Landlord-Tenant Law Basics

Most aspects of landlord-tenant relationships are regulated by state and local laws. However, federal statutory law may be a factor (1) in times of national/regional emergencies, (2) in preventing forms of discrimination (e.g., fair housing laws), and (3) regarding certain health or safety issues (e.g., lead-based paint). Failure to obey the law can be costly and ignorance of the law is not a legal excuse.

Landlord-Tenant Law protects landlords and tenants in the renting of real property, both residential and commercial. It defines the rights and obligations of landlords and tenants during the tenancy.

All states have landlord-tenant laws although there are variances among the states. Most states’ laws are similar, sharing general principles of contract law, property law, and, in some states, consumer protection statutes. A number of states
have based their statutory law on either the Uniform Residential Landlord and Tenant Act (URLTA) or the Model Residential Landlord Tenant Code. Some city and county governments also have enacted various landlord-tenant regulations. There can be instances where the local statute has stricter regulations than does the state statute. The general rule is that local regulation cannot go against state or federal regulation but can impose the stricter rule if the general rule is silent upon the issue.

Landlord Tenant Relationship

The landlord-tenant relationship is founded on duties proscribed by either statutory law, common law, or the individual lease document. What provisions may be contained in a lease (oral or written) are normally regulated by statutory law. Any provisions that do not comply with statutory law are illegal and are unenforceable. The location of the real property determines the applicable state law.

The tenant has a property interest in the land (historically a non-freehold estate) for a given period of time. The length of the tenancy may be for a given period of time, for an indefinite period of time, (e.g. renewable or cancelable on a month to month basis), terminable at any time by either party (at will), or at sufferance if the agreement has been terminated and the tenant fails to leave (holds over). If the tenancy is tenancy for years or periodic the tenant has the right to
possess the land, to restrict others (including the landlord except for specific purposes) from entering upon it, and in most cases, to sublease or assign the tenant’s interest in the property. The landlord-tenant lease agreement may eliminate or limit some of these rights by statutes.

Unless the lease states otherwise, there is an assumption that the tenant has a duty to pay rent. State statutes may provide for a reasonable rental value to be paid absent a rental price provision. Summary eviction statutes commonly allow a landlord to quickly evict a tenant who breaches statutorily specified lease provisions, particularly a failure to pay rent. Landlords in many states are restricted from evicting tenants in retaliation of action the tenant took in regards to enforcing a provision of the lease or applicable law.

In most states, commercial landlord-tenant law is significantly different than residential. For example, many states allow the landlord to lock out a commercial tenant for non-payment of rent provided that
correct procedures are followed, essentially shutting down his business.

Landlord Responsibilities

In most jurisdictions a landlord’s general responsibility can be summarized as a duty to:

1. Maintain the premises in a fit and habitable condition.
2. Maintain the common areas of buildings and grounds in safe and sanitary condition.
3. Comply with building, housing, health, and safety codes.
4. Keep all electrical, plumbing, heating, and ventilation systems and fixtures in  good working order.
5. Maintain all appliances and equipment supplied or required to be supplied by the landlord.
6. Provide running water and reasonable amounts of hot water and heat, unless the hot water and heat are supplied by an installation that is under the exclusive control of the tenant and supplied by a direct public utility hook-up.
7. Provide garbage cans and arrange for trash removal if the landlord owns four or more residential units in the same building. Some jurisdictions also require recycling containers.
8. Give at least 24 hours notice, unless it is an emergency, before entering a tenant’s unit, and enter only at reasonable times and in a reasonable manner.
9. Evict the tenant when informed by a law enforcement officer of drug activity by the tenant, a member of the tenant’s household, or a guest of the tenant occurring in or otherwise connected with the tenant’s premises.

Tenant Responsibilities

In most jurisdictions a tenant’s general responsibility can be summarized as a duty to:

1. Keep the premises safe and sanitary.
2. Keep the plumbing fixtures as clean as their condition permits.
3. Use electrical and plumbing fixtures properly.
4. Comply with housing, health, and safety codes that apply to tenants.
5. Refrain from damaging the premises and keep guests from causing damage.
6. Maintain appliances supplied by the landlord in good working order.
7. Conduct himself in a manner that does not disturb any neighbors and require guests to do the same.
8. Permit landlord to enter the dwelling unit if the request is reasonable and proper notice is given.
9. Comply with state or municipal drug laws in connection with the premises and require household members and guests to do likewise.

Rights of Tenants

There are two important tenant rights that the landlord must protect:

Covenant of Quiet Enjoyment

The courts have upheld the right of the tenant to quiet enjoyment of leased premises regardless of whether the lease agreement contains such a covenant. This covenant ensures the tenant that during his tenancy, the tenant’s use and enjoyment of the dwelling unit will not be disturbed by someone with a superior legal title to the land including the landlord. The covenant between landlord and tenant provides the tenant with the right to exclude others from the premises, the right to peace and quiet, the right to a clean and habitable environment, and the right to basic services. If the tenant is deprived in whole or in part of the beneficial use and enjoyment of the leased premises due to actual or
constructive action by the landlord, a breach of the covenant has occurred.

Warranty of Habitability

The implied warranty of habitability is a legal doctrine in most states that requires landlords to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease.

In the past landlords were only required to deliver possession of the premises to the tenant in return for the tenant paying rent. However, courts began to uphold that the lease by its nature was a contract and was controlled by principals of contract law. The lease contained mutual dependant warranties – the tenant’s promise to pay rent and the landlord’s imposed obligation to provide habitable premises.

A material breach of obligations by either party relieves the other party from his obligation as long as the breach continues. If the landlord causes a material breach of the warranty the tenant may be entitled to such remedies as damages, lease termination, rent abatement, or repair and deduct expenses. The landlord’s obligations do not extend to breakages, malfunctions, or other conditions which do not materially affect the health and safety of the tenant nor is the landlord held to correct conditions caused by misuse or inappropriate use of the premises by the tenant, the tenant’s family or invited guests.

States that have adopted the implied warranty of habitability through statute or judicial law have used one of two approaches to determine habitability requirements. One approach uses local building codes which have specific minimum requirements for essential services such as water, plumbing, and heat. The other approach uses common law definitions of habitable housing conditions.

An important point for landlords is to understand the source of their state’s requirements (building codes or common law) since the source of the warranty controls the landlord’s responsibilities and tenant’s remedies. States that use building codes as the source of warranty make it easier for compliance because they have detailed, specific requirements for repair and maintenance responsibilities. In states that use common law definitions for habitability, implied warranty is independent of building codes and it may be more difficult to satisfy requirements. Landlords may be responsible for repairs and maintenance under building codes and responsible for repairs and maintenance under the common law approach. Landlords may thus be held to more responsibilities for habitability in those states that use common law definitions for warranty of habitability.

Landlords are advised to check for state and regional variations that may impose additional requirements to ensure habitable conditions.

Applicant References

Even though the most important tenant screening tasks are credit reports, criminal records, and eviction records, references can also be of value in evaluating applicants as potential tenants.  The primary reason why references can be useful is the fact that, while an applicant has a good credit rating and there appears to be no criminal record or evictions in the jurisdictions checked, there is no guarantee that an applicant will be a good tenant. References can provide information regarding an applicant’s character.

There are basically two different types of references of potential interest to the landlord. One is from previous landlords and the other is from those who know the applicant personally.

Previous Landlords

Most experienced landlords recommend asking the applicant to provide rental history for the past three years. Usually that will provide one or two previous landlord references in addition to the current landlord reference. Going back farther than three years may be counter-productive in that records are unavailable or contact personnel are no longer there.

Some landlords will be forthcoming about giving out information while some will be reluctant to provide any information other than tenant name, residency dates, and monthly rent. Their reluctance to share information is not necessarily a negative response to the tenant or an unfriendly behavior. Some people like to talk more than others do.

