant than a multi-unit housing provider who can spread the expense over his entire operation. With today’s technologies, the playing field is leveled in information collection and delivery.  Single-unit and multi-housing providers alike have access to powerful screening models that are
easier than ever to work with and understand, take less time from a business schedule, yet provide more relevant data and a more comprehensive approach to risk assessment than ever before.

When the selection offer is made and the lease signed you have now acquired a business partner for the term of the lease. It would be unwise to put less effort into the screening and selection of your tenant than you would for a financial partner. The tenant will be in control of a portion of your assets (rental property) and promises to pay you the contracted rental amount for a minimum period of time. Risk assessment should be at the top of your list – well before you turn over the keys. You must decide for your business model the amount of risk you can afford and select accordingly.

Some landlords may be able to afford more risk than they are willing to accept. Setting high standards can in theory help minimize risk. However standards that are too high can reduce the applicant pool and extend vacancy periods. Standards should be objective, measurable, and relevant to the applicant’s performance as a tenant. Your standards must also comply with federal, state, and local fair housing laws.  Federal fair housing law prohibits discrimination in rental housing based on protected classes of race, color, national origin, religion, sex, familial status, and handicap. State and local fair housing laws may be more stringent than the federal law. If any standard you set, despite being neutral and
non-discriminatory in its intentions, has a disproportionately adverse effect on any member of a protected class you have violated fair housing laws through a practice known as “disparate impact.”

You can select the tenant you want as long as you’ve based your decision on sound business criteria, each and every applicant has been screened in the same manner under the same criteria, such criteria applied consistently, without discrimination and in full compliance with all applicable federal, state, and local laws.

What is it that you look for in a tenant? Most commonly, behaviors of a good tenant are the ability and willingness to (1) pay market rent, (2) take good care of the rental property, and (3) be a good neighbor. These three demonstrated behaviors are the base line standard most landlords consider in applicant evaluation.

In reality there is no perfect tenant, no foolproof screening process, and no perfect landlord. However past behavior patterns are recognized as an indication of future behavior patterns.  By analyzing the applicant’s reported historical data for credit management, rental housing, and public records you can begin to see a pattern of behavior that may qualify the applicant for acceptance or denial as your tenant.

Once you have identified the behavioral characteristics that you want in a tenant, determine how you can best measure for these characteristics. As an example, you might require that the tenant have an income that is three times the monthly rent and utilities.  An objective measurement would be the applicant’s gross monthly income as verified with the current employer or verification of other sources of income sufficient to meet your standard.

You also want a tenant with a stable rental history and satisfactory payment history. Your objective measurement would be to contact previous landlords, conduct a credit check, and search eviction history.

Historically, landlords relied upon a numerical scoring process to evaluate candidates, thinking perhaps that a fixed score was a more objective measurement, but more likely thinking it would help create a possible future defense if the applicant was denied and later challenged the decision. As an example, your standard is only those applicants with a credit score of 720 or higher will be considered for further evaluation. By setting this criterion you lock yourself out of potential candidates who just miss the cut-off score but qualify in all other standards. You may put yourself out of business if your standards are impossibly narrow and restrictive. A reasonable business policy for your market, your type of properties, and your tolerance for risk may be to exercise common sense and consider alternatives or modifications to your terms. Perhaps you would be willing to accept with conditions, such as a co-signer. You can make changes in your business model to adjust to changing market conditions, but always document the need for such changes and make sure the business criteria upon which the change is based is sound, legal, and defensible regarding a possible discrimination claim.

Design your business model so that all phases of the rental process have a legal, stated purpose that flows together to produce the most efficient and effective collection of data. Stand alone forms or practices inserted into the process without first analyzing how they contribute to the operation of your business may cause confusion or contribute to misunderstandings, actions you want to avoid.

Your policies and procedures, including the criteria you use for tenant screening and selection should be documented in writing. Documentation is the key to defending against charges of discrimination. Any communication with a prospect, applicant, or tenant should be documented and retained for the required amount of time required by statute.  Not only does documentation help refute false claims; it helps to “remind” both parties as the tenancy proceeds of what was said and done. Information may be misunderstood, memories may fail, or there might be outright distortion of what was said. Without written documentation of policies, practices, forms, interviews, or other public contact, you create potential liability. It will be your word against a claimant’s allegation. You cannot bank on coming out the winner.

