While we strongly recommend against having corporations as residents in residential leases, sometimes it is necessary and often actually works out fine. How the lease is executed with the corporation becomes a big problem, and rarely do we see leases with corporations executed correctly. The name of the corporation, who signs, the personal guarantee and how it is signed will determine if you will potentially have a successful lease or major problems later. This article will not address the dangers of the corporate resident, but will rather show you how to enter into a lease with the corporate resident in the proper legal fashion.

 

The “Corporation Only” as a Resident

 

There will be times when the resident will be the corporation. Granted, a human being will be the occupant in the residential property, but the lease named resident will be a corporation and nothing more. This means that the corporation as resident is responsible for paying the rent, is bound to the lease and incurs all the obligations and benefits as a leaseholder. If the leaseholder corporation is in default of the lease, the manager’s only recourse will be to sue the corporation as the resident, and the manager will be bound by all the legal requirements and procedures necessary to sue a corporation. No individual person is responsible for payment of the rent or liable for failure to pay the rent.

 

Why Would a Lease Only Be in the Corporate Resident’s Name?

 

 

In the case of a medium to large corporation, no one is going to personally sign or guarantee a corporate lease in most situations. Usually the corporation is placing employees, officers or directors in the rental unit. The manager deals directly with the employee, officer or director of the corporation. Neither the occupant nor the corporation, officers, employees of directors will have any individual being liable under the lease. The corporation is the only liable party.

 

Who Is the Corporation?

 

Before you can even think of entering into a lease with a corporation, it is crucial to know the exact legal entity’s name as it is registered with the Florida Secretary of State or the state in which it is incorporated. “Joe’s Painting Company” is not the proper corporate name, if in fact the corporate name filed with the Secretary of State indicates, “Joe’s Painting and Contracting, Incorporated”. We see a massive amount of sloppiness in how the name appears on the lease. We recommend you always get a printout from the internet, and even possibly get a copy of the Articles of Incorporation. While you may not think this is important, when it comes time for the corporation to break a lease, skip out on you or get evicted, this sloppiness can really cause serious complications. Never assume that the name of the corporation that is being provided to you is in fact the exact legal name of the corporation. Always investigate and confirm.

 

How Is the Pure Corporate Resident Lease Drafted?

 

The corporate resident should be on the lease exactly as it appears in the Secretary of State records. The lease should clearly state who the occupants will be, and if you routinely do criminal background checks on your residents, failing to do criminal background checks on the occupants could be a Fair Housing violation. Years ago, a client found out that one of the occupants in a unit rented under a corporate name was in fact a registered sexual offender. Since the occupant never filled out an application and the manager never did a criminal background check, the occupant could not be evicted.

How Does the Pure Corporate Resident Sign?

 

In the signature section of the lease, the corporate name needs to be listed as the resident along with the name of the person signing the lease on behalf of the corporation.

 

Example: XYZ Engineering and Surveying, Inc., by John Smith, President.

 

Is John Smith now liable at all if the corporation fails to pay the rent or gets evicted? No. John Smith is simply signing as his authorized capacity as president of the corporation.

 

Who is Authorized to Sign on Behalf of the Corporation?

 

This is not an easy question to answer. Someone may have apparent authority, but due to the bylaws of the corporation, only certain people or persons can actually bind the corporation. Your attorney can help you investigate this. Never assume that the person signing the lease is in fact authorized. You will sadly find out that he was not authorized to sign when the corporation is trying to get out of the lease, and the corporation’s attorneys can prove that this person had no actual authority.

 

The Corporate Resident and the Person With Individual Liability

 

Unless you are dealing with a solid corporation with a proven track record and know for sure that the person signing the lease has the absolute authority to bind the corporation, you will want to have someone sign “individually” in addition to signing in a corporate capacity. This person signing “individually” is actually bound to the terms, conditions and all obligations of the lease as if there were no corporation in the picture at all. This is the best possible way you can execute a corporate lease.