Some current landlords may be upset enough with the tenant to say nothing bad about them to allow them to move to your vacant property. For this reason, you should contact the applicant’s landlord prior to the current one rather than depending solely on a current referral.

What you are trying to find out is whether the applicant paid the rent on time, kept the rental property in good condition, was considered a good neighbor, and otherwise materially adhered to the lease agreement. In short, from his past rental behavior, can you determine if the applicant is likely to be a future good tenant?

Limited Rental Histories

There are many potential applicants who have limited rental history, no recent rental history, or no previous rental history at all. Refusing to consider such applicants may significantly reduce the pool of available applicants. This is particularly true in certain locations and/or under certain economic conditions.

There can be many good potential tenants among the following three categories of applicants for which the landlord cannot obtain information from previous landlords:

(1) Those that have never lived in rental housing,

(2) Those who have resided in rental housing, but not as lease signing tenants in recent years, and

(3) Those that have been homeowners for quite a while, but are returning to rental housing, either by choice or necessity.

Category 1 includes those who have only recently left the nest. These potential applicants not only have no rental history, but they also often have little or no credit history. College students and first-time job holders are often in this category.

Category 2 includes those who were spouses or roommates, but have not themselves signed a lease agreement.

Category 3 includes those who have just sold a home and need to rent for a period of time until they find a replacement property or have one constructed, as well as those who have lost their homes due to the current housing market collapse or through some other financial catastrophe. Those who were unable to meet mortgage, property tax, and insurance costs may easily be able to meet the expense of monthly rent.

For applicants in any of the three categories, landlords must sometimes consider utilizing personal references as a qualification tool.

Personal References

Personal references differ from landlord references in that that a personal reference will be an individual that has never rented to the applicant. Personal references are character references offered by family, friends, business associates, community leaders, etc, who can personally vouch for the applicant.

Some landlords feel that such references are worthless, since most applicants are not likely to provide the name of someone who would give a bad reference. The fact that information obtained from personal references can be difficult to quantify and assess in measurable terms also leads some landlords to use this source of information sparingly.

Other landlords view personal references as a third party opinion, and while acknowledging the potential for bias, recognize that behavior observed over a period of time is indicative of future behavior, much as the applicant’s credit history reflects future credit management.

Most landlords who utilize personal references prefer to use hard data to evaluate candidates and “soft” information obtained from references only as a tie breaker for equally qualified applicants.
In spite of the suspect value or difficulty of using personal references, landlords should realize that, properly used, personal references can be a helpful screening tool and in some situations may be necessary.

Obviously, landlords must understand the differing values of reference sources. A parent’s reference may be of little value unless the parent is willing to provide a financial guaranty for the child’s lease, with a guaranty usually eliminating the need for qualifying the child. A reference from a pastor, priest, rabbi or other religious leader or from a former teacher, counselor, coach, scout leader, or employer who has long-term knowledge of an applicant’s character can be meaningful.

Landlords must also use care in selective use of this screening tool so as to avoid discrimination claims. It is important that the tool be used based on lack of credit or rental history, that is, financial or behavioral issues, not because of any characteristic that is prohibited by fair housing laws. However, if you understand and follow fair housing laws you shouldn’t be afraid to exercise your right to adequately screen applicants.

Checking References

References are of little or no value unless the landlord puts some effort into checking them. There is also a benefit to contacting personal references in that certain information supplied by the applicant on his rental application can be cross-checked with the reference. This allows the landlord to help determine the truthfulness of the applicant’s statements and also to ferret out false references that would aid the applicant in trying to fool the landlord.

Landlords should also make some effort to verify the identity of references and confirm that phone numbers or other contact information provided is those of the purported reference.

It is important to schedule interviews for a time when both you and the reference will have sufficient opportunity to communicate. Listening skills are critical since some answers may require clarification before proceeding to the next question.

As with interviews of previous landlords, it is a good idea to use a prepared script in conducting reference interviews. It allows accomplishment of the task in a professional and efficient manner, and ensures all questions are asked of each reference of each applicant. The reference’s responses to questions should also be recorded.

Some Possible Questions

In what capacity does the reference know the applicant? Is he a relative, friend, teacher, etc? A reference from someone who is a relative or friend is less valuable than one who has dealt with the applicant on a business level or in some other capacity.

How long have the reference known the applicant? References usually carry more weight the longer the reference has known the applicant. However, recent knowledge is also important because people can change over the long term.

The value of a reference is greater when you are provided a detailed and believable context for his opinion of the applicant instead of only a generalized statement. The value of a reference also depends on whether or not you heard similar things from each reference you checked, but either way, the reference check will have provided valuable information.

Screening Services

Most screening firms will not contact references. Even those that claim to confirm employment may in reality only look at employment information that appears on a credit report. The business model of screening services does not allow for the time required and the cost of adequately checking references. Additionally, checking references is a subjective task that does not fit the mathematical models used by most firms.

Q1

If an unmarried couple wants to rent our rental home can we have only the man who is working sign the lease? We don’t want to have the live-in lady to have her name on the lease in case the boyfriend leaves as she has no income. If her name isn’t on the lease and he leaves her we could then ask her to leave, but if her name is on the lease then it would be difficult to ask her to leave and she has no means to pay the rent. Also can we refuse to rent to unmarried couples?
A1

In my opinion, there is almost never a reason to not have every adult sign a lease. On the contrary, there are numerous reasons why every adult should be required to sign, some of which are discussed herein.

Federal, state, and local fair housing laws protect against housing discrimination. You will need to research your state and local fair housing laws to determine if there is an applicable statute protecting unmarried couples from housing discrimination. Many states do allow a landlord to use unmarried status as criteria for refusing an application. If allowed by law and your rental standards you must be sure to apply your standards to all applicants. Each and every applicant must be screened using the same rental criteria, in the same manner, every time.

At a minimum, landlords should require that each applicant:

• Be of legal age (18, 19, or 21, depending on state) or an emancipated minor,
• Complete and sign a rental application,
• Sign an authorization of release of personal information form for credit reports, employment, rental history, eviction report, and criminal history, and
• Present at least two forms of personal identification, with at least one being a government-issued photo ID.

Every occupant, age of maturity or emancipated (including spouses), should be named on the lease agreement. In the event one occupant defaults, you have recourse against the other tenant. The fact that one tenant has no income at the time of application does not mean he/she cannot be collected from in the future – he/she may later be employed, win the lottery, or marry someone of significant financial status. Judgments against a person who had no income or assets at the time the judgment was obtained can be collectable for many years later and in other states. And if the person seeks credit at a later date (including when applying to rent) provides leverage for payment because credit grantors sometimes require payment of judgments as a condition of granting credit.

If the boyfriend leaves you can certainly “ask” the lady to leave, but if she refuses you will have to legally evict her or any other person who has moved in, potentially costing you the same time,
money, and stress as if she had been a wife. This is one reason why eviction complaints should usually include “John Does” as defendants. Having the unemployed person(s) sign the lease assures the ability to obtain a judgment
against that person.

In general, the more people who can potentially be held liable for rent and damages the better the chance the landlord will eventually collect what’s owed.

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Q2

Can you tell me where I can find notices for my tenant to clean the swimming pool?

A2

There is unlikely to be available a notice form specific to this issue, but you could use a generic “cure or quit” notice and state the issue as being a default of the lease. What you can do may depend on whether or not the lease agreement adequately specifies the tenant’s responsibilities regarding cleaning the pool. If he fails to clean it as often and to the degree specified in the agreement, or reasonably adequate if the degree is not specified, you can serve him with a “cure or quit” notice (the type of notice available and its exact name varies by state). If he fails to cure the problem within the time period specified by the law of your state, you can begin the eviction process. Depending on what the lease agreement says on the matter, you might also be able to pay someone else to do the work and bill the tenant for the cost.