Keep current with landlord-tenant statues. As an example, written notices of tenant screening and selection may now be required by state statute. The Tenant Protection Act recently passed by the Washington state legislature requires landlords prior to obtaining any information about a prospective tenant to first notify the applicant in writing (or by posting notice) what types of information will be accessed to conduct the tenant screening and what criteria may result in denial of the application. This disclosure must be provided regardless whether the landlord performs the screenings or uses a tenant screening agency for screening reports.

Your rental forms must be sufficiently detailed to allow you to collect the necessary information needed for applicant evaluation. Make available a copy of your rent rules and lease agreement at open houses or initial public contacts to alert prospects and applicants of your expectations and, accordingly, tenant responsibilities. Also provide a copy of the application and consent form used for tenant screenings, making it clear what information you will collect and the types of reports that will be run. This should be done whether or not required by state statute.

Tenant screening and selection is a process worth the effort to minimize the risk. With the major decision to employ tenant screening already made, you are able to concentrate on the task at hand – filling your vacancy, not gambling with the rent money.

Questions 1

Can I legally limit the number of vehicles a tenant can park on my rental property?

Answer 1

Landlord-tenant laws of most states do not specifically address this issue. Accordingly, a landlord may control parking in a reasonable and equitable manner. What might be considered reasonable may depend on the type of property and the available parking space.

A landlord should control parking space assignments to tenants rather than the number of vehicles a tenant may have. A landlord would not have a right to restrict parking on public property, for example, on the street in front of the property, except as restricted by the city or an home owner association. Furthermore, it may not be reasonable to limit a tenant of a SFR to one or two vehicles when there is ample parking space for six vehicles. Of course, lawns, flower beds, or patios would not be included within such parking space. Any governmental restrictions or HOA rules can be enforced by the landlord. Similarly, depending on the location, it may be reasonable and enforceable to prohibit vehicles being partially dismantled or up on blocks. There could be other issues that might concern the government and/or neighboring property owners.

As with most issues, in order to avoid misunderstandings, it is best to have parking rules well defined in the lease agreement.

Furthermore, the number of available parking spaces should be disclosed during the marketing of the vacant unit, certainly prior to lease signing, in order to avoid last minute problems. Rules should be applied in the same manner to all applicants and to all tenants.

*   *   *   *   *   *

Question 2

I’ve been thinking about converting my 12-unit building from a single meter to individually-metered. Can anyone give me information about experience in doing this and provide an idea of the cost involved?

Answer 2

You didn’t indicate whether you were talking about electric, gas or water meters. However, in general, the same issues usually apply to any of the three.

The cost of converting from single to multiple electric meters depends on both the location of the property and how the building was wired. Similarly, the cost of converting from single to multiple gas or water meters depends on both the location of the property and how the property is plumbed.

There are usually two ways to accomplish separate metering.  One is having the service provider provide an individual meter for each unit.  The other is sub-metering on the “house side” of the existing single meter. In either case, it will be necessary to have each unit serviced by a separate electric wiring, gas piping, or water piping system.

Depending on how the building was wired and plumbed, the cost of separating the units for each of the two approaches can vary from relatively small if each unit has separate systems from the point of the existing meters to extremely costly if the units are significantly interconnected.

In addition to the interconnected vs. separate issue, the choice of whether to sub-meter or have separate master meters installed depends greatly on the service provider, as setting new meters can be greatly different among electric, gas, and water providers.

The bottom line is that the cost for each utility can vary from hundreds to thousands per unit. The only way to determine the cost is to check out the plumbing – something that landlords can usually do themselves – and to ask both the service providers and sub metering vendors to provide estimates and, if units are interconnected, getting quotes from electrical or plumbing contractors for the task of separating units.

It is certainly a good idea to have tenants pay for their own usage, as those who conserve benefit and those who waste pay. However, you may find that neither separating via master metering or via sub-metering is cost effective. In this case, there are two possible solutions.