 

Example: In the beginning of the lease, it will state that something like “Bill Jones and Mary Jones, Manager and XYZ Engineering and Surveying Corporation, through its agent John Smith, President AND John Smith Individually”

 

At the signatory section of the lease, you will have a place for Bill and Mary Jones to sign (unless you are signing on their behalf with a Power of attorney) and 2 more places for signatures:

 

XYZ Engineering and Surveying Corporation, by John Smith President _______________________ (sign here)
and

 

John Smith, Individually ______________________ (sign here)

 

Common mistakes we see

 

1. The corporate name is incorrect or incomplete.

 

2. The lease is signed by a person in the corporation that has no authority.

 

3. The lease fails to include a signature line creating individual liability.

 

4. There is a signature line, but it fails to state whether the person signing is doing so individually or on behalf of the corporation, causing legal confusion.

 

Our Recommendation

Besides all the dangers of entering into corporate leases in residential units which we promised not to address in this article, we strongly recommend that unless you are sure you know how to enter into a corporate lease, give your attorney a call so that you will know how to draft the lease correctly.

 

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Many managers are reluctant to copy the resident’s identification due to a fear that this will trigger a Fair Housing violation. By not having a copy of the identification, the manager is at a distinct disadvantage when this identification is needed later in the tenancy or for collection purposes. Should the identification be copied? Is it legal? Let’s look at the risks and benefits of copying the ID and get some advice from our nation’s Fair Housing Experts.

The Application Process

Most managers have been advised that copying an applicant’s identification and keeping it with the file can open you up to a Fair Housing complaint. The theory behind this is the fact that you can gather up numerous applications, sit down and review them, look at the photos of the applicant and decide to discriminate against the applicant based on race, religion, color, nationality or anything else you may be able to determine by viewing the image of the applicant. Possibly, the applications are gathered and sent to a third party in your company who makes the ultimate decision as to accepting or rejecting the applicant. This person can easily sort through the applications and make decision based on what they see on the applications. In the event of a Fair Housing complaint, the investigator may and probably will want to see all your applicants’ files, and in the event there appears to be a pattern of discrimination against someone based upon a protected class that can be determined by the ID copies, you will have a lot of explaining to do. Is it illegal to make copies of the ID at the time of application? Nadeen Green, a nationally respected Fair Housing expert and Senior Counsel with For Rent Media Solutions says this:"If you feel a need to have a copy of the applicant’s photo prior to them being approved, (1) know the risk, (2) be consistent within the policy, and (3) be sure you can absolutely justify the decision making procedures and process as to why one person got an apartment and another did not. Otherwise there could easily be the illusion that decisions were based on factors about the people, with those factors being identified through the photos." Let’s look at what she is saying.

1. Know the risk. The risk is that you will be accused of discrimination, as you can often easily identify a person of a protected class by the photo on the ID. Will not having a copy of the photo ID keep you safe? Of course not, but having a copy certainly elevates this risk.

 

2. Consistency in your policy. If you are taking a copy of photo ID for the purposes of identification of the applicant, you must do this with all your applicants. Never pick and choose or make exceptions unless these exceptions are not based upon any discriminatory purpose. If you have a policy to copy photo ID, you will need to have a written policy for when a person does not have a photo ID. Note the emphasis on “written” when it comes to all your policies.

 

3. Justifying your application approval/rejection decision. All managers need to have a written Resident Selection Criteria and/or other written policy which must be followed for the application acceptance or rejection. Careful file notes should be kept with the full reasons for which a resident was denied.

Copying the ID at Lease Signing

While some managers may be hesitant to copy ID during the application process, it is crucial that ID is copied at the lease signing. This gives the manager another chance to look at the ID, compare it with the information provided, and have a firm way to identify the resident at a future date. A copied ID often is useful in a resident lock-out, pursuing a bad check, and dealing with identity theft or in an unauthorized resident matter. Both Doug Chasick of Call Source and Fair Housing Trainer Nan Cavarretta agree that copying ID at lease signing is both legal and recommended, but feel that copying during the application process is risky.

Your Decision?

When dealing with any potential fair housing issue, caution is key. If you have a good Resident Selection Criteria and detailed policy and procedures AND you follow them, documenting everything along the way, you will probably be safe copying the ID at application time. Short of that, we recommend you hold out until the lease signing. Finally, when it comes to copying the ID, no matter when you do it, as Doug Chasick of Call Source will tell you, "most copy machines at leasing offices don’t make good copies of photographs anyway!"

 

“Serving the Property Management Professional”

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        OFTEN THE TENANT WILL SUE A PROPERTY OWNER REGARDING A SECURITY DEPOSIT DISPUTE

 

1.   If the HWW Lease is used, the Tenant is to only sue the Property Owner rather than the Property Manager or Property Management company.  In some cases, the Tenant will sue the Property Owner.

