VOLUME 10 - ISSUE 6 LEGAL UPDATE
- The Curable Noncompliance Examined #1
- The Attorney Fee Multiplier
- Key Release Considerations
- January 1, 2014 Lease Disclosure
- Avoiding The Accidental Rent Acceptance
- Making Sense of the Adverse Action Notice
- QUICK LEGAL Q AND A #2
The Curable Noncompliance Examined
by Harry Heist, Attorney at Law
The article is the first in a multi-part series examining specific curable noncompliances and how the property manager must deal with getting compliance or setting the case up for a potential future eviction action. Each noncompliance is unique. Many are dealt with in a similar way, but often the proof needed to proceed with legal action if the noncompliance is not cured differs. The legal papers filed in court for an eviction based upon a lease noncompliance other than nonpayment of rent are similar to that of a nonpayment of rent case, but if the case is contested, the property manager must be prepared to prove the case AND win the case.
The vast majority of property managers have prepared and served Seven-Day Notices of Noncompliance with Opportunity to Cure to a resident. Some property managers have had to file evictions when the noncompliance was not cured. Only a small fraction of property managers have had to deal with a contested case on a noncompliance eviction in which the resident has fought to stay in the unit. In an even smaller percentage of those cases that were fought, the resident was represented by an attorney. In a large percentage of those cases in which an attorney represented the resident, the property manager LOST the case in court.
Here is a question for you: “Did you ever have an eviction action for a noncompliance in which the resident had an attorney and fought you in court?” We can almost guarantee that you will say no. Very few property managers have experienced this, but they MUST be prepared for it.
THE UNAUTHORIZED OCCUPANT – EXCESSIVE TRAFFIC - THE UNAUTHORIZED PET
PROBLEM: Resident has an unauthorized person or persons residing in the rental unit not on the lease agreement
FORM: SEVEN-DAY NOTICE OF NONCOMPLIANCE WITH OPPORTUNITY TO CURE
WORDING: “You have an unauthorized person residing in the premises in violation of the terms of your lease agreement”
RENT ACCEPTANCE: Do not accept rent after you become aware of the noncompliance and have served your Seven-Day Notice of Noncompliance with Opportunity to Cure, unless you are certain the unauthorized occupant has been removed. Acceptance of rent can interfere with your ability to proceed and could act to “authorize” the unauthorized person.
PROOF ISSUES: You may see the unauthorized person there every morning. You see that person’s car parked there every night. The unauthorized person even comes into your office complaining about something. While it may seem like a simple matter, this is one of the hardest noncompliances to prove in court, because some residents are good liars, and these cases often hinge upon circumstantial evidence, not direct proof. Moreover, you will usually have to prove that your guest policy has been exhausted before giving a Seven-Day Notice of Noncompliance with Opportunity to Cure, which can be particularly difficult if your lease allows guests to stay for 14 consecutive days, for example. Before giving a Seven-Day Notice of Noncompliance with Opportunity to Care, you should have at least the equivalent of probable cause that the noncompliance is occurring, and in order to terminate, you will need hard-core solid proof; this is not to be taken lightly.
To terminate and evict a resident for unauthorized occupancy, you first need to have served a proper Seven-Day Notice of Noncompliance with Opportunity to Cure. In order to serve a Seven-Day Termination Notice, you must be reasonably certain that you can prove to a judge that the resident has an unauthorized occupant residing on the premises, not just visiting, and that the occupant was not “authorized” by you, the manager or prior management’s failure to act quickly. If the occupant has been on the premises for some time with your knowledge or the knowledge of maintenance personnel, employees or prior management, and/or you have accepted rent with knowledge of the unauthorized occupancy, you most likely will not be successful evicting, as you have “authorized” the occupant by failing to act. This is due to the legal principles of waiver and estoppel. Sometimes managers will tolerate an unauthorized occupant until something happens, and the manager gets angry at the resident or the occupant. This is not the way to go. Depending on the situation, the following is some proof you may need to win.
1. Photos of the unauthorized occupant AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired.
2. 24-hour Video surveillance tapes or a written admission by the resident(s) acknowledging the unauthorized occupant AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired.
3. Employees of the apartment community who will testify in court that they know for a fact the unauthorized occupant is still living on the premises AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure expired, and are prepared to show the judge proof.
4. Dates and times the unauthorized occupant was seen on the premises AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure expired. The more you document the dates and times, the better.