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Q3

The lease agreement specified no pets. I knew at least 2 large dogs were there and tenant failed to have them removed per my request. Tenant is now out but the dogs seriously damaged carpeting. I had to replace carpet that was otherwise in perfectly good condition. Do I need to prorate the price of carpet and installation in this instance? Carpet at three interior doors has been scratched to the backing and I have not yet had it replaced. Also, the house still really reeks of urine after installing the new carpeting. Is there a way to remove the smell and do I have recourse here?

The tenant quit paying rent during the 60-day notice and there is no security deposit. I Plan to file a small claims action when the final tally has been made.

A3

Proration replacement cost – You cannot charge the tenant for the total cost of replacing the entire carpet in the unit. There are two different issues regarding this issue. First, depending on the floor plan and the location of carpeting, it may be acceptable to replace carpeting in only certain rooms. Second, wherever carpeting is replaced you cannot charge for the full cost of carpeting, but must allow for depreciation.  The percentage of cost of replacing damaged carpet (labor and materials) that may be charged against the tenant is determined by dividing the number of years the carpet has been in service (including the period the unit was occupied by the tenant who damaged the carpet) by the useful life of the carpet. There is more than one number that might be justifiable for useful life, but it is usually least arguable to use the number of years warranted by the manufacturer.

As examples, assume a carpet that the manufacturer had warranted for 15 years. If the carpet was 10 years old when the tenant vacated the unit, the tenant can be charged 5/15 = 33.3% of the replacement cost. If the carpet had been new when the tenant moved in a year earlier, the tenant can be charged 14/15 = 93.3% of replacement cost. If the carpet was 14 years old when the tenant moved into the unit and the tenant remained for one year or more, the tenant cannot be charged any part of the cost of replacement.

Similar considerations must be given to window coverings, appliances, and other components of a rental that would be considered capital items (have a typical useful life of longer than a year) when they require replacement rather than repair.

Regarding the carpeting at doors that hasn’t been replaced, you could proceed as with the other carpeting as long as the departed tenant caused the damage as evidenced by the move-in and move-out checklist.

The smell – While there are a number of products available for the do-it-yourselfer, it is often better to hire a competent vendor. Often, it is necessary to deal with the problem at the source of the odor. This may mean treating the underlying flooring – be it concrete or wood – and to replace not only carpet and pad, but also all carpet strips that have been exposed to the urine. Unless this is done, following installation of new carpet and pad alone one may find that the bad odor often returns after the “new carpet” smell goes away. Accordingly, although you have already replaced carpeting, if flooring and/or carpet strips were not previously adequately dealt with you may have to have the carpeting pulled up and proceed with adequate treatment related to flooring and carpets strips and also treat the new carpeting that was in contact with problems underneath.

Landlords can usually charge a departed tenant for the full cost of dealing with the urine problem.

Unfortunately, a significant percentage of applicants will have pets and even more will likely have them in the future and they won’t always obey lease terms regarding pets. Accordingly, under some economic conditions, in some market areas, and for some types of property it sometimes becomes necessary to consider allowing pets in order to fill a vacancy without otherwise lowering qualifying criteria. Allowing pets, but utilizing adequate lease clauses can be better than dealing with the results of unauthorized animals.

It is often better to select a tenant who has pets and has a good credit record, has no criminal record, has a good rental history, has been employed at his current job for several years and has income that is more than sufficient to pay the rent and all other financial obligations than to select a tenant who has no pet but is seriously deficient in one or more of the above or other qualifying criteria.

For landlords who have desirable property and when there is a good rental market, it can be possible to prohibit pets and still have an adequate pool of applicants. When it is necessary to allow pets in order to obtain an otherwise acceptable tenant, having adequate procedures and documentation in place is important in minimizing potential problems.

Having an adequate lease agreement is very important, including clauses that specify in detail the penalties for having animals without written approval of the landlord. Within the lease agreement or as a separate document tied to the lease agreement there must be an adequate animal agreement. Finally, a security deposit of the maximum amount allowed by state law and, if allowed by state law, also a separate pet deposit.  Discussions of these issues are available in our eCourses, Mini Training Guides, and Blogs.

Moving Tenants In

A good beginning for a new tenancy starts with clear understanding of the legal rights and obligations of both parties. Utilizing adequate move-in procedures can reduce problems both at the beginning of a new tenancy, throughout its term, and when the tenant leaves.

Provide a Copy of Lease Agreement

The lease agreement is a very important document that can govern the entire landlord-tenant relationship and a clearly written, detailed lease agreement will help protect both the landlord and tenant in the event of disagreements or disputes.

When an applicant has been selected he should immediately, certainly before the lease signing meeting, be provided with a blank or filled in unexecuted version of the lease agreement, with instructions that everyone who will execute the lease should read it over carefully before attending the signing meeting, make notes regarding any questions they might have, and phone with any questions that might be material to whether or not they will sign the documents. This will reduce the chance that issues regarding lease clauses might derail the process and require starting over in the vacancy-filling process, can save time at the meeting, and helps to make sure that the tenants fully understand the terms of the lease that they sign.

Provide HOA Documents

For the same reasons as stated above for the lease agreement, provide copies of all relevant HOA documents (CC&Rs, Bylaws, and Rules & Regulations) to the selected applicant with instructions that everyone who will execute the lease should read them over carefully before attending the lease signing meeting. Be sure that tenant acknowledgement of having read and approval of the documents is included in the lease agreement or in a separate document.

Lease Signing Meeting

Because of the importance of the lease agreement, it is best to require that all prospective occupants who will sign the lease attend a meeting where the lease will be signed. Landlords should be flexible enough in scheduling of the meeting to
reasonably accommodate applicant schedules.
At the signing meeting any special lease clauses should be pointed out prior to signing. As examples, “note that you will be paying all utilities except for trash collection” or “note that smoking is not allowed in the subject unit and the tenant will be liable for any damages resulting from smoking and subject to eviction or other remedies for default.”

Giving Possession

The issue of when possession of a unit should be given to the selected applicant is an important one that has potentially significant legal and financial implications. It should always be remembered that it can require an eviction to remove tenants once they are in possession.

Possession of a unit should not be given to new tenants until (1) all documents, including lead paint disclosure if applicable, have been executed by all parties on the lease agreement, (2) all moneys (cash, money order, or bank check – no personal checks) have been received by the landlord, and (3) if utilities are still in the landlord’s name, arrangements have been made for certain transfer to the tenant. Regarding item 3, allowing possession with utilities in the landlord’s name can result in problems because, in most jurisdictions, if the tenant fails transfer them to his/her own name, the landlord does not have the right to turn them off.

Never let a prospective tenant stay temporarily or even move a single item of his personal property into your vacant unit until all pre-possession tasks, including payment of all funds, are completed and there is no chance that you’ll change your mind about the person’s selection. If you give out the key or indicate transfer of possession in some other way, you may have effectively given him a legally protected status of tenant even though no lease agreement was signed or rent money paid.  It will now require an eviction if he can’t or won’t complete the terms of move-in and refuses to voluntarily leave, potentially resulting in substantial financial loss.

Move-In Orientation

Possession is often transferred by the landlord simply turning over the keys to the new tenants at the landlord’s home or office, perhaps with the tenants being handed a move-in checklist. However, a more formal way of transferring possession, though requiring more time for both landlord and tenant, has significant advantages in reducing risks for the landlord. A good procedure is to:

• Meet the tenants, preferably all those who executed the lease agreement, at the property for a move-in orientation and walk-thru inspection.
• Complete the move-in checklist & inventory
• Provide a few blank maintenance request forms.
• Give the keys to the tenants.

You should be sure that your unit is absolutely rent-ready before you schedule your tenant move-in appointment. Everything should be clean, and in good working order when you and the tenant inspect the unit so as to avoid the embarrassment of an obvious problem being spotted by the tenant. There should be no pests or mold/mildew issues.