 

2.   Tenants sometimes will sue the Property Owner if there is a unresolved security deposit dispute.

 

3.   If the Tenant sues the Property Owner, the Property Owner may expect you to handle the lawsuit.

 

4.   No lawsuit can ever be ignored.  If a lawsuit is ignored, the Plaintiff in the lawsuit will win by default.

 

5.   Some courts will require the Property Owner to hire an attorney and/or attend court while some will allow the Property Manager to stand in the Property Owner’s place and attend the Mediation and Trial if not settled in Mediation if the Property Manager has a Power of Attorney given to them by the Property Owner.  

 

6.   The Property Management Agreement should give the Property Manager the power to settle lawsuits.

 

7.  Settlement is often a wise path to avoid wasting additional time and money.

 

8.  If the Tenant is represented by an attorney, the stakes become high as if the Tenant wins even a small part of the lawsuit, ALL the attorney’s fees of the Tenant (whether they paid them or not) can be awarded to the Tenant and a Judgment for attorney’s fees will be assessed against the Property Owner.

 

9.  A judgment against a Property Owner will attach to the rental property and can result in serious expenses to the Property Owner.

 

ALWAYS CONTACT OUR OFFICE THE MOMENT YOUR PROPERTY OWNER IS SUED NO MATTER HOW UNFAIR OR RIDICULOUS THE LAWSUIT MAY SEEM. 

 

NEVER ATTEMPT TO ACT FOR THE PROPERTY OWNER IF THE TENANT HAS AN ATTORNEY.

 

EDUCATE YOUR PROPERTY OWNER ABOUT THE RISKS IF THE TENANT HAS AN ATTORNEY.

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                            OUR OFFICE MAKES YOUR EVICTION QUICK, EASY AND PAINLESS

 

1.   Gather up your Lease, your Notice to Pay Rent and your Payment ledger.  

 

2.   Confirm your Notice to Pay Rent is completely filled out and the “Certificate of Service” is completed.

 

3.  Go to www.evict.com and you will see how simple it is to send the info in to us.

 

4.  While we have hundreds of articles and videos, you may want to watch a couple of the below ones to get an understanding of the process and timelines.

 

PREPARING THE THREE-DAY NOTICE   https://vimeo.com/511224514

 

RETURNING RENT  https://vimeo.com/295616035

 

THE  BASIC EVICTION-  https://vimeo.com/295658623

THE UNCONTESTED EVICTION  https://vimeo.com/295616767

 

NONPAYMENT OF RENT- THE PROPER NOTICE https://vimeo.com/311537164

 

SHUTTING OFF ONLINE PAYMENT https://vimeo.com/337287280   

 

THE MOST COMMON NOTICE MISTAKE https://vimeo.com/337287393

 

 

IF YOU HAVE ANY QUESTIONS, DO NOT HESITATE TO CALL 1 800 253 8428 OR EMAIL US AT INFO@EVICT.COM 

 

ONCE THE EVICTION IS FILED, WE WILL KEEP YOU UPDATED AT EACH STEP.

 

“Serving the Property Management Professional”

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OFTEN THE TENANT WILL SUE YOU OR THE PROPERTY MANAGEMENT COMPANY ON A SECURITY DEPOSIT DISPUTE RATHER THAN SUING THE PROPERTY OWNER

 

1.   Technically, AND especially if the HWW Lease is used, the Tenant is to only sue the Property Owner rather than the Property Manager or Property Management company.

 

2.   Tenants often sue the Property Manager or Property Management company improperly.

 

3.   If the Tenant sues the Property Manager or the Property Management company, a MOTION TO DISMISS can be filed and there can be one of three results. 

1. The Judge may dismiss the case OR
2. The Judge may dismiss the case and tell the Tenant to sue the Property Owner  OR
3. The Judge may leave the Property Manager or Property Management company in the lawsuit and tell the Tenant to also sue the Property Owner.

 

4.   If a MOTION TO DISMISS is filed, while you may get your company out of the lawsuit AFTER A HEARING ON THE MOTION, the Tenant simply amends (the judge often allows this) or files a new lawsuit so you often will have accomplished little.