5. 24-hour Video surveillance of the unauthorized occupant’s vehicle AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure expired.
6. Police report in which the unauthorized occupant gives your address as his or her address AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired. Ironically, if an unauthorized person gets arrested for some incident on the property or tells the police that he is living there, it can help the case immensely.
PROBLEM: Resident has an unauthorized pet or pets in the apartment not permitted by the lease agreement
FORM: SEVEN-DAY NOTICE OF NONCOMPLIANCE WITH OPPORTUNITY TO CURE
WORDING: “You are keeping an unauthorized pet on the premises in violation of the terms of your lease agreement.” Remember, DON’T quote leases clauses!
RENT ACCEPTANCE: Do not accept rent after you become aware of the unauthorized pet and have served your Seven-Day Notice of Noncompliance with Opportunity to Cure, unless you are certain the pet or pets have been removed. You will want to do a good inspection. You can waive your ability to proceed and could act to authorize the unauthorized pet or pets by accepting rent with knowledge of the noncompliance.
PROOF ISSUES: You may see the unauthorized pet each day, you observe the resident walking the pet, the pet bites another person or bites or kills another pet, you have received a complaint of barking, or your maintenance tech discovers the pet during a routine inspection or service call. Discovery can occur in many ways. If the resident claims the animal is an assistance animal, you should contact your attorney, because if the resident has a legitimate assistance animal, you are not dealing with an unauthorized pet, and your pet policies don’t apply. You should have solid proof before serving a Seven-Day Notice of Noncompliance with Opportunity to Cure for an unauthorized pet. A justified suspicion is not proof, and you need proof to support a successful eviction. To evict a resident for failing to remove the unauthorized pet, you first need to have served a proper Seven-Day Notice of Noncompliance with Opportunity to Cure. To evict, you must be absolutely certain that you can prove to a judge that the resident has failed to remove the unauthorized pet, and that the pet was not “authorized” by you, the manager or prior management’s failure to act quickly. If the pet has been on the premises for some time with your knowledge or the knowledge of maintenance personnel, employees or prior management, and/or you have accepted rent with knowledge that the resident had an unauthorized pet, you most likely will not be successful evicting, as you have “authorized” the unauthorized pet by failing to timely act. In one case, the son of the maintenance tech had fed and walked the pet while the resident was on vacation. This knowledge of the pet was imputed to the manager, even though the manager never really knew about this. As with unauthorized occupants, the legal principles of waiver and estoppel can kick in. Depending upon the situation, the following is some proof you may need to evict.
1. Photos of unauthorized pet AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired. This could be as simple as getting on a letter, getting the pet to come to the window and taking a photo.
2. Video surveillance or photographs of the pet or written or verbal admissions by the resident(s) that they have failed to remove the unauthorized pet AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired.
3. Employees of the apartment community who will testify in court that they know for a fact the unauthorized pet is being kept on the premises AFTER the Seven- Day Notice of Noncompliance with Opportunity to Cure expired and are prepared to show the judge proof.
4. Other residents of the apartment community who will testify in court that they know for a fact the unauthorized pet is still being kept on the premises AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure expired and are prepared to show the judge proof.
5. Dates and time the unauthorized pet was seen on the premises AFTER the Seven Day Notice of Noncompliance with opportunity to cure expired.
6. Evidence of pet food or water bowl AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure has expired.
7. Audio recording of barking, meowing, chirping, noise, etc. of the unauthorized pet AFTER the Seven-Day Notice of Noncompliance with Opportunity to Cure expired.
PROBLEM: Resident has excessive traffic in and out of the unit an all hours of the day and night, most likely for the sale of drugs or prostitution. Everyone has a right to have visitors, but visitors who stop by for really short periods of time usually indicates that something illegal is going on. Since we may not be able to prove actually illegal activity, we are often able to prove excessive traffic.
FORM: SEVEN-DAY NOTICE OF NONCOMPLIANCE WITH OPPORTUNITY TO CURE
WORDING: “You have excessive traffic in and out of your apartment disturbing the peaceful, quiet enjoyment of the premises for other residents.” This can be modified to also add vehicular traffic if this is occurring, and it often does.
RENT ACCEPTANCE: Do not accept rent after you have served your Seven- Day Notice of Noncompliance with Opportunity to Cure unless you are certain the excessive traffic has completely ceased. You can waive your ability to proceed or delay matters by accepting rent with knowledge of an ongoing problem.
