Don’t Lock Out or Freeze Out a Tenant — It’s Illegal

Landlords are subject to penalties if they change the locks or shut off utilities to get a tenant out of rental property.

As any experienced landlord will attest, there are occasional tenants who do things that are so outrageous that the landlord is tempted to bypass normal legal protections and take direct and immediate action to protect the property. For example, after a tenant’s repeated destructive behavior, a landlord may consider changing the locks and putting the tenant’s property out in the street. Or, a landlord who is responsible for paying the utility charges may be tempted to simply not pay the bill in the hopes that the resulting lack of water, gas, or electricity will hasten a tenant’s departure.

Why You Shouldn’t Lock Out a Tenant

Landlords who take matters into their own hands often think that their behavior will be excused by the tenant’s egregious conduct. However, the fact that the tenant didn’t pay rent, left the property a mess, verbally abused the manager, or otherwise acted outrageously will not be a valid defense — and in fact, a landlord may well end up on the wrong end of a lawsuit for trespass, assault, battery, slander or libel, intentional infliction of emotional distress, and wrongful eviction. Defending this lawsuit will cost far more than evicting the tenant using legal court procedures.
Landlords or property managers who are tempted to take the law into their own hands to force or scare a troublesome tenant out of the property should heed the following advice: Don’t do it! Shortcuts such as threats, intimidation, utility shutoffs, or attempts to physically remove a tenant are illegal and dangerous. So, although the eviction process can often entail considerable expense and delay, consider it the only legal game in town. (For information on the steps you must take to evict a tenant legally, see How Evictions Work: Rules for Landlords and Property Managers.)

Avoid Penalties and Money Damages

Virtually every state that forbids “self-help” evictions also imposes penalties for landlords who break the law. When tenants sue after being locked out or frozen out, they can not only sue for their actual money losses (such as the cost of temporary housing, the value of food that spoiled when the refrigerator stopped running, or the cost of an electric heater when the gas was shut off), but they can also sue for penalties, such as several months’ rent. In some states, the tenant can collect and still remain in the premises; in others, tenants are entitled to monetary compensation only.
Even in states that have not legislated against self-help evictions, landlords who throw tenants out on their own run a risk of serious practical and legal entanglements. The potential for nastiness and violence is great — picture the arrival of a patrol car while tenant and landlord wrestle over the sofa on the lawn.
Landlords who lock out their tenants often find themselves sued over the “