VOLUME 9 - ISSUE 7 LEGAL UPDATE

- Receiving the Initial Funds
- Water Temperature and Liability
- Showing the Unit

 

 

Receiving The Initial Funds
by Harry Heist, Attorney at Law

 

It is up to each company to decide what will be required in terms of the initial funds to be paid by the resident. If the occupancy date is far off, it may be more appropriate to allow the resident to pay by check, since ample time exists for clearance of the funds; if occupancy is to occur soon, money orders or cashier's checks may be more appropriate. Whatever choice or policy is made should be in writing to avoid any claims of discrimination. Cash is never advisable due to safety and documentation problems, and the property manager needs to fully understand that a stop payment order can be made on a cashier's check or money order, so until funds are cleared, there always is a risk that the payment will not be honored. A policy of allowing personal checks for move- in funds will result in applicants being approved, becoming residents, moving in and all funds being returned NSF. This will create a serious problem within a week or two of move-in, and possibly trigger the need for an eviction action right away.

Acceptance of Funds

If funds are "held", they are often deemed to be accepted. Holding a check in your drawer or paper-clipped to an application could and often is construed as acceptance. Either you take the funds and deposit them, or you do not take them at all. If you are licensed with the Division of Real Estate or your company has a Florida broker, you must deposit funds within 72 hours: no holding them "in your drawer".

Personal Checks

Even with the changes in technology resulting in the faster clearing of checks, you can find out up to three weeks after depositing a check that it is being returned NSF, or that a stop payment order has been issued. The resident may already be in the unit by this time. Sometimes in a case of multiple checks being received, only one of the checks given bounces, and you must either serve a Three-Day Notice or Seven-Day Notice with Opportunity to Cure, depending on what failed payment the check represented. Ideally, all funds will clear before move-in, but this does not happen often. Remember that if a resident is in a hurry to move in, this is a big warning sign, and accepting a personal check from that resident increases your chance of a bounced check exponentially. If you manage homes for others, you may be held liable by the owner for placing a resident in a unit before all funds have cleared. If the owner wishes that you place the resident in the unit without cleared funds, get this in writing. Do not take separate checks from separate people, as this increases the possibility of a bigger problem if one of the resident's check bounces, and the other check does not bounce.

Money Orders

Money orders are far safer than checks, or so it seems. The idea is that since the purchaser of the money order had to buy it with cash, at least you know that person had the cash at one time. The reality is that a resident can place a stop payment order on a money order, just as with a personal check. The purchaser of the money order simply can call the money order company or go back to the place of purchase and claim that the money order was lost or stolen, and that money order will not be paid after you deposit it. The effect and end result is essentially the same as a stop payment order on a personal check.

Cashier's Checks

In order for a person to obtain a cashier's check from the bank, that person must prove that there are funds available at the time the check is obtained. As with personal checks or money orders, a cashier's check can have a stop payment order placed upon it, rendering it worthless.

Fake Instruments

Personal checks, cashier's checks and money orders are counterfeited all the time. Not sure of the instrument? Contact the issuer.

Credit Card Payments

Credit Card payments can be disputed long after the fact. How long depends on a number of factors, including the consumer's card issuer, the merchant, the merchant bank, the processor and the law. You may wonder how a person could possibly dispute a credit card payment. Many think that a dispute can only be registered in situations regarding fraud, but this is not the case. A person can dispute for a myriad of reasons that are true or simply fabricated. When a resident wants to get out of a lease agreement, that person can pull out all the stops. We highly recommend against you accepting the deposit or first month's rent by credit card payment, be it a direct credit card payment or through the electronic billing company you may be using.

Cash

While cash would seem to be ideal, acceptance is fraught with problems. Cash acceptance exposes the property manager to a later dispute of how much was actually paid, future payment of rent by the resident with cash, safety and security issues. If a resident pays by cash, the resident may assume that you allow this on a routine basis, thus causing you and your office to become a target for crime. If you give the resident a receipt for cash, this receipt can be altered by the resident. Make it an office policy to never accept cash, and never make exceptions to the policy. If a resident has cash, send the resident off to the local convenience store to purchase one or more money orders, and when the money orders are tendered to you, insist that the resident write the name of the apartment community, real estate company, or owner on the money orders in front of you on the original attached to the carbon copies. Never accept a blank money order.