PROOF ISSUES: Often you see the excessive traffic or hear about it from other residents, some of whom actually get knocks on their door, as the visitors don’t have the correct address. This is quite upsetting for a resident to have this happen at 3:00 a.m.! Discovery can occur in many ways. Legitimate complaints from neighboring residents are enough to support service of the Seven-Day Notice of Noncompliance with Opportunity to Cure, but if the ultimate case is contested, some of the complaining neighbors will need to testify in court.
To evict a resident for excessive traffic, you first need to serve a proper Seven- Day Notice of Noncompliance with Opportunity to Cure. In order to serve a Seven-Day Termination Notice, you must be absolutely certain that you can prove to a judge that the resident has excessive traffic and it is a problem. The following is some proof you may need depending upon the situation:
. 1. Photos of people coming and going. You never need permission to photograph a person to create this proof.
2. Video surveillance or verbal admissions by the resident(s) that people are coming and going. Do not record conversations though, as that is not legal in Florida without permission.
3. Employees of the apartment community who will testify in court that they have seen an excessive number of people coming and going, staying for short periods of time.
4. Other residents of the apartment community who will testify in court that they have seen people coming and going, AND most importantly, that this has caused a disturbance to them of their peaceful, quiet enjoyment of the premises.
5. Dates and timepeople are seen coming and going AFTER the Seven Day-Notice of Noncompliance with Opportunity to Cure expired.
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The Attorney Fee Multiplier
by Harry Heist, Attorney at Law
Under Florida law and also the wording of most leases, the prevailing or winning party in any action in court regarding landlord/tenant law is entitled to an award of reasonable attorney’s fees. Simply put, if you have an attorney and you win in court, you can get a judgment again the losing party for your attorney’s fees and costs. Okay, great, you exclaim! You win in court, and the resident has to pay your fees and costs. Nice. Well, they rarely do, and it is difficult if not impossible to collect from a deadbeat resident. On the other hand, if the resident wins the case, has an attorney, and gets a judgment for fees against your owner, this creates quite a problem, as your owner has non-homestead property, the rental, maybe other rentals and money as well, and that makes it easier for an attorney to go after the debt and collect against your owner. A simple attorney’s fee judgment can be recorded and will attach to that rental property or apartment community. Ask any attorney, the best person to sue is the one that owns some rental property. Attorney’s fees and the landlord/tenant relationship have been written about extensively by us in the past, and we recommend you read the articles again. This article will examine a little known danger to losing a case in court. This danger can actually double or triple the amount of an attorney fee award against you or the property owner. This little danger is called a “multiplier”. So read on.
What is a Multiplier?
A multiplier is a procedural mechanism in law under which a judge can take an attorney’s fee amount awarded to the winning party and multiply it by a certain number, often 2 or 3, thus making the attorney’s fee award much higher. $2000 becomes $4000 or $6000 just like that, and it is all up to the judge!
When does a Multiplier Apply?
In order for a judge to award a multiplier, certain things or factors must apply or be in place. First of all, the judge must feel that one party is entitled to an award of attorney’s fees. This is fairly common, as the law provides this in landlord/tenant actions, as does the lease in most cases. Even if the lease were silent, the judge would most likely award attorney’s fees to the winner of the case based on Florida law alone. Usually it ends there, unless the attorney for the winning party decides to pursue the multiplier.
The attorney for the winning party must first establish that the attorney’s fees are reasonable. The attorney will present the judge proof of time spent on the case and tell the judge what his or her normal hourly rate is. The rate these days usually ranges from $250 to $450 an hour. Most often the attorney for the winning party will also bring into court another attorney who will testify as to the reasonableness and fairness of the fee and the amount of time spent on the case. Now comes the fun part. The multiplier!
If certain factors are present, the judge may follow the precedents set forth under a 1985 case called Florida Patient’s Compensation Fund v. Rowe. Certain questions are asked, the case is examined, and depending on the answers, a multiplier can be awarded.
1. Did the resident’s attorney take the matter on as a contingency fee basis? Often an attorney will represent a resident without requiring money up- front. This is called a “contingency fee agreement’ and is most commonly seen in personal injury cases. We have all heard the saying, “You pay nothing unless we win”. If the attorney did not require up-front money, a multiplier may be appropriate. Some attorneys are now focusing on representing residents, and this is how it is often done. Let’s face it: most people under eviction don’t have the money for the rent, much less an attorney, so they are not going to drop a $1000 retainer on an attorney at the beginning of a case and agree to pay $350 an hour.