One is to allocate utility costs among units based on theoretical differences in usage. That is, charging units according to number of occupants and/or unit size. Whatever approach you take, keep in mind that you would not be able to change the terms of a lease during the lease period.
The other is to charge higher rents for each unit.

*   *   *   *   *   *

Qustion 3

What is meant by Class B office space? Are there other classes?

Answer 3

Office space is usually divided into three classes – A, B, and C. The class rankings are just what one would expect. That is, higher quality at the Class A end and lower quality at the Class C end. The rating system is more a graduated scale, with each class being a range rather than a discrete class.

Defining the three classes can be difficult. As for many things, beauty is truly in the eye of the beholder and definitions are somewhat subjective. Definitions vary among regions, local markets, developers, owners, potential tenants, and real estate agents. It may even depend on competition
for tenants in a given market.

Class B and Class C buildings are often defined in reference to the qualities of Class A buildings. Judgment is always involved, as there is no set formula or legal criteria by which buildings can be placed into classes.

The classification of office buildings as either A, B or C usually relates to location, the year of construction, and physical characteristics such as design, type of construction, renovation, functionality, and the amenities that the building provides.

Class A

Generally speaking, Class A space is usually considered to be newer luxury office space that has finer finishing work inside and out, a lobby area, elevators if multi-story, multiple-fixture public rest rooms in common areas, and private restrooms within suites. The building is well located in a desirable business corridor, and is convenient to public transportation and freeways.

A Class A building is of modern construction (utilizing high quality building materials), with state-of-the-art functionality and architectural design, infrastructure, life safety and mechanical systems. Class A buildings are also located in the most sought-after areas. Not surprisingly, Class A buildings typically attract high quality tenants, command the highest rents (although competitive with other new buildings), include the best amenities, and offer the least attractive concession packages for tenants. They are almost always managed professionally.

Class A office space is the highest quality space locally available. The architecture of Class A office structures always prioritizes design and visual appeal over cost, and sometimes over practicality. A Class A building can be considered a testament to the success of its tenants.

Class A office space is built as multi-story (usually 3 floors or more) buildings using structural steel and composite concrete construction. Construction cost for the structure alone (excluding land purchase and site improvements) is typically relatively high per square foot, often several hundred dollars, and can rise significantly higher for a specific space due to the tenant’s preferences for interior finishes.

Class B

Harder to define, Class B space is generally less modern and with finish work that is not as high quality as Class A space. It may also be office space with no lobby, instead featuring exterior entrances to individual offices, much like garden offices or certain office condos. Not all garden offices are Class B, however. Class B buildings should have very little functional obsolescence and deterioration. They are usually highly functional, well-located facilities that have good management, and high tenant standards.

Offices built to Class A standards, but located too far off the beaten path may also be considered Class B. Class B buildings generally feature a less desirable design and infrastructure than Class A buildings.  However, a well-located B building of the right type can sometimes be renovated and reclassified as Class A.

Class C

Class C space is generally older office space without up-to-date interior features. Class C buildings are usually located in less desirable areas. Offices that are worn or that suffer from significant functional or economic obsolescence also belong in this class. Generally, Class C buildings are more than 25 years old and have not been renovated but are maintaining high levels of occupancy. They command the lowest rents and attract the least credit-worthy occupants. It is not likely that a Class C building could be renovated to Class A status even if in a good location.

A number of Class C office spaces in the inventory of a particular market are not truly office buildings, but are walk-up office spaces above retail or service businesses.

Class E

Although historically not an official classification, one sometimes sees what is referred to as Class E office space in some cities. These are generally older Class B buildings that have been considerably renovated to become spaces with a totally new look. Due to their age, they usually have high ceilings, lots of large windows, and lots of wood.  They tend to appeal to the high tech and dot-com tenants and this is likely the reason they are given the “E” class designation.

Summary

The definitions of class are subject to considerable variation and, as with many things, perceptions by tenants and the public are usually more important than the name designation.

Buying Condos as Rentals

All too often, real estate investors, even successful experienced ones, make decisions based on past performance of an already owned rental property or on success during recent years. One of the few certainties regarding investing is that the market can take away your gains as fast as it can give them. As a real estate investor, it is important to treat every purchase decision independently and to perform adequate due diligence before making a purchase.