Move-In/Out Checklists

Many state laws require a move-in checklist to be completed when possession is given to the new tenant. The checklist is a written statement of condition of the rental unit at the time of move-in signed by the landlord and the tenant(s). The move-in inspection should be done before the tenant moves in any of his boxes or furnishings.

The original signed checklist should be retained by the landlord in the tenant’s file and a copy given to the tenant for his file. The same checklist, or a copy thereof, will be used to document the condition of the rental unit upon the tenant’s move-out and helps serve as evidence why deductions were taken from the security deposit.
If the landlord prepares such a move-in checklist without the assistance of the new tenant, the tenant in those states where the checklist is mandated, has the right to inspect the premises himself to verify the landlord’s accuracy and detail in
completing the checklist. If there is no law on this subject, the lease agreement should contain a clause requiring that the tenant report any discrepancies within a specified few days of possession.

Free-standing appliances and any other property not physically attached to the real estate are listed on the checklist or on a separate inventory list. Any other furnishings provided by the landlord (e.g. shower curtain, welcome mat, window
coverings) should be inspected and their existence and condition noted.

The tenant should sign the last page of the inspection checklist and initial each other page of a multiple page checklist.

Failure to follow good procedures can have important implications regarding the landlord’s right to withhold any part of the security deposit when the tenant moves out.  Landlords should be sure that good checklists are utilized whether or not required by law in their state. It is better to have more detail than needed rather than not enough. Other than the fact that the more information included, the longer it takes to complete the sheet, one cannot really include too much
information on the sheet.

There is no set format for checklists except for issues that might be required by the laws of a few states. Formats vary from a single page to multi-page documents having a separate page that covers each room or other area in detail. Whichever format you decide to use, it is recommended that the list include the following:

• Appliances – cleanliness, with notes of any damage
• Cabinets – cleanliness, with notes of any damage
• Paint – cleanliness, with notes of any damage
• Carpets & other floor coverings – condition, with detailed description of any stains, tears, excessive wear, or other damage
• Closets – cleanliness, with notes of any damage
• Windows – cleanliness and no cracks
• Window coverings – cleanliness, with notes of any damage
• Window screens – cleanliness, with notes of any damage
• Doors – cleanliness and operation, with notes of any damage
• Sinks, showers, tubs, toilets – cleanliness, leaks, operation
• Light fixtures – cleanliness, with notes of any damage
• Landscaping, if applicable – condition, with notes of any damage
• Parking areas – clean and oil free

You should familiarize the tenant with operating instructions for electrical, heating/cooling, and plumbing systems as well as furnished appliances. The tenant should be shown the locations of the furnace, air conditioner, water heater, breaker/fuse box, gas valve, and water valve. Supply valves for sinks, toilets, and other fixtures should be pointed out. If it is the tenant’s responsibility to change heating/cooling system filters or keep water softener units filled with salt, the tenant should be instructed in the correct procedures to maintain the systems. The location of each smoke detector and carbon monoxide detector should be noted and the tenant should test each device to verify it is working properly, with the fact that they are working being included in the checklist.
It is recommended that the condition at move-in also be well documented with photos and the tenant should be advised of the documentation. It can be helpful to take some photos during the walk-thru and to include the new tenant in some of the photos to avoid future claims that he was not aware of the condition of the unit at move-in. The tenant should know that there will be equally extensive documentation of the condition of the property following move-out of the tenant including plenty of photos.

Summary

Utilizing good procedures when moving a tenant in provides for a better beginning, can result in a better tenancy, and can minimize move-out problems at the end of the lease.

Q1

A tenant in one of my units vacated as scheduled but left the place a mess. In addition to not doing any cleaning, the carpet is seriously stained and otherwise damaged in several spots, walls and blinds have damages. I have a non-refundable cleaning deposit in addition to a security deposit. What can I charge the ex-tenant against his deposits?

A1

Some states do not allow a separate cleaning deposit and some states prohibit making it non-refundable. Technically, any
“deposit” is by definition potentially refundable if the tenant meets the terms of the lease agreement. In states where a non-refundable amount is allowed, it should be called a “fee” rather than a “deposit.” Finally, some states that allow other than a “security deposit” still limit the maximum total of all amounts collected to the maximum amount for a security deposit. For example, in some states a “cleaning fee” of $200 plus a “security deposit” equal to two months rent would exceed the legal limit if state law limits a security deposit to two months rent. I mention these potential issues because a knowledgeable tenant could use collection of excess deposits against the landlord when disputing the deductions taken from his deposits.

I will assume that a cleaning deposit/fee is allowed in your state and that it can be non-refundable. I will also assume that his rent was paid to the date of vacating, as you made no mention of rent being owed. If both rent and damages are owed it can sometimes be important regarding the order in which deductions are taken from amounts held by the landlord.

In your case and under my assumptions you should apply all cleaning costs against the cleaning deposit/fee amount. In some states, if the amount of the cleaning deposit exceeds the cost of cleaning (as the term is generally understood) the excess cannot necessarily be applied against damages that are not considered cleaning and the excess of the “deposit” must
be refunded to the tenant. This fact is another reason to call the amount collected for cleaned a cleaning “fee” rather than a cleaning “deposit” when such a fee is allowed by the particular state.

If the entire cleaning amount collected is not enough to cover all cleaning costs, the excess cost would next be applied against the security deposit.

Actual damages, including carpet and blinds, but not including “normal wear & tear” would then be charged against the remainder of the security deposit. Damages in excess of the remaining deposit amount may be recoverable via a lawsuit.

It is important to understand that you cannot charge the tenant for the total cost of replacing the entire carpet in the unit. There are two different issues regarding this issue. First, depending on the floor plan and the location of carpeting, it may be acceptable to replace carpeting in only certain rooms. Second, wherever carpeting is replaced you cannot charge for the full cost of carpeting, but must allow for depreciation.

The percentage of cost of replacing damaged carpet that may be charged against the tenant is determined by dividing the number of years the carpet has been in service (including the period the unit was occupied by the tenant who damaged the carpet) by the useful life of the carpet. There is more than one number that might be justifiable for useful life, but it is usually least arguable to use the number of years warranted by the manufacturer.

As examples, assume a carpet that the manufacturer had warranted for 15 years. If the carpet was 10 years old when the tenant vacated the unit, the tenant can be charged 5/15 = 33.3% of the replacement cost. If the carpet had been new when the tenant moved in a year earlier, the tenant can be charged 14/15 = 93.3% of replacement cost. If the carpet was 14 years old when the tenant moved into the unit and the tenant remained for one year or more, the tenant cannot be charged any part of the cost
of replacement.

Similar considerations must be given to window coverings, appliances, and other components of a rental that would be considered capital items (have a typical useful life of longer than a year) when they require replacement rather than repair.

Charges for damages to painted surfaces can depend on a number of factors, including specific terms of the lease agreement
and that the “damages” are actually “normal wear & tear.”

Landlords should not try to charge a tenant for replacement when a repair can fix the problem. When charges for damages end
up in court the judge is usually concerned that the landlord was fair and reasonable.

Finally, to avoid penalties that are potentially significant in some states, landlords should always provide detailed accounting (including documentation) of charges against deposits and do so within the period allowed by state law for return of deposits and/or an accounting of amounts not returned.

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Q2

I have heard that there is a method of depreciating rental property that provides for greater tax deductions than those typically used by real estate investors. Can you provide some info about it?

A2

You are likely referring to a depreciation method often called “component depreciation.” One can usually increase the amount of depreciation in the early years of ownership by depreciating individual components of an improvement rather than the total value of the improvements which is the cost of the property less value of the land. This is also often referred to as “cost segregation depreciation.”

This method is an accelerated depreciation method, as it results in significantly greater total depreciation in the early years because many components and other improvements are depreciated over a shorter period than the life allowed for the overall improvement, 27.5 years for residential property and 39 years for commercial property. There is, of course, less total depreciation available in later years after many of the shorter-life components have been fully depreciated.