2. Are there a lot of attorneys who take these cases? Well, actually no. There are really not a lot of attorneys out there right now who will take a case representing a resident on a contingency fee basis, so there is an argument that landlord/tenant type cases are “underrepresented” by attorneys unlike personal injury cases, where we see ads for those attorneys every day.
3. Will awarding a multiplier allow residents better access to an attorney? The argument is made that by awarding a multiplier, it will encourage other attorneys to take cases on behalf of residents. The idea is to create an incentive for an attorney to help someone who could not afford one otherwise.
4. Is there a pretty high chance that the resident could never pay the attorney? In landlord/tenant cases, if an attorney who represented residents on a regular basis were to depend on their clients paying, they would be out of business in no time, or will have created a non-profit charitable law firm!
5. Is the case a slam dunk win? If the case is not a slam dunk win for the resident’s attorney, he may be less apt to want to take such a case, so when an attorney takes a case like this defending a resident or representing a former resident/plaintiff in a security deposit dispute, he is talking quite a chance. Because of the gamble, the judge may award a multiplier.
When you examine factors or requirements 1-5, you can see how they could easily be applied to many landlord/tenant cases, whether the case in question be an eviction action or a simple security deposit dispute. If an attorney for a resident decides to go to court and ask the judge to award a multiplier, the judge often will grant the request.
The Result of a Multiplier
The result is fairly obvious. The potential stakes in any landlord/tenant dispute can now rise dramatically. If the owner loses a case in court, a judgment can be entered against the owner for a substantial amount of money. We have seen many cases in which the multiplier resulted in attorney’s fee awards of between $6000 and $18,000 on extremely routine eviction cases and security deposit disputes.
So you still want to take that chance in court on a defective notice? Do you still want to charge a resident for damages that you cannot 100% prove and you know will be a sticking point in court? We think not. Make sure you know the ramifications of going to court or getting involved in a legal dispute. While you may have some control over what your attorney will charge you, you neither will have any control over what the resident's attorney will charge or ask for in court, nor do you have control over whether a judge will award a multiplier. Think about all of this the next time you have a weak case, and you tell your attorney, “Just go ahead and file the case, I know they’ll just pack up and move without a fight.”
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January 1, 2014 Lease Disclosure
by Harry Heist, Attorney at Law
While the Landlord Tenant Act changes went into effect on July 1, 2013, one change applied later. All leases will be required to have a new disclosure regarding the security deposits beginning January 1, 2014. The disclosure really makes no material changes to the lease and is more informative in nature. If our single family home lease is used, the changes have already been implemented. If you are using the FAR/BAR lease, make sure that you have the most up to date and correct lease. Feel free to email or fax it to us for a free, quick compliance review. Below is the wording provided for in Florida Statutes Section 83.49 that needs to be in all leases beginning in 2014.
YOUR LEASE REQUIRES PAYMENT OF CERTAIN DEPOSITS. THE LANDLORD MAY TRANSFER ADVANCE RENTS TO THE LANDLORD'S ACCOUNT AS THEY ARE DUE AND WITHOUT NOTICE. WHEN YOU MOVE OUT, YOU MUST GIVE THE LANDLORD YOUR NEW ADDRESS SO THAT THE LANDLORD CAN SEND YOU NOTICES REGARDING YOUR DEPOSIT. THE LANDLORD MUST MAIL YOU NOTICE, WITHIN 30 DAYS AFTER YOU MOVE OUT, OF THE LANDLORD'S INTENT TO IMPOSE A CLAIM AGAINST THE DEPOSIT. IF YOU DO NOT REPLY TO THE LANDLORD STATING YOUR OBJECTION TO THE CLAIM WITHIN 15 DAYS AFTER RECEIPT OF THE LANDLORD'S NOTICE, THE LANDLORD WILL COLLECT THE CLAIM AND MUST MAIL YOU THE REMAINING DEPOSIT, IF ANY.
IF THE LANDLORD FAILS TO TIMELY MAIL YOU NOTICE, THE LANDLORD MUST RETURN THE DEPOSIT BUT MAY LATER FILE A LAWSUIT AGAINST YOU FOR DAMAGES. IF YOU FAIL TO TIMELY OBJECT TO A CLAIM, THE LANDLORD MAY COLLECT FROM THE DEPOSIT, BUT YOU MAY LATER FILE A LAWSUIT CLAIMING A REFUND.