 

5.   The KEY to success is to try to settle the case to avoid time wasted in court and attorney’s fees.

 

6.   If you or your Property Management company is sued in a Security Deposit lawsuit, you MUST take action right away if you wish that we try to have you or your Property Management company dismissed from the case.  

 

IF A LAWSUIT IS FILED AGAINST YOUR PROPERTY OWNER, YOU OR YOUR PROPERTY MANAGEMENT COMPANY, AND THE TENANT HAS AN ATTORNEY, THE STAKES ARE HIGH.

 

ALWAYS CONTACT OUR OFFICE THE MOMENT YOUR PROPERTY OWNER, YOU OR YOUR PROPERTY MANAGEMENT COMPANY IS SUED NO MATTER HOW UNFAIR OR RIDICULOUS THE LAWSUIT MAY SEEM.   

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MOST SUCCESSFUL PROPERTY MANAGERS SIGN LEASES WITH A POWER OF ATTORNEY GRANTED TO THEM BY THE PROPERTY OWNER.

THE POWER OF ATTORNEY IS PROVIDED BY OUR OFFICE AND MUST BE SIGNED, WITNESSED AND NOTARIZED

Some reasons why it is wise to sign a Lease for the Owner:

1. Owner knows you are working with an applicant and wants to refuse them.
2. Owner does not want to rent to children and does not sign Lease.
3. Owner finds out applicant has a service animal or ESA and refuses to sign Lease.
4. Owner sees name of the tenant and decides he/she does not like people from that country.
5. Having Owner sign the lease could result in delays.
6. Only one owner may sign.
7. Owner changes mind.
8. Owner finds out tenant is Black, Asian etc. and decides to change mind.
9. Owner never gets you the signed Lease.
10. Owner gets Lease from you, makes changes, then sends it back to you.
11. Owner delays in getting you the lease, it’s Friday, you move Tenant in, Owner changes mind on Monday.

 

THE PROPER WAY TO HANDLE PROPERTY MANAGEMENT IS AS FOLLOWS:

TENANT APPLIES, TENANT IS APPROVED BY THE PROPERTY MANAGER, LEASE IS PREPARED, TENANT SIGNS, PROPERTY MANAGER SIGNS, PROPERTY MANAGER THEN TELLS OWNER THE GOOD NEWS A WEEK AFTER TENANT MOVES IN.   

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1.   THE LANDLORD OR THE PROPERTY MANAGER IS ALLOWED TO SERVE ANY NOTICE.

 

2.   A PROCESS SERVER MAY SERVE NOTICES BUT THERE WILL BE A COST INVOLVED OF $35 TO $50 AND SOMETIMES MORE IF THERE IS A RUSH.

 

3.  FLORIDA LAW DOES NOT PROHIBIT A THIRD PARTY SUCH AS A STAFF MEMBER, HANDYMAN, ASSISTANT, OR A NON PROCESS SERVER TO SERVE NOTICES.

 

4.  THE NOTICE SHOULD BE PREPARED BY AND SIGNED BY THE LANDLORD OR THE PROPERTY MANAGER. 

 

5.    IN THE EVENT OF AN EVICTION, THE PERSON WHO SERVED THE NOTICE MAY BE REQUIRED TO COME INTO COURT TO PROVE THEY ACTUALLY SERVED THE NOTICE.

 

6.  SERVING A NOTICE WITH A WITNESS IS PREFERRED BUT NOT LEGALLY REQUIRED.

 

7.  AFTER SERVING THE NOTICE BY POSTING ON THE DOOR, WE ADVISE YOU TAKE A PHOTO OF THE NOTICE ON THE DOOR PREFERABLY WITH A TIME/DATE STAMP.

 

SERVING NOTICES IS AN IMPORTANT PART OF THE PROCESS AND CAN BE DANGEROUS.  BEING ABLE TO PROVE SERVICE IN COURT IS A MUST.

 

IF YOU DESIGNATE A THIRD PARTY TO SERVE NOTICES FOR YOU, BE SURE THEY ALWAYS KNOCK FIRST AND ONLY SECURLY POST ON THE DOOR IN THE EVENT NOBODY ANSWERS THE DOOR, A PERSON UNDER THE AGE OF 15 OPENS THE DOOR OR A PERSON WHO IS NOT AN ACTUAL OCCUPANT ANSWERS THE DOOR.