Real estate investors often decide that the best type of rental property for them is condos. Reasons for this preference include:

• Single unit properties can be sold to owner occupants,
• Lack of external maintenance responsibility makes condos more attractive than single-family homes,
• Good condo communities provide numerous amenities that are attractive to potential tenants and future buyers, and
• Condos are considered to be a hot market.

We will examine some relevant issues to consider when you perform your due diligence, including some issues that are often overlooked.

Rental Restrictions

The CC&Rs of some developments regulate rental of units, even to the prohibition of rental. Even when rental is not outright prohibited the number
and severity of restrictions must be considered. Restrictions other than outright prohibition include requiring Association Board approval of tenants.
The importance of this issue depends on the details. If a tenant must be approved by a formal meeting of the board, it could mean a delay of many days,
even weeks. Since this is something that must be disclosed to potential applicants this might eliminate a significant percentage of your potential pool
of applicants. A Board approval requirement also creates opportunity for fair housing violation claims because of Board actions.

For the owner occupant purchaser prohibition and even less severe restrictions regarding renting can be a positive. Many buyers consider owner occupants to be superior to tenants. Lenders and even the government appear to agree. Financing is more difficult to obtain and more costly when a significant percentage of units are tenant occupied.

Severity of other possible restrictions can also create serious problems if the selected tenant refuses to proceed with signing the lease agreement. The applicants should be required to read the documentation prior to signing because your lease should contain clauses whereby the tenants agree to abide by all documentation and reimburse the landlord for any fines resulting from tenants’ violations and agree that repeated violations (with the number stated) is cause for termination.

Accordingly, investors should read the condo documentation before considering any other issues and immediately terminate consideration of the development if the restrictions are unacceptable – obviously, particularly when renting is prohibited.

Have a Plan

One should never invest in anything without having an adequate plan. The plan must be consistent with the investor’s goals, financial qualifications, knowledge of the type of investment being considered, and risk tolerance. Planning carefully will help an investor place his capital in the most productive way toward realizing goals.

Goals can vary from quick profits to long term growth. Whether you are a short-term investor, perhaps even planning to flip a property for almost instant profit or you are a “growth” investor who plans to hold the property as a rental for many years, the rental numbers still have to make sense for resale value. Short-term investors must buy far enough below market to make enough profit to warrant the wish being taken.

Long-term growth investors should usually focus on the capitalization rate of the property as well as expected future rents and expenses. A growth investor must consider how the rental property will be managed. Will he be basically a passive investor who, upon close of escrow, turns full operation of the rental property to a property management company or will he fully manage the property? Being a passive investor requires the investor to find a competent experienced manager and means that the extra cost of management must be considered. The extra cost includes not only the fee paid to the manager but also the extra cost of maintenance that would usually be performed by the owner-operator. One must also consider that the cost of the maintenance contracted out by a manager is often higher than when the owner personally finds the contractor.

An investor’s financial qualifications will limit the types of investments as well as the risks he should take. This is so for both the amount of cash that will
be initially be invested and the amount of negative cash flow the investor can support. Everyone can tolerate different levels of risk and everyone reacts
differently when it become evident that the risk was greater than that which the investor should have taken.

Purchase Price

An “old” real estate investing proverb says: you make money in real estate by what you pay for it, not what you sell it for. The price of a condo is the next thing that you should consider. Of course, an investor must perform a financial analysis to be sure that the cash flow after paying the mortgage and all operating expenses and expected reserve for capital improvements is acceptable considering his financial resources and income tax situation.

It is important to avoid inflated prices. If the condo is in a hot neighborhood or in a heated market it is even more important that care be exercised because it is very possible that you’re buying at the high point of “value.” This is often a greater problem when buying units in new projects.

For new projects it is particularly important that buyers thoroughly understand the fees that will be assessed by the HOA. Inadequate budgeting projections, whether intentional in order to increase sales or due to incompetence, can significantly increase the cost of operation, reducing the “real” gain upon ultimate sale. You must remember that developers spend many thousands of dollars on marketing and promoting a new product.