YOU SHOULD ATTEMPT TO INFORMALLY RESOLVE ANY DISPUTE BEFORE FILING A LAWSUIT. GENERALLY, THE PARTY IN WHOSE FAVOR A JUDGMENT IS RENDERED WILL BE AWARDED COSTS AND ATTORNEY FEES PAYABLE BY THE LOSING PARTY.
THIS DISCLOSURE IS BASIC. PLEASE REFER TO PART II OF CHAPTER 83, FLORIDA STATUTES, TO DETERMINE YOUR LEGAL RIGHTS AND OBLIGATIONS.
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Making Sense of the Adverse Action Notice
by Brian Wolk, Attorney at Law
Beyond the initial disappointment of receiving negative feedback from the resident screening company informing a property manager that an applicant should be declined, the property manager must not only notify the applicant of the decision to deny the application, but the denial must be communicated properly in accordance with federal law. The denial of the application must be communicated to the applicant in the form of an “adverse action” notice. The applicable federal law which contains these numerous and often confusing requirements is called the Fair Credit Reporting Act. Congress intended to heavily regulate both consumer reporting agencies and the users of such information so consumers could be protected. This is a very serious undertaking for the property manager. One false step and the property manager and property manager’s company may be sued in court due to violations of this federal law. There are a vast number of attorneys who are eager to sue property managers in these situations. There may be significant liability if the property manager and the property manager’s company are out of compliance. Consumer
Financial Protection Bureau
Ask just about any property manager if the name “Consumer Financial Protection Bureau” has any significance. Chances are the response from the property manager will be a blank stare. Why does this organization matter? The Consumer Financial Protection Bureau has the responsibility to enforce the provisions of the Fair Credit Reporting Act. Until recently, the Federal Trade Commission governed those rules and regulations. It is well worth the time for a property manager to review the website of the Consumer Financial Protection Bureau, as the topics include not only adverse action requirements but other relevant provisions of the Fair Credit Reporting Act, including identify theft and the sharing of consumer information. The website can be found conducting a simple internet search. It is important to note that while the Consumer Financial Protection Bureau promulgates rules and has enforcement powers over violations of the Fair Credit Reporting Act, a former resident can sue over violations of the Act without the permission of the Consumer Financial Protection Bureau.
Adverse action notice requirements are triggered when an action is taken that is unfavorable to the interest of a rental applicant when denying a rental application, or when additional conditions involved in accepting the applicant are required. Examples include requiring the applicant to obtain a co-signer or lease guarantor. Those are fairly obvious to most property managers. Less obvious examples of when the adverse action notice must be provided to the applicant are instances when the applicant is required to submit a higher security deposit amount, or the applicant is required to pay an increased rent amount. The adverse action notice may be provided in writing or electronically via e-mail. The notice must contain contact information for the consumer reporting agency that provided the consumer report; a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer with specific reasons for the action; information about the consumer’s right under the FCRA to obtain a free copy of the consumer report from the consumer reporting agency if the consumer makes the request within 60 days of receiving the notice; and the consumer’s right to dispute the accuracy or completeness of information with the consumer reporting agency. In 2011, additional requirements involving credit score disclosure were added and are discussed below.
2011 Law Change
Effective July 21, 2011, the Dodd-Frank Wall Street Reform Act amended the Fair Credit Reporting Act. The Fair Credit Reporting Act prior to July 21, 2011 only required a property manager to provide an applicant with notice of any adverse action based on information obtained from the applicant's consumer report. The Dodd-Frank Wall Street Reform Act requires the property manager to disclose the applicant's credit score when the adverse action is based in whole or in part on the applicant's credit score.
Mandatory Credit Score Disclosure Required for Adverse Action Notice
The property manager must disclose the following information in the adverse action notice if any part of the decision making process involved the credit score of the applicant: the credit score number used in making the credit decision, the name of the person or entity that provided the credit score, the date on which the credit score was created, the range of possible credit scores under the model used, and all of the key factors that adversely affected the applicant's credit score, not to exceed four factors. However, if the number of inquiries made with respect to the consumer report is a key factor, no more than five factors should be listed. Also required is a statement that indicates a credit score is a number that takes into account information in a consumer report, and that a credit score can change over time to reflect changes in the consumer's credit history. The property manager should understand that if the credit score was not a factor in the adverse action taken, then the new rules involving the credit score disclosure would not apply. Also, if the property manager used a customized score that was not used by lenders to predict future credit behavior, then the requirement would not apply. In addition, the property manager must realize that if a credit score disclosure is not required, the applicant still must be given an adverse action notice if the adverse action was based on the content of a consumer report.