However, although the procedure is simple in theory, utilizing it requires adequate knowledge of component costs as well as consideration of accrued depreciation if not new construction. Accordingly unless the subject property is new construction for which an accurate breakdown of costs is sometimes readily available, determination of the depreciation schedule is usually best done by qualified experts so as to minimize the chance of disputes with the IRS in the event of an audit. The cost of such expertise can offset any benefit from the method, particularly for smaller properties that are not new construction. In addition to the cost of setting up the method, with hundreds of separate items, there will almost certainly be higher accounting and tax return reparation
costs both in the first year and throughout the period of ownership.

One must also remember that upon sale of a property for which depreciation has been taken the seller must pay a “recapture” tax on the depreciation previously taken.

Accordingly, whether this method provides significant benefit considering the setup costs depends on the type of property, type of construction, period of ownership, federal/state tax rates during the period of ownership and the recapture rate
at the time of sale, and the tax bracket of the owner during the period of ownership and at the time of sale.

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Q3

I have heard differing opinions on whether it is best to use a verbal or a written lease.

A3

When discussing agreements, many often mistakenly use the term “verbal” to indicate that the agreement is not written.
However, “verbal” technically means expressed in “words” rather than implied by conduct. Accordingly, “verbal” can refer to either spoken or written words. The correct term for referring to spoken (not written) is “oral.” So, agreements are either oral or written.

In general, contracts of almost any kind can be either oral or written and each can be equally valid and enforceable no matter what the legal purpose or dollar amount involved. However, most states have Statute of Frauds (SOF) laws and these laws are fairly uniform among the states. Among other things, SOF laws require that contracts related to most real estate transactions be in writing. As examples, contracts to list real estate for sale or lease with a broker must be in writing to be enforceable in Court and “oral” contracts for those purposes are worthless. This is usually so even though there might be indisputable non-written evidence as to the contracts, for example, unrelated third party witnesses. Many states specify certain items that must be included in such contracts.

Statute of Frauds laws of most states require that a lease of real estate for a term of more than one year be in writing. An oral lease for a term of one year or less is binding and will be enforceable regarding most terms normally found in a lease.

However, as for any type of oral contract, oral leases regularly cause problems for both landlords and tenants because it is often difficult to determine what the terms of the lease are. This can be the result of a number of factors, including the following:

• Misunderstandings by either party at inception of the agreement,
• Misremembering or forgetting terms later by either party,
• Purposeful distortion of terms by one party or the other, and/or
• Limited  or no ways of proving the lease terms if there is a dispute.

When an oral lease ends up in court, the judge can sometimes make a reasonable decision based on circumstantial evidence. For example, if the disagreement between landlord and tenant related to the amount of rent, cancelled checks or receipts would prove what the rent was for those past months. However, it would usually not support or deny any rent increase.

Sometimes a judge makes the decision based on which party can provide the best circumstantial evidence whether or not that
evidence is directly relevant to the disputed issue. However, when there is no clear evidence of who might be telling the truth he may make a decision based on who was the best liar. If both parties are equally believable or equally unbelievable, the decision is most likely to be in favor of the tenant.

Judges sometimes will not enforce certain terms of an oral lease. Non-typical lease terms will likely not be enforced.  Even certain typical terms may not be enforced. For example, it is not uncommon that a judge will refuse to enforce a late penalty provision that is not in writing.

A month-to-month oral lease can continue for many years so long as it remains a month-to-month lease or a lease for a term
of no longer than one year and an oral lease can be amended orally.

The bottom line is that oral leases are only as good as the paper they are written on.

There’s never been a better time to rent your house. The demand for rental property is high, but the supply is not. While home prices drop, rent increases. If you are in a position to be a landlord, it may be smarter than ever to keep and rent your house. YouCheckCredit.com has created this infographic to help you prepare to rent your house.  By following these simple steps, you’ll be more prepared to work with your renters.

Transcript of infographic: “The renter population has been rising quite robustly over the past four years because of the housing market crash,” says Lawrence Yun, chief economist at the National Association of Realtors. “The demand [for rental property] has been rising, yet the supply has not.“ U.S. News & World Report. Home prices have decreased significantly since 2005 while rent has increased. It may be smarter than ever to keep and rent your home.

Before You Rent Your House

Consult Your Attorney. Find out what it’ll take to remove the tenant if they damage the property or don’t pay the rent.
Set Rules and Boundaries. Decide if you want to allow your renters to modify your property or if you’ll allow pets. How many people will you allow to share the home? (Do you want ten college kids in your house!?)
Do Your Homework on Potential Renters. Use a service to check your renters’ background and credit.
Prepare a Realistic Budget. Mortgage Payments, Property Taxes, Maintenance & Repair, Insurance, Late Rent, Vacancy
Lawn, Landscaping & Snow Removal. Consider handling these tasks and charging enough rent to cover the expenses. Even if your renter agrees to these chores, most won’t put the effort into yard work to meet your standards.

Infographic brought to you by YouCheckCredit.com. Online Tenant Screening & Background Check.

Assistance Animals

Landlords may be asked to allow an assistance animal for an applicant or tenant with a disability as a reasonable accommodation under federal or state Fair Housing laws. A reasonable accommodation is a change in policies, practices, or services to allow a person with a disability to have equal opportunity to use and enjoy a dwelling unit or common space area.

An assistance animal is legally not a pet. A landlord is required to make an exception to any “no pets” policy and allow an assistance animal if the request for reasonable accommodation would not create an undue financial or administrative burden on the landlord or fundamentally alter the nature of the housing. A request for reasonable accommodation can be made at any stage of the rental process including application, tenancy, or to prevent an eviction. Denial of a valid accommodation request is a violation of discrimination laws.

The right to reasonable accommodation is protected by federal statutes:

• Fair Housing Act (FHA) – applies with certain limited exception to all forms of housing for sale or rent. Most residential housing is covered by the Fair Housing Act.
• Rehabilitation Act of 1973 (Section 504) – applies to programs that receive federal assistance such as public or subsidized housing.
• Americans with Disabilities Act (ADA) – Title II applies to all programs, services, and activities made available by public entities, such as state and local governments, regardless of federal  financial assistance. Title III applies to private entities and non-profit service providers that are considered public accommodations such as restaurants, hotels, schools, theaters, shopping malls, supermarkets, recreational facilities, medical offices, law offices, insurance offices, and other commercial facilities. Title III of the ADA permits the use of a service animal by an individual with a disability.

Landlords need to be well acquainted with Fair Housing and the ADA to understand and comply with federal laws regarding accessibility and reasonable accommodation. In addition there may be state or local laws regarding accessibility and fair housing laws that impose more stringent requirements than federal laws. Some states may define assistance animals in broader terms or extend coverage to animal species other than dogs which may impose greater legal obligations regarding accommodation. It is important for landlords to have a reasonable accommodation policy including how to handle
assistance animal requests to make sure all requests are treated equally and in the same way.

An important distinction to keep in mind is that Fair Housing laws regulate private residential housing while ADA governs public accommodations. However, Title III of the ADA covers public and common use areas at housing developments when these public areas are, by their nature, open to the general public. For example, a rental office is covered since the rental office is open to the public. As another example, facilities such as a clubhouse or pool may be covered if they are open to non-residents.

The applicant or tenant must meet the statutory definition of having a disability. Federal law defines a person with a disability as “Any person who has a physical or mental impairment that substantially limits one or more major life activities; has a record of such impairment; or is regarded as having such impairment.”

In general, a physical or mental impairment includes hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex, and mental retardation
that substantially limit one or more major life activities. Major life activities include walking, talking, hearing, seeing, breathing, learning, performing manual tasks, and caring for oneself.
The disability discrimination provisions of the Fair Housing Act do not extend to persons who claim to be disabled solely on the basis of having been adjudicated a juvenile delinquent,
having a criminal record, or being a sex offender. Furthermore, the Fair Housing Act does not protect persons who currently use illegal drugs, persons who have been convicted of the manufacture or sale of illegal drugs, or persons with or without disabilities who present a direct threat to the persons or property of others.