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ALLOWING A TENANT TO INSTALL THEIR OWN WASHING MACHINE CAN HAVE SERIOUS AND DIRE CONSEQUENCES.

 

1.   Basically anyone has the ability to install a washing machine with little to no mechanical knowledge.

 

2.   An improperly installed washing machine can result in serious flooding and/or mold issues.

 

3.    An old or defective water rubber supply line can rupture or leak causing immediate serious damage. Only braided stainless steel supply lines should be used.

 

4.    The Property Manager and the Tenant may have no knowledge of the defective water supply line(s).

 

5.    Often the small round washer in the supply line fitting will fall out in transit resulting in slow unnoticed leaks and resulting water and mold damage.

 

6.  The washing machine drain line must be installed properly or it can fall out or come out of the house drain pipe due to the water pressure or the movement of the washing machine. Many Tenants and Property Managers do not know that this drain line must be properly secured.

 

7.    If a Tenant is allowed to bring their own washing machine, it should be installed by or installation supervised and inspected by the Property Manager’s handyperson or trained staff.

 

8.    Charging the Tenant for the installation or supervision is perfectly reasonable and wise and most Tenants will have no difficulty accepting this charge.  

 

UNDERSTANDING THE DANGERS OF A TENANT INSTALLED WASHING MACHINE IS CRUCIAL. TAKE THE STEPS NOW TO AVOID A DISASTER.   ANY TENANT INSTALLED WASHING MACHINE SHOULD BE INSPECTED AS SOON AS POSSIBLE MAKING SURE THE DRAIN LINE IS SECURED AND RUBBER SUPPLY LINE HOSES REPLACED WITH BRAIDED STAINLESS STEEL SUPPLY LINE HOSES.

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THE PROPERTY OWNER SHOULD EXPECT AND BE PREPARED FOR A WALL MOUNTED TELEVISION

 

1.   Many Tenants wish to have a wall mounted television.

 

2.   Allowing the Tenant to self install a wall mount is a serious mistake.

 

3.   An improperly installed wall mount will cause damage to the wall, could create a dangerous situation, and the Tenant often will remove the mount leaving significant damage.

 

4.   If appropriate, the Tenant should be asked if they wish to have a wall mount and the Property Manager should have the mount installed at the Tenant’s expense if it is decided that a wall mount is allowed.

 

5.   In most cases, the properly installed wall mount should remain on the premises as it will often add value and versatility to the premises.  

 

FAILURE TO ADDRESS A WALL MOUNTED TELEVISION PRIOR TO THE TENANT TAKING OCCUPANCY CAN RESULT IN A SERIOUS EXPENSE TO THE OWNER AND UNINTENDED CONSEQUENCES. 

 

“Serving the Property Management Professional”

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DO NOT TRUST A VENDOR WHEN THEY STATE THAT THEY ARE WAITING FOR A PART FOR A REPAIR

 

1.  Often a part is needed to complete a repair job and you are told by the vendor that this part is not available, on back order or there will be some significant delays.

 

2.  Many vendors only buy their parts from their own preferred suppliers.

 

3.  The vendor then marks the price of the part up sometimes by 100% in the final bill to you.

 

4.  Often a Tenant cannot be forced to wait for a part to arrive and legally may have a right to stop paying rent or withhold rent.

 

5.  If the vendor tells you that they are “waiting for a part” or the arrival time for a part will be significantly delayed, you MUST jump into action.

 

6.  ALMOST every part needed for a repair is available online if you are willing to find it on your own AND potentially pay more for the part and pay for expedited shipping.

 

7.  The Property Manager cannot accept the vendor’s representation about a part availability or delay.

 

8.   If a vendor will refuse to guaranty a part that you purchase, then you must make a decision as to the risk of a delay versus the risk of a part that is not guaranteed.

 

9.  YOU as the property manager must make your vendor understand how important it is to get a repair completed as YOU are required to get a repair done in a fast manner.

 

10. Your vendor often does not see the urgency in a repair.  This is YOUR responsibility.

 

TAKE CONTROL AND QUESTION ANY PART DELAY OR REPAIR DELAY BY YOUR VENDOR.  TAKE ACTION TO GET THE NEEDED PART EVEN IF THERE IS AN INCREASED COST INVOLVED AND MORE WORK ON YOUR PART.   

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