Relationship between Screening Company and the Property Manager
If the property manager uses a resident screening company, the property manager could clearly still be subject to the credit score disclosure requirements. The property manager must find out whether the resident screening company uses a credit score as part of its own scoring model. If the answer is yes, then the property manager will be subject to the credit score disclosure requirements. If the screening company used a customized score that was not used by lenders to forecast future credit behavior, then the credit score disclosure requirement would not apply.
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Avoiding The Accidental Rent Acceptance
by Harry Heist, Attorney at Law
If you accept rent during an eviction action without using a stipulation signed by all parties to the action, your ability to continue on with the eviction case is seriously jeopardized and often killed. If you accept rent after a 3-day notice has expired, and you go straight to eviction without taking some legal steps, the eviction is defective, and if challenged, will likely be dismissed. If a resident is in serious noncompliance and you have given a Seven-Day Notice of Noncompliance with Opportunity to Cure, rent acceptance could prevent you from proceeding. If a lease is expiring and you accept rent after the expiration date, you may be stuck with the resident longer than you wanted, as you may have created a month to month tenancy. While this is fairly basic to most property managers, each day rent is accepted resulting in defective cases, dismissals of eviction actions and failed Seven-Day notices. Simple steps need to be taken, procedures put in place and protocols followed to avoid these accidents from occurring. Sometimes full rent is accepted by a property manager or staff member after an eviction is filed. The eviction dies, so there is no harm done. Correct? Well, yes and no. While you may have all the rent that is owed, you already have expended attorney’s fees and costs which now may be difficult or impossible to recover.
Creating a Plan
Each company is unique in how it operates, so there is no real, “one size fits all” plan. The first step is to speak to your staff about the law and then discuss how to avoid making the rent acceptance mistake. They may come up with some novel ideas. Explain to your staff how rent acceptance affects the filed eviction or the soon to be filed eviction, and make sure they fully understand this.
Online Rental Payments or Direct Deposit
The moment a decision is made to file an eviction, confirm that no rent has been paid in full or part, log into your online rent payment program, and place a block on payments for that unit. Confirm carefully that the block has taken place and that it is completely impossible to bypass the block and make a payment. If you are using direct deposit into a bank account, and that account is for one resident, as is sometimes the case with the small landlord with one home, you may have to actually close the account if it is a direct deposit account, so make sure you are ready to file the case and have exhausted all other avenues. If you have one direct deposit account, and many residents deposit money into that one account, you have further complications.
Notify all Staff Members
Speak to all your staff, office and maintenance and let them know that what resident or residents are under eviction. This is crucial, as often a resident under eviction will stop by the office to tender rent, knowing full well an eviction action has been filed, or the resident may not even know that you have already sent the file to your attorney. In either case, taking the rent can cause a large problem.
Put an Actual Sign on the Wall or Desk
While this may sound amateurish, do something, anything, so that it is easily determined by a staff member that someone is under eviction OR you have decided not to accept the rent for whatever reason. This should be posted in a conspicuous place, BUT not visible in any way to other residents. If there is a designated place where rent is placed upon receipt, some kind of warning should be in that place so it is easily seen, and if rent is tendered or discovered it can be immediately returned.
Finding the Rent in a Drop Box, Mail or Other Place
While most property managers who are keeping up with the latest developments are fully aware of the massive problem with drop boxes, some are not, and they still have a drop box system in place. All checks or money orders that you may find in the morning or any other time from a drop box need to be immediately processed with great care taken to match up the check or money order with the person who has paid. It is at that time you do not want to accidentally post a payment from a resident who is under or near eviction.
Checks from Third Parties
A resident in financial trouble may have help paying the rent. This would account for a check or money order from some third party appearing on your desk, in the mail or a drop box. Sometimes the resident’s name is not clearly identified on the check. Accepting this payment is the same as accepting payment from the resident.