The words used to describe assistive animals can create confusion regarding definition and compliance.  Assistance animals may also be called emotional support animals, companion animals, comfort animals, well-being animals, or service animals. In fact it was common in the past to refer to all assistance animals as service animals whether covered by Fair Housing or ADA requirements.

A recent ADA amendment has now given a more narrow definition to the term service animal. The new rules now limit the definition of “service animal” to include only trained dogs. A “service animal” is defined as any dog that is individually trained to do work or perform tasks for the benefits of an individual with a disability including physical, sensory, psychiatric, intellectual, or other mental disability. However, new rules also, in certain situations subject to certain limitations, allow the use of trained miniature horses as alternatives to trained dogs.

While the new ADA rules exclude emotional support animals in defining service animals this exclusion does not apply to Fair Housing or Section 504 requirements. Fair Housing law takes a broader approach to assistance animals. Individuals with disabilities may request a reasonable accommodation for assistance animals in addition to dogs including emotional support animals under the FHA or Section 504. In situations where both laws apply housing providers must meet the broader FHA/Section 504 standard in deciding whether to grant reasonable accommodation requests.

Q1

Exactly what is a Living Trust and would one be of benefit to hold title to my rental properties?

A1

A Living Trust, usually called a Revocable Living Trust, is a Trust set up during the lifetime (and while having legal capacity) of the person implementing the Trust, who is called the Settlor (also called Grantor or Trustmaker). As the trust name implies, the terms of the Trust can be changed in any way desired, replaced by a new Trust, or revoked entirely during the lifetime of the Settlor.

A Trust involves Settlors, Trustees, and Beneficiaries. The Settlor is the person who sets up the trust. This is also the person who currently holds the assets that will be transferred to the Trust. The Trustees are the person or persons who carry out the wishes stated in the Trust. Beneficiaries are persons named to receive assets under terms of the Trust document. You would likely name yourself, your spouse, or both as the Settlor or Settlors. Usually, the initial Trustee is one or more of the Settlors and provision is made in the trust document for Successor Trustees, which can also be a Beneficiary.

The primary purpose of a Revocable Living Trust is to avoid Probate while ensuring that the Settlor’s assets are disposed of as he/she wished. Probate is a Court proceeding whereby liabilities of the deceased are paid and assets of the deceased are distributed as specified under a Will that was executed by the deceased during his lifetime. In the absence of a Trust or a Will, the Probate Court will proceed as specified in laws of the particular state, with distribution of assets as specified in those laws. Probate can be expensive – from a few thousand to tens or even hundreds of thousands of dollars because the services of an attorney, a Certified Public Accountant, and perhaps other professional are usually required. Also, Probate can take a long time, sometimes years. Finally, Probate records are open to the public, so there are no secrets from the “world” regarding financial information related to the deceased or to those who inherit from the estate.
If ownership of all assets is transferred to a Revocable Living Trust during the lifetime of the Maker, the assets will not be subject to probate. In practice, “all” assets really means those that require someone to execute documents for their transfers. Included are real property, registered vehicles, stocks & bonds, brokerage accounts, and bank accounts. Personal property for which the entire category is being left to a single individual, such as household furnishings, need not be listed in detail as long as there is unlikely to be any confusion. Statutes in most states provide means of transferring assets having relatively low values via legal procedures that do not necessarily require an attorney.
Although useful for avoiding probate, a revocable living trust is not an asset protection technique. Assets transferred to the trust during the Settlor’s lifetime will remain available to the maker’s creditors. It does make it more somewhat more difficult for creditors to access these assets since the creditor must petition a court for an order to enable the creditor to get to the assets held in the trust. Typically, a revocable trust evolves into an irrevocable trust upon the death of the maker.

Because a living trust does not provide protection against creditors, the living trust should obtain the same protection that most individual rental property owners should have – that is, by having the title to each property held by a separate Limited Liability Company. For a Trust, the LLCs are then held by the Trust.

All decisions related to estate planning and asset protection should be made following adequate research and/or consultation with legal and/or financial professionals.

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Q2

In the state of CT, if a tenant moves in, signs a lease agreeing to 1 yr lease term and pays a security deposit, then one week wants to vacate the premises, are they entitled to any of the security deposit or lease back in any way? Also, they have no good reason to vacate except that they don’t like a neighbor that does not lease from me.

A2

The short answer is that signers of lease agreements, both the landlord and the tenant, are bound by the agreement during its agreed term.

Absent any default by the landlord that might give the tenant the right to terminate the lease (e.g., failure to maintain the unit as legally required), the tenant is liable for paying the rent until the
end of the lease term or until a replacement tenant begins paying rent. If the tenant breaks his lease, he will usually be responsible for continuing to pay rent until a new tenant begins paying rent and for other costs. Many states specifically prohibit collection of rent from both the old and new tenant for the same period of time. Also, many states require that the landlord make
“reasonable effort” to re-lease the property.

In general, tenants cannot escape liability under their leases due to economic hardship, a job transfer, marital discord, or health issues. In many jurisdictions, even death does not terminate
a lease and the deceased’s estate remains liable for the lease.

While some county or city somewhere in the country may be an exception to the statements in this reply, the only country-wide exception applies to military personnel under specific
circumstances.

A tenant who breaks a lease is potentially liable for the rent for the rest of the lease term even though no longer living in the unit. He would almost certainly forfeit his security
deposit for application against unpaid rent and the costs of re-leasing the unit. Furthermore, he could be sued for the rent still due under the lease along with any alleged damages to the unit. And, if he didn’t defend himself in court, the landlord would likely obtain a default judgment for whatever amount was claimed in the complaint. This judgment would affect the tenant’s credit record and be collectable even if the tenant moved to another state, assuming the tenant doesn’t discharge the judgment in bankruptcy or the tenant is or becomes judgment proof due to some other reason. The tenant, in addition to owing rent for months that he didn’t even live in the unit, could have to pay the landlord’s attorney fees and court costs, as well as the other costs of re-leasing the unit.

A landlord can always voluntarily release a tenant from their lease obligations with a settlement negotiated between landlord and tenant. A negotiated settlement is usually of benefit to both the landlord and the tenant, as it avoids the unpleasantness of a broken lease and the potential costs of legal actions. Furthermore, there is never a certainty that a judgment can really be collected. Accordingly, in a normal rental market, the landlord may be ahead by collecting for a certain number of months rent and any damages and to find a new tenant as soon as possible. It is almost always advantageous for a tenant to negotiate a termination if the landlord is willing to be reasonable.

The negotiated settlement will usually mean that the departing tenant (1) pays a certain amount of rent in advance that the landlord considers adequate to cover the period until a new tenant moves in,
(2) pays for any damages, (3) pays for the cost of again preparing the unit for showing to prospective replacements (e.g., cleaning), and (4) pays the costs of re-marketing the property (e.g., advertising and/or leasing commissions).

If the tenant breaks the lease without such a settlement agreement, the tenant would usually be legally liable for the rent, as stated in the second paragraph and for the costs listed in items 2, 3, and 4
in the above paragraph. This usually provides an incentive for the tenant to agree to a reasonable settlement.

Any settlement should always be done with a detailed written agreement that includes all terms of the settlement, including that there will be a move-out inspection and that settlement amounts paid by the tenant will be in cash, bank check, or money order.
Since certain jurisdiction may have more restrictive laws than the state, I encourage you to also research the matter via other resources and/or to consult a competent landlord-tenant law
attorney, particularly if it becomes impossible to negotiate a settlement.

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Q3

Is there a particular format required for Denial of Application to Rent letter?
A3

The actual name of the document required under the federal Fair Credit Reporting Act (FCRA) is “Adverse Action Notice” and the notice is only required when the landlord uses
a “consumer report” as defined under FCRA.