Is the initial marketing budget being provided to potential buyers realistic or is it underestimated to keep monthly fees low in order to facilitate sales? Will there be a need to significantly increase fees or have special assessments for future capital expenditures as the property ages because of grossly inadequate
reserves? Don’t fall prey to developer greed. No matter what the hype for the project, don’t be fooled into overpaying.

While fee and budget issues must also be considered when purchasing in existing communities, one has the ability to analyze financial records from previous years for resale units. Required availability of adequate financial information for several past years should be included in the purchase offer, with buyer approval being a contingency.

Location

As for all real estate, location is a primary issue in value for condos.  The purchase price should definitely depend on the location because the rents that can charged and the eventual resale price will depend on the development’s location and on the neighborhood around it.

The condo does not usually make the neighborhood; the neighborhood usually makes the condo. This doesn’t mean that the neighborhood has to be modern, refined, or meet any other strict requirement. It does, however, mean that the neighborhood must have a stable foundation for rental and resale. When all is said and done, the project should feel like a community.

New Project Issues

Hot markets often attract amateur developers who want to get in on the action. However, many times products by such developers have inadequate planning, have poor designs, and/or build poor quality. It is usually best to buy from (1) a local developer and (2) a developer who has a portfolio of successful products of similar type and size in the local market.

Buyers of new construction often have significant choices regarding numerous components.  It is very easy for a buyer to spend too much on upgrades. Developers make money on each upgrade, so they will make it easy to select upgrades and provide many incentives to do so.

When considering upgrades you should think of what the average tenant for the type of unit being purchased in the particular development where located would need in order to sign a lease. Do not look at the decisions as if you were going to live in it yourself for many years. When buying for rental it is best to stay with middle of the road components such as light fixtures, fans, appliances, flooring, cabinets, and countertops. Do not choose unusual colors and patterns.

While overly upgrading to your tastes may not stop the average qualified rental applicant from signing a lease, it will not likely result in rents enough higher to justify the costs. Furthermore, just as for being the largest and most elaborate home in a single-family subdivision, being an overly upgraded unit in a condo development will usually not get you a lot more net profit upon future resale. For both rental and resale value, you want to appeal to the masses. Overly upgrading can actually decrease your buyer pool if the costs of high-price upgrades are to be recaptured upon resale.

Even if the price is right and the developer appears to be great you will still need to have sufficient knowledge and spend adequate time analyzing the location, size of the project, layouts, designer, amenities, and HOA documentation. Of course, you should consider all the same issues when buying resale condo units.

Tenant Insurance

Most landlords protect themselves against a variety of hazard and liability losses by trying to have adequate types and amounts of insurance coverages.

Unfortunately, many residential tenants do not realize that they must purchase their own insurance to cover damage to or loss of their personal property. Many also do not understand that they will be potentially liable for accidents that occur inside their apartments or rented homes and also outside of them in some cases. Many wrongly think that the landlord’s insurance will protect them in one or both cases.

Residential Rentals

According to one estimate, less than a quarter of renters have renter insurance. Furthermore, many tenants have limited assets and are somewhat “judgment proof.” For these reasons, landlords should usually expect to be named in any lawsuit when someone is injured on a rental property, no matter that the landlord was in no way at fault.

Accordingly, landlords and property managers should make every effort to insure that their tenants realize the importance of purchasing their own insurance. Tenants must clearly understand that a landlord’s coverage does not extend to their
liability or to replacing their own personal property for losses resulting from risks such as fire, vandalism, and theft.

Landlords and property managers should clearly state in their lease agreements and in other written reminders to tenants that they do not insure a tenant’s personal property or potential liability and encourage tenants to buy a tenant insurance policy for themselves. Not only is the insurance of possible benefit to the tenant, but it will reduce, usually even eliminate potential landlord-tenant disputes after tenants’ losses, including from fire, water damage, and theft.

Tenant insurance, like homeowners, is usually a package of several coverages designed to cover more than one risk. Tenant policies usually have deductibles of $250 or $500.  Tenants who live in a flood, mud, or earthquake areas will need to pay for extra for those coverages.