Returning the Accidentally Accepted Rent
Read the article we wrote on this subject immediately to see how to return the rent. You do not want to hold it for any length of time at all, as some judges are extremely tough on this and consider acceptance to have occurred even after the payment is held for just a very short period of time. The judge will place the responsibility on you and your staff to know that the resident is under or near eviction. Placing the check or money order into a drawer can cause a big mess later. Never hang on to a payment like this.
So you did not follow the plan or protocol, and a payment was accepted. Well, your eviction may have to be dismissed, but it is not too late to enter into a stipulation with the resident. Your best approach will be to call your attorney, explain the situation, and see if you can get the resident to agree to paying the balance in full over time, possibly including payment arrangements on the attorney’s fees and costs associated with the eviction. Try to implement a system right away. Avoidable mistakes are to be avoided!
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Key Release Considerations
by Harry Heist, Attorney at Law
So many problems can be avoided if your company has a policy when no keys will be given to the resident until certain “things” or “occurrences” take place. Once you give those keys out, you have lost a lot of control and leverage, but it happens every day. You did not use a checklist, you trusted the resident to do the “right thing”, and NOW you have a problem: avoidable mistakes indeed. If you have a system or policy in place, AND you follow it, many problems can be avoided.
Lease not Signed by all Parties
Every day we examine many leases in the eviction process. So often, we see leases in which two people are on the lease as residents, but when you get down to the signature page, only one resident signed. Why? Many reasons. Maybe both residents could not come in to sign at the same time. Maybe one was out of town. In each of these cases, the tenants were given keys, but the lease in the file was not fully executed by all parties. You see, the second resident never came in the next day as planned to sign the lease. The out of town resident never came in the next week to sign the lease. In every case we hear a story of why someone did not sign a lease, and it always was avoidable. No keys should be given out until all residents sign the lease. No excuses, no reasons, no exceptions: no signatures, no keys.
Utilities Not Placed in Resident’s Name
You know the deal. The resident is supposed to put the utilities in the resident’s name before moving in. After all, that is what the lease provides, right? The lease also provides the rent is to be paid on time, so we can stop laughing right now. The resident moves in and two months later, you get a call from the owner in Iowa who has a $400 electric bill and a $200 water bill. Who is going to pay this, the resident? Sure. This is the same resident who did not pay rent this month, the security deposit check has bounced, and now this resident is under eviction. You may be stuck paying this utility bill yourself. You need to have a strong company policy that states that no keys will be given out until the utilities are placed in the resident’s name and proof is provided to this effect. No utility changeover proof? No keys.
Pet Procedures not Completed
A pet application should always be used along with the pet addendum and all fees and/or deposits paid. Everything on the pet application should be verified and a photo of the pet taken by you before any keys are released.
Approval by Association not Received
If an association requires an approval process, it must be followed exactly as required. Associations have immense power and often will enforce their power if you don’t do everything they want exactly how they want it done. When they delay in approval, there is a temptation to allow the resident to move in, especially when pressured by the property owner. No full approval, no keys.
Signed Lease not Received from Owner
Often the lease is sent to an owner for signature but does not come back to you quickly. The date is fast approaching for the resident to move in, but the lease is still in the hands of the owner. You call the owner who tells you the lease has been signed, and you then hand the keys to the resident who promptly moves in. For whatever reason, the owner decides not to sign the lease, but the resident has already moved in. This can be disastrous. No fully executed lease by all parties, no keys.
Security Deposit not Paid in Full
A common occurrence is for the approved resident to inform you at the last minute of an inability to pay the full security deposit or other monies that may be required. You may or may not get permission from the owner for the resident to move in. With consent of the owner, you may make a deal with the resident to make payments after the move-in date. While this sometimes works out, often it does not. A good policy is to not to do security deposit payment deals. No fully paid security deposit, no keys. Payment not Cleared by Bank
Whenever a person is in a rush to move in, this is a huge red flag. If the time is short, the check or money order may not have cleared the bank yet. The resident moves in, and sure enough the check or money order is dishonored. This is a huge mistake that many managers make, especially with money orders, as there is an incorrect assumption that a money order is somehow clear funds. Some managers feel that a money order is almost as good as cash itself. Anyone can buy a money order, go back to where the money order was purchased, claim the money order has been lost or stolen, and with a stop payment order in place, the money order given to you is just as worthless as a worthless check. No cleared funds, no keys. This should be your policy.