 

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Water Temperature and Liability
by Harry Heist, Attorney at Law

Hot water burns. Your company can be held liable for a resident, employee, guest, occupant or prospect being burned by hot tap water. While common sense would tell you that hot water burns, it is imperative that the temperature setting on your water heater is such that a skin burn is not possible or would take a significant amount of time to cause a burn. Most property management companies do not fully appreciate or understand this risk and fail to test the water temperature of the hot water on a regular basis.

Injury and Death

Each year, thousands of people are scalded and burned by excessively hot tap water. Some burns result in death. While most individuals will avoid excessive hot water and adjust the water temperature avoiding any problems, there are certain, at-risk individuals who must be protected. Children, infants, elderly individuals, people with communication deficits, people taking certain medications, and people with various special needs and disabilities are at a high risk of inadvertently burning themselves with hot water. If the human body is not capable of telling the brain that water is too hot, or an individual cannot get away from the hot water, serious injuries can quickly occur. With our aging population, individuals with paralysis, mobility issues, slow or awkward movements, loss of feeling, and people with mental disabilities such as Alzheimer's are at great risk. They must be protected, and your company can be held liable for any injuries or death when proper safety measures are not taken.

Types of Water Heaters and Trends

The two types of water heaters in use today are the typical tank type and the instant, on-demand or "tankless" water heaters. Traditionally, the standard tank water heaters are found in just about every single rental unit and common area application. The earlier, tankless, on- demand water heaters were inefficient for large scale hot water applications, such as filling a bathtub, and were more appropriate for applications when limitations on space suited the smaller, tankless heaters. An infrequently used bathroom or kitchen was more suited for the tankless heater. Some of the tankless heaters do indeed have a small tank in which the hot water was used up quickly, and the heater usually cannot keep up with a strong flow. With changes in technology, some of the tankless heaters are now capable of producing steady hot water at full pressure, so are becoming more popular. The conventional tank water heaters are still the most widely used type of water heater and will be for some time in the future, but there is a trend towards the tankless heaters, especially in the common area and low use situation. They may use gas, and most commonly in Florida, electric power. Many companies are changing over to the tankless heaters for commercial and common area applications, and often new construction is using the tankless heaters, as the prices are steadily decreasing and the reliability and efficiency increasing. Chances are that if you were to build new construction, the clubhouse bathrooms and kitchen would be fitted with a tankless water heater and not with the conventional tank water heater. While both types of heaters achieve the purpose of heating water, the tankless heaters are capable of immediately producing water at boiling temperatures. Because of this, they must be fitted with special mixers where the hot and cold water is mixed before it comes out of the faucet or shower head, or they must have special calibrated temperature controls. Basically the way many of them work is to produce a hotter than usual water temperature at a lower flow rate, which mixes with the normal flow of cold water, thus making a theoretically usable and safe water temperature. Many properties are converting not only the common areas but the apartment units themselves to the more efficient on-demand water heaters. The common areas can include the clubhouse, office restrooms, clubhouse kitchen, outdoor pool shower or spa shower.

Dangers of High Water Temperature

If a conventional water heater is not set correctly, it will produce water easily capable of immediately burning a person. By law, conventional water heaters are set at the factory, usually at a temperature of 120 degrees Fahrenheit or less. This is not to be relied upon. All water heaters have thermostats, and these can fail with age and corrosion. The tankless water heaters can produce water that can come out at a temperature near boiling. All water heaters are dangerous and capable of producing water that will quickly burn an individual. The severity of an injury is dependent upon two factors: the temperature of the water and how long a person is exposed to the water. At 120 degrees Fahrenheit, it will take a typical person approximately 5 minutes to get a full thickness (third degree) burn. As the temperature increases, the time to get a third degree burn lessens. At 140 degrees Fahrenheit, a full thickness burn can occur in 5 seconds or less.

Action Plan

Most building codes and municipalities have a 120 degree cap on the hot water temperature. Some codes have different temperature limits, depending upon the type of housing. Senior housing may be different than conventional housing. Find out what the law is in your area, and immediately take steps to prevent your residents from being injured. Purchase a quality digital thermometer as soon as possible, and have your maintenance tech test the temperature of the hot water in all the apartments, common areas and anywhere there is hot water, no matter if you are using a conventional water heater or a tankless heater. Start with the taps that are closest to the water heater, and work your way back from there. All sinks, tubs, shower heads and whirlpool tubs must be tested. If a tankless unit is in use, extreme care must be taken, as (1) the water temperature it can produce can be boiling, (2) the thermostat may be set incorrectly or be defective, and (3) if cold water is used to mix with the hot water, and there is a drop in cold water pressure, the mixer may be rendered ineffective, resulting in excessively hot water. The neighbor in the adjoining apartment may be flushing the toilet, washing dishes or filling the tub, and this could result in a dangerous drop in cold water pressure.