An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant. It includes not only a landlord’s denial of a rental application but also a landlord’s action that imposes a burden not required of all tenants. Common adverse actions by landlords include:

• Denying  an application
• Requiring  a co-signer on the lease
• Requiring a deposit that would not be required for another applicant
• Requiring a larger deposit than might be required for another applicant raising the rent to a higher amount than for another applicant

The circumstances of a rejection determine what you must do by law to notify an applicant that his application has been rejected.  To be covered by the FCRA a report must be prepared by a credit reporting agency (CRA). The most common type of CRA is the credit bureau. Landlords using consumer reports for evaluation of rental applicants must follow the provisions of the Fair Credit Reporting Act (FCRA).

Whether verifying employment and previous landlord references is covered by the FCRA depends on who does the verification. A reference verified by the landlord’s employee is not covered by
the Act; a reference verified by an agency hired by the landlord to do the verification is covered.

The landlord must provide the notice if the adverse action in any way is based on a consumer report that played a factor in the landlord’s action, even though its action is based primarily on an applicant’s income or prior reputation as a tenant.  Although there is no set format for the notice, a notice of the adverse action provided to the consumer must include:

• The  name, address and telephone of the CRA that supplied the consumer report including a toll-free telephone number for CRAs that maintain files nationwide,
• A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it,  and
• A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.

Although the law can be interpreted to allow oral adverse action reports, it is best to mail an adverse action letter to the rejected applicant using the USPS with a Certificate of Mailing to prove it was sent.

Landlords who fail to provide required disclosure notices potentially face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. In addition the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties. However, a landlord who inadvertently fails to provide a required notice in an isolated case has legal protections, so long as he can demonstrate “that at the time of the violation he maintained reasonable procedures to assure compliance” with the FCRA.

The above discussion relates only to federal law. As for many property management issues, landlords must also understand and abide by any more restrictive consumer credit laws that might exist in their particular states.

Landlord-Tenant Disputes

Disputes happen. Issues with rents, deposits, repairs, maintenance, privacy, and lease violations can quickly flare into full blown disputes between landlord and tenant. Some disputes can be avoided, some cannot. Even then, not every dispute is a call to battle. However disputes could be considered a call to action. How you handle the dispute – the action you take – is important.

Landlord tenant disputes are disruptive and stressful and bleed time, energy, and money away from business and private life. Some landlords view tenant disputes as inherent to their business. Others seem to have relatively stress-free tenant relationships. The difference may relate to your business policies, in particular the importance you place on communication.

Disputes often arise as a result of a breakdown in communication. Disputes may be resolved by engaging in communication to determine the underlying issues and either negotiating a settlement, entering into mediation, arbitration, or litigation.

The best way to handle disputes is to avoid them. Avoiding disputes is not done so by ignoring the issues. Doing nothing to resolve conflicts is rarely a good business policy. Similarly, jumping into legal action as a first response to a dispute may also be ill advised. However there are situations that do call for legal action, such as an eviction to terminate a tenancy. Before you make the legal call consider all available options. There are alternative methods of resolving a dispute without having to consult a lawyer. Your job is to select the option that allows you to control and resolve the issue ppropriately and in a professional manner.

To minimize the chance of disputes, it helps to know and follow the law. Landlords and tenants have certain rights and responsibilities under a myriad of federal, state, and local laws. Knowledge of the law provides the foundation for your lease agreement. A strong lease agreement that is compliant with statutory requirements and emphasizes the rental issues important to your business helps to minimize problems later on. A tenant move-in orientation meeting allows landlord and tenant to discuss rental issues and clarify what’s expected from both parties. Ongoing communication about your policies helps to remind the tenant what his duties and responsibilities are. All communication, oral and written, should be documented to help defend against tenant claims of landlord default. In a perfect world, both landlord and tenant would conduct themselves in good faith and fair dealing during their relationship. However misunderstanding, misremembering, or manipulation of the facts can lead to disagreements. The willingness to listen and work toward satisfactory resolution is important to keep communication open and honest.

It makes sense to start by talking with the tenant to determine if negotiation and settlement is possible, particularly if your tenant has been a good tenant to this point. Even though you might think you have “right” on your side by going to court, you will spend a good deal of time and money to win on principle. If you actively listen to the tenant you may discover the tenant has a valid point, perhaps information you can use to avoid future disputes. In reaching a successful compromise both parties want to feel they’ve won, or at least not lost as much. While money is usually the chief motivator to solve problems, not everyone puts a premium on the dollar. Determine what might motivate your tenant to accept a settlement.  When settlement is reached, all details should be documented and acknowledged in writing by each both parties.

If you are unsuccessful in your negotiation and settlement talks, you may want to consider mediation. A mediator is an independent, neutral third party trained to help facilitate communication. The goal of mediation is to help parties work out their own solution to disputes. A mediator does not have authority to bind either landlord or tenant to an agreement. Either party is free to proceed with legal action if no compromise can be reached. Studies have shown however that those who agree to mediate their differences are more likely to be satisfied with the resolution that those who proceeded directly to court.

Arbitration is another non-judicial method of resolving disputes. An arbitrator is a neutral third party who reviews the case evidence and makes a final decision. Unlike mediation the arbitrator has the authority to bind the parties to an enforceable decision.  If the arbitration decision involves a money award and the losing party does not pay as required, the money award can be converted to a court judgment.

Many business contracts include language specifying that any disputes under the contract are to be settled by binding arbitration. If you are using a generic rental agreement you may want
to read it thoroughly for such language and act accordingly.

Alternatively, you may file a lawsuit against the tenant or find yourself served by his lawsuit. Most lawsuits involving a relatively small amount of money are handled through the state’s small claims courts. Small claims courts have a maximum limit on the amount of money that can be awarded with the majority of states limiting the amount to less than $15,000. A few states have a higher maximum limit, but information such as this should be verified with the appropriate court of jurisdiction before bringing a lawsuit. Small claims court procedures are relatively simple and most landlords can easily represent themselves in court.  However, it is usually advisable to be represented by an attorney if the tenant is. In some states, lawyers are not allowed in small claims courts.

There is another consideration that could arise in landlord tenant disputes. If the tenant has exercised a legal right – complained to a government agency such as a building or housing agency regarding code violations for health or safety or has organized or become a member of a tenants’ union organization – and the landlord takes an action against the tenant which is or is presumed to be retaliatory, the landlord is in violation of state law. Retaliatory landlord action may take the form of raising the rent, reducing services to the tenant, or threatening to bring legal action for possession of the unit (eviction). Some states have an automatic presumption timeframe, ranging from 90 days to one year from the time of the tenant’s legal activity, during which a landlord’s action would be considered retaliatory. However it may be that if the landlord can prove his action for possession is due to the tenant being in arrears for rent or that code violations are the tenant’s fault due to lack of reasonable care of the property, presumptive retaliation may not be applicable. To help avoid charges of retaliation you must accurately document the interactions you have with the tenant (e.g., repairs, complaints, or inspections), the type of action taken, and the date and time received/resolved. Any time you terminate a tenancy or change terms of the tenancy you should have a legitimate business reason that is unrelated to any exercise of tenant rights.

In summary, key to efficient and minimum-stress property management are avoiding disputes to the degree possible and resolving as early as possible those that are unavoidable.

Q1

I recently took over the management duties of a 10 unit complex in Florida and there are a few tenants that have not paid the rent in over 2 months. The previous management company is not cooperating with me to get copies of the rental agreement(s) or lease(s). therefore I do not have a name to put on to the 3-day notice or know if it is the correct name (whom ever the lease was made out to) or even if the person(s) that originally signed the lease are in fact the ones that are now occupying the units. I also need a copy of the rental agreement or lease to file for the eviction in this county.

A1

I assume that you are not the owner, that you are doing the management for compensation, and that you are properly licensed in Florida to manage property if doing so on a commission basis. If not the owner and not licensed, you should not manage for compensation unless you are legally an employee of the owner – that is, all employment, insurance, and tax laws are being followed. There are potentially serious penalties, from both civil liabilities and criminal prosecution, if caught doing so otherwise. Even managing for some other owner without compensation and avoiding licensing law issues, can pose significant legal risks and financial costs if something goes wrong.

So long as you are legally an employee of the owner or are properly licensed in FL, the most effective action might be to warn the previous management company that you will immediately file a complaint with the real estate licensing agency in your state because of the failure to cooperate unless they immediately provide copies of all documents relative to existing tenants. You might first check that the previous management company was properly licensed, as this could change what you want to say to them.

In some states it may be possible to serve notices, even commence evictions without names. For example, when evicting tenants occupying a unit where non-tenants may also be living, one will
sometimes need to add John/Jane Does 1 through 5 (or some other number to cover all potential unknown occupants). It is even possible that Florida allows service against the unit itself without the exact names of the occupants.

You may be able to easily get an answer to the above issue by asking the court clerk’s office in the court of jurisdiction, as sometimes the office will be willing to provide such information. If Florida
or the specific county or city provides notice forms (as is done in some jurisdictions in the country) the instructions for the form or the form itself may provide information regarding the need to use exact tenant names when serving notices. If all else fails you may need to consult a competent attorney to determine if serving notices to John and Jane Does or against a unit without including names is adequate in your state. This is something that may not be covered by Florida’s landlord-tenant law and asking an attorney may be simpler than researching Florida statutes yourself and would more reliable than searching on the Internet because the answer could vary among courts within the state or other jurisdiction.

Another potential issue revolves around whether or not tenants were adequately noticed regarding change of management. If not, the tenants could have a defense supporting their failures to respond
to the notices.

If the previous management company did not provide notice of the change in management, it should be possible to solve this problem via adequate notice from the owner, perhaps accompanied by proof of ownership.

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Q2

Is there any law for Illinois that helps in ending a lease when a tenant is moving several hundred miles away for a change in job?

A2

I am aware of no state where changing to a job in a distant location, no matter what the reason, allows the tenant to break a lease without the potential for serious ramifications.  However, I am not knowledgeable about potential peculiarities of IL law and local jurisdictions within a particular state can have more restrictive laws than the state. Accordingly, I encourage you to also research the matter via other resources and/or to consult a competent IL landlord-tenant law attorney.

In general, tenants cannot escape liability under their leases due to economic hardship, a job transfer, marital discord, or health issues. In most jurisdictions, even death does not terminate
a lease and the deceased’s estate remains liable for the lease.

While some county or city somewhere in the country may be an exception to the above statements, the only country-wide exception applies to military personnel under specific circumstances. I assume that the tenant is not military, so I’ll not discuss this case.

A tenant who breaks a lease is potentially liable for the rent due for the rest of the lease term even though no longer living in the unit. He would almost certainly forfeit his security deposit
and he could be sued for the rent still due under the lease along with any alleged damages to the unit, something that will be difficult and costly for the tenant to defend against from several hundred miles away. And, if he didn’t defend himself in court, the landlord would likely obtain a default judgment for whatever amount was claimed in the complaint. This judgment would affect
the tenant’s credit record and be collectable even if the tenant moved to another state, assuming the tenant doesn’t discharge the judgment in bankruptcy or the tenant is or becomes judgment proof due to some other reason. The tenant, in addition to owing rent for months that he didn’t even live in the unit, could even have to pay the landlord’s attorney fees and court costs.

Some states’ laws require and many judges in states without such laws would likely require that the landlord make reasonable attempts to re-lease the unit as soon as possible and, absent a
negotiated settlement, a landlord may not be allowed to collect rent beyond the date when the unit is re-leased.
A landlord can always voluntarily release a tenant from their lease obligations with a settlement negotiated between landlord and tenant. A negotiated settlement is usually of benefit to
both the landlord and the tenant, as it avoids the unpleasantness of a broken lease and the potential costs of legal actions with no certainty that the landlord will recover the total costs. Accordingly, in a normal rental market, the landlord may be ahead by collecting for a certain number of months rent and any damages and to find a new tenant as soon as possible. It is usually also
advantageous for a tenant to negotiate a termination if the landlord is willing to be reasonable. Any settlement should always be done with a written agreement.

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Q3

Can I ask applicants for deposit if they want me to hold the apartment for them? In case they change mind later, do I keep the deposit money?

A3

In most states a landlord can take holding deposits. However, considerable care must be exercised when taking them.

The holding deposit is not a security deposit, but is to meant to compensate the landlord for damages suffered for holding a unit off the market in the event that the applicant fails to meet screening qualifications or rescinds his/her agreement to rent the unit.

Although holding deposits may be legal in your state, they can often lead to misunderstandings or even legal hassles. A major problem is that most states do not cover the subject adequately in their
statutes, if at all, and it is often unclear regarding how much of the deposit may be retained by the landlord in the event screening results are unsatisfactory or the applicant cannot come up with the necessary funds or simply changes his mind about wanting the unit.

Some states that cover holding deposits by statute specifically allow a landlord to retain an amount related to the landlord’s cost of holding the unit. This might include the costs of additional
advertising, prorated rent for the holding period, and perhaps a reasonable charge for the time related to paper work and inconvenience to the landlord.  Holding a larger amount puts the landlord at risk for a lawsuit. Some states specifically require that there be a written contract that states the terms and provides a receipt for the amount.

For the landlord’s protection, holding deposits should always be in cash, cashier’s check, or money order and, even if not required by law, for the protection of both parties there should always be
a written agreement detailing the conditions related to the deposit.

When the landlord holds the rental unit for an applicant, it should be considered off the market and unavailable to other qualified prospective tenants who may have to be turned away. If the applicant later changes his/her mind, the landlord may have suffered financial harm. In such a case, the landlord is justified in retaining all or part of the holding deposit within the limits allowed by state law. However, be sure that this scenario is discussed in a signed agreement.

The amount of the holding deposit should be reasonably related to the rent of the unit and should take into account the potential inability of some applicants to immediately put up significant
deposit funds in addition to application and/or screening fees.

The written holding deposit agreement should be in accordance with any applicable state law and unambiguously cover the following issues:

• The  address of the rental unit,
• The  names of landlord and applicant,
• A  clear statement that the deposit is a “holding deposit” rather than a  security deposit,
• The  amount of the deposit,
• The  length of time (including exact ending date) the landlord is willing to  hold the rental, taking into account the size of the deposit and other  qualifying information,
• The  basic terms of the lease agreement,
• The  conditions under which the landlord will rent the unit to the applicant –  e.g., verification of identity, a fully completed application form,  satisfactory results on all applicable screening reports, verification of  employment, and full payment of the security deposit and first month’s  rent by the end of the holding period,
• What  will happen to the deposit if the applicant signs a lease agreement –  usually, that the full holding deposit will be credited to the security  deposit,
• What  will happen if the applicant decides not to rent the unit before being  notified whether or not his/her application has been approved,
• What  will happen to the holding deposit if the applicant fails to pass  screening – usually the full deposit should be returned if the failure is evident within a couple of days after the landlord has accepted the  holding deposit, and
• What will happen to the holding deposit if the applicant defaults on the holding agreement – specifically, how much the landlord will retain, and when and how the portion not being retained by the landlord will be returned to the applicant.

In summary, landlords and agents must follow any laws of their states and they should use good judgment and be fair in their holding deposit policy. It is best to avoid the use of holding deposits,
particularly now that most verifications of qualification can usually be done within a relatively short time utilizing today’s technology. An applicant whose holding deposit is retained without adequate justification may well have a cause of action for damages against the landlord which can result in more time and expense than the deposit was worth.