Copies of Identification not Made
We recommend that you should have copies of government issued identification from all applicants and residents. This should be done early in the application process, but at the very least, prior to allowing the resident to move in. Identity theft is rampant, and the most common way it is done in the rental setting is for you to take all the information the applicant gives you on the application, believe it, have it all check out with your screening company, but never actually confirm the person with whom you are dealing is the person on whom you are running all the background checks. No verification and copying of identification, no keys.
The previous items we just mentioned are only a starting point and not all the times or reasons when something needs to be done before keys are turned over to the resident. Go through your procedures carefully, create checklists, policies and procedures, but most importantly, consistently follow the guidelines you create. Once the keys are handed to the resident, your power is gone, and the resident has the upper hand.
QUICK LEGAL Q & A
by The Law Offices of Heist, Weisse & Wolk, P.A
Q. We just received a new account under which the prior management company stole the security deposit. The lease states that the security deposit is in a local bank, but we know for a fact that there is no money, as the prior manager has been arrested and is currently in jail. The property owner notified the resident that we are the new manager, and we have received the rent this month. Is there anything we need to do to protect ourselves?
A. It is quite possible that the resident does not know about the loss of the deposit and happily thinks it is sitting in an escrow account. When the resident vacates and finds out it is gone, the resident may try to come after your company, thinking that you were in control of the funds. Any time you take over a property when the owner is holding the deposits, or when the deposit money has disappeared, it is crucial that you notify the resident in writing of this fact to avoid the resident thinking otherwise. The owner will ultimately need to come up with this money, as the owner was the one who hired the prior management company where the misdeed occurred. Of course the owner can go after the prior manager or the prior management company, but the chances of recovery are slim. To be 100% safe, you may ask the owner to replenish the lost deposit before you even take over the management of the property, having the owner pay this money into your escrow account, where you can keep it safe and have control over the funds.
Q. We have a property owner that is causing us serious problems. The owner has always been a pain, complaining every time we had to make a repair to the premises. Now we have a serious problem with a roof leak that developed into black mold. We notified the owner, who is refusing to authorize the repair. The owner’s response to us was to tell the resident that, “They can just move if they don’t like it”. The resident wants the leak repaired and is threatening legal action. We do not want to keep managing this property under these circumstances. How can we get out?
A. You need to look at your property management agreement carefully in the section governing termination. Unfortunately, many property management agreements are completely deficient in this section and provides that either you or the owner must give 30 days’ notice to terminate. This is a dreadful clause to have in the situation you are describing. It requires you to manage the property for 30 more days. This is 30 more days of liability when your hands are tied, you have no money to make the repair, but you still have to manage the property, attempt to collect rent, serve a 3-day notice and potentially file an eviction which you almost surely would lose. Make sure your management agreement enables you to stop managing immediately in the event of something like this. Our suggested wording allows you to immediately terminate if “LANDLORD'S actions or inactions violate the terms of this management agreement or are illegal, improper, jeopardize the safety or welfare of any TENANT(S) or other persons, interfere with this management agreement, code violations occur on the property, a foreclosure action is filed against the LANDLORD or LANDLORD is delinquent in the payment of any taxes, fees, assessments, fees, bills, fines or any other financial obligations related to the premises or the BROKER.”
Q. Sometimes the homes we rent out have an extra refrigerator in the garage. They are usually older models, used for overflow, beer or soft drinks. Well, we just got a call that the garage refrigerator at one of our homes does not work anymore. We contacted the owner, as we only have $200 in repair authorization, and the owner said he is not going to allow us to repair or replace that refrigerator. Is the residen entitled to have the refrigerator located in the garage operable?
A. If you did not exclude that garage refrigerator from the lease agreement and clearly state that the owner would not repair or replace it, you may be stuck repairing or replacing it. All items that you do not intend to repair or replace should be clearly listed in the lease agreement, or these types of things happen. Learning what to exclude from a lease is a crucial part of the pre- leasing process. Water softeners, built in grills, sprinkler systems, pool heaters, alarm systems, garbage disposals, ice makers, Jacuzzi tubs: the list goes on and on. If these items are not specifically excluded, many judges will rule that the owner must maintain, repair or replace them; an “as is” clause in the lease will not carry the day with those particular judges. In this little mess you have here, I would bite the bullet and buy them a replacement used refrigerator and consider it a learning experience.
Disclaimer: These Q and A’s are basic general legal advice only and pertain to single family home management issues. They may be reproduced in full, as long as nothing in the text is modified.
(Back to Top) Revised 11/26