Documentation

Have your maintenance tech keep a date and time log showing when each unit was tested, listing out all the water sources tested. Speak to your maintenance tech and risk management to determine how often you should engage in the testing process, and certainly always test after the installation of any new equipment.

Recommended procedures:
1. Let the hot water run for 3-5 minutes;
2. Insert the stem of the thermometer straight or angled into the stream about 2 inches into the stream of running water;
3. Wait 15 seconds;
4. Detail the time the temperature was measured;
5. Detail the actual temperature;
6. Detail the location where temperature was taken, unit number, clubhouse, etc., and fixture.

 

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Showing the Unit
by Harry Heist, Attorney at Law

The actual process of showing a unit to a prospective applicant can have dramatic legal ramifications, especially if that unit is representative of, but not the actual unit which will be available if the actual unit is currently occupied. Often the model unit is smartly decorated, in a great location, upgraded, well lit, and furnished nicely with new carpeting. The prospective resident looks at the unit, likes it, and asks where to sign. When the resident actually moves in, the unit that is received may be quite different than the model. It is a different layout, has a beautiful view of the dumpster, appliances from the 70's, and a pink Formica bathroom. In some situations, units are rented sight unseen, all through the mail and internet. In such situations, the resident refuses to move in or moves in and begins the process of complaints to attempt to get out of the lease agreement. Care must be taken in the showing process and dealing with the questions that arise regarding the makeup of the community, safety, amenities, location, layout and all aspects of the community. Make a plan and checklist now to avoid problems, and train anyone who may be showing a unit.

Who should be present?

Ideally, all applicants would be present at any showing. If the unit is being rented sight unseen, when the applicant or applicants do not observe the unit in person prior to lease signing, you always run the risk that some or all of the applicants who have signed the lease will try to change their minds before or after move-in, feeling that information was misrepresented in some way. Exercise extreme care if you have an applicant who will sign a lease prior to physically observing the actual unit. Send the applicant as many pictures as possible of the interior of the unit, the exterior and the surrounding area or homes. If an applicant rents sight unseen, and then wishes to break the lease prior to move-in, your attorney can advise you on whether it is prudent to try to hold the resident to the lease, settle or allow the lease to be rescinded. Trust your attorney's advice. He or she is trying to keep you out of litigation.

Making Representations

Situations will arrive when a prospect is shown a unit and inquires about the possibility of items such as upgraded appliances, fresh paint or new carpeting being put in the unit. If you or your leasing agent even remotely imply that this is a possibility, and a lease is signed, these words can come back to haunt you. Train anyone who will show a unit to be extremely cautious about making any promises that may or may not be kept. A simple statement such as, "It may be possible to upgrade the carpeting prior to move-in" will often be interpreted as a "promise", and if the carpets are not replaced or upgraded, you will end up with a legal controversy either before or shortly after move-in. Sometimes, upgraded items are available at an additional price or will affect the rent amount. This should clearly be noted in the price sheet that the prospect is given before or while the unit is being shown.

Questions Regarding Noise and Soundproofing

Many apartment communities and condominium units are made of wood construction with firewalls and floors that are not concrete. Some have single glazed windows near high traffic areas. Some are of concrete construction where noise is easily transmitted from one unit to the next. Plumbing can result in embarrassing sound transmittal, and it is not unusual for the bathroom, bedrooms, kitchens, or laundry rooms of two units to be back to back, as this type of construction significantly cuts down on costs. You must be careful answering any questions regarding noise. If you are asked if a current neighbor above, below, or besides the unit are college students, have children or pets, it most likely is not a fair housing violation to answer such questions, but it is not something that you should volunteer unless asked. You never want to steer your prospect, but if your prospect wishes to pick a unit based upon potential neighbors, it may not be a problem to answer these questions, making no guarantees about who may move in after a current resident moves out. If a prospect claims to be an extremely light sleeper, or claims to work the night shift and sleep during the day, being as honest as possible about noise is crucial, as the resident could later attempt to use alleged noise problems to break the lease, and may even be successful in doing so. It happens all the time. The fact that you may have absolutely no control whatsoever over the noise is not relevant. The peaceful quiet enjoyment of the premises is paramount.

Questions regarding Safety or Security

1. The Property or Neighborhood

Your company must decide upon a policy or procedure to deal with crimes that occur on or near the property. Some companies go as far as providing a law enforcement generated crime or response sheet, while others avoid the subject altogether. If you or your leasing agent are asked about crime incidents on or near the property, your representations can potentially be used against you in a later attempt to break the lease, or in an attempt to hold the property liable in the event of a later criminal act which occurs on or near the property. Telling a prospect that the property is "safe" when there have been multiple incidents of car break-ins could result in a prospect having a change of mind after signing a lease, or after moving into the unit. Some properties are indeed quite safe, but may be near or even adjoin a property that is riddled with crime. Speak to your regional manager, risk manager and attorney to make the proper decision on how to answer these questions. The most important thing to keep in mind is to not represent your property or neighborhood as "safe".

2. Courtesy or Security Officers

Some properties have some sort of actual security provided, or simply have what is commonly called a courtesy officer on the property. Commonly a prospect will ask about this. Be certain to not call the company or person you use "security", unless your company explicitly tells you to do so. You may state, if asked, that you do not provide any sort of security service, but have a part-time "courtesy officer" or company that occasionally patrols the property. Remember that courtesy officers and "security" is for the preservation of your property, not the safety or security of any persons. While you may know what a courtesy officer is, a prospect will equate this with a "security officer" or law enforcement. The next time there is a disturbance in the middle of the night or a break-in, the fact that your courtesy officer was nowhere to be found could become a problem.

Cost of Utilities

In most rentals, the resident at a bare minimum is responsible for the cost of the electric bill. The electric bill is usually the most substantial utility cost of the resident. A wise prospect will ask what the average utility bill is, and if this is answered improperly, could result in a claim of misrepresentation and later be grounds for lease breakage. It is important to know your property, so the range of utility costs should be disclosed to the prospect. Utility charges can vary widely. The resident who is never home and keeps the thermostat at 85 degrees all year long will have dramatically different utility bills than the family of six who is in and out all day long, and who keeps their home at a brisk 70 degrees. Factors that can affect utility bill amounts include among others thing, usage, type of systems, number of occupants, size of the unit, exposure, and insulation of the unit. These vary dramatically, and you do not want a prospect to make any assumptions based upon that prospect's current living situation. The cost of heating and cooling a 1000 square foot, recently constructed, energy efficient apartment is far different than that of a 1000 square foot, flat roofed, un-insulated home with window air conditioning/heating built in the 1950's. After moving in and experiencing high energy bills, residents often ask for an "energy survey", a service that is often provided for free by the local utility company. These surveys will invariably indicate a number of deficiencies and extremely expensive changes and retrofits that need to be done to the rental, and will be used by the resident to try to break the lease. The more that is disclosed before move-in and if possible, within the lease itself, the better.

The Resident's Financial Responsibilities

It is extremely important that the property manager has an info sheet clearly detailing the resident's responsibilities, so that there is no confusion later. All utilities need to be discussed during the property showing, including the cable bill. In the single family home setting, other items may exist, such as pools, hot tubs, appliances, landscaping and many other items that cost money to use and/or maintain. Wrong assumptions are often made. You must be clear who is responsible for what BEFORE you take an application, receive any deposits or prepare the lease.

Responding To Demographic Questions

All staff should be completely trained on how to respond to any questions regarding the demographics of the neighborhood, your apartment community or particular building. Inadvertent fair housing violations could occur based upon answering simple, innocent sounding questions as to whether there are many children on the property, or the racial makeup of any of your residents. Be trained and prepared for these questions, and how or if you are able to answer them. You may be answering the question of a Fair Housing tester!

Best Practices:

1. Only allow experienced and trained persons to show the rental unit;
2. Know your product and the range of costs in addition to the base rent amount;
3. Never represent that the property is secure, safe or crime free.

 

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Law Offices of Heist, Weisse & Wolk, P.A.
Phone: 1-800-253-8428 Fax: 1-800-367-9038

Serving Florida's Property Managers with main office in Fort Myers Beach. Available by appointment in Orlando and Clearwater


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