The renter policy is relatively inexpensive because both policy limits and risk will be much less than for a homeowner. The coverage on a building accounts for a major portion of the homeowner policy premium. Tenants only need to insure against losses to their own personal property, with limits likely to be from $20,000 to $50,000. Furthermore, if the renter insurance is obtained from the same company that insures their vehicles, the multi-policy discount will reduce the cost.

Most renter policies also include personal liability coverage of $100,000, although higher limits can usually be purchased.

Tenants can often be convinced that having insurance is of significant benefit, particularly in view of the relatively nominal cost of annual premium, by providing a list of benefits. Although by no means complete, a basic list would include the
following points:

• If another tenant who lives above, below, or to the side  of an insured tenant does something that results in damages to property of  the insured tenant, the renter insurance of the tenant in the unit who was  responsible for cause of damage would pay for the damages.
• In the above scenario, if the other tenant doesn’t have renter  insurance, then the insured tenant’s own renter insurance would cover the damages, the degree of compensation depending upon the terms of the renter  policy and compensation will either be the amount the items were worth at the time lost, taking depreciation into account, or what it would cost to replace them.
• Renter insurance will help pay for medical bills for someone who is injured on the insured tenant’s rented property. In a serious case where the injuries are extensive or there is a death, and the person files a lawsuit, the renter policy will also help cover legal fees.
• Renter  insurance helps pay to replace stolen items. As mentioned before, the insured tenant will either be reimbursed for what the items are worth or for what it would cost to replace them, depending on the terms of the policy.
• If an insured tenant, upon returning to his car, discovers that a window was broken and something was stolen from the car, the tenant’s auto insurance policy covers the broken window, and a renter insurance policy provides compensation for the stolen property, again, the amount of compensation for the stolen property depends on the terms of the policy.
• If a tenant having renter insurance causes damage to his unit or to other rental units – for example, a dish towel setting next to an active gas stove burner bursts into flames and burns the wall and some of the kitchen cabinet, renter insurance covers damage to the landlord’s property. Absent renter insurance, the landlord’s policy would likely cover the landlord’s costs, but the insurance company would have the right to file suit against the tenant to recover its costs and the landlord could file suit for the costs of the damages not covered by insurance, for example, for the deductible amount and any damages not covered by the landlord’s insurance policy.

The insurance agent who services your landlord insurance policy may be able to provide insurance company brochures that discuss rental insurance and would certainly be happy to provide some to you.

Either brochures provided published by an insurance company or a list of benefits developed by the landlord can be attached to application forms when provided to potential applicants.

It is also a good idea to include a paragraph in the lease agreement itself wherein the signers acknowledge that they have been informed of the fact that, absent direct fault of the landlord, the landlord has no liability for loss of tenant personal
property and that they have been informed of the benefits of covering their potential property losses and legal liability to others by having renter insurance.

It is obviously of significant benefit to both tenants and landlords for tenants to have renter insurance. Accordingly, as long as not prohibited by law in the jurisdiction of the rental property, landlords might consider requiring renter insurance as a condition of tenancy.

When thinking about such a requirement, landlords must consider a number of issues, including the market for the particular property. The primary issue is the degree to which the cost of renter insurance added to the rent and all other costs of living at that property (e.g., utilities) might significantly reduce the pool of acceptable applicants. This is, of course, less a concern for higher end rentals than for lower, as those who pay higher rents often carry renter insurance anyway because they usually have more personal property which they need to protect with hazard insurance and more assets which they need to protect with liability insurance.

Commercial Rentals

Commercial property owners must not only carry adequate insurance coverage themselves that is tailored to the type of property, but should require that all tenants insure the leased premises and their liability. This is accomplished by including an insurance clause in the commercial lease. The clause should contain at least the following terms:

• The tenant shall maintain the required insurance at its own expense.
• Casualty insurance shall be carried in an amount not less than the full replacement value of the leased premises.
• The tenant’s policy shall include liability coverage of the amount specified by the lease agreement, all-risk property coverage, and adequate business interruption coverage. The last coverage is important so that the rent will continued to be paid in the event of a loss that requires closure of the tenant’s business.
• The policy shall name the owner (and property management company, if any) on the policy as additionally insureds. This assures advance notification of the additionally insureds by the insurance company in the event of a cancellation, giving them time to force the tenant to solve the problem or face eviction or other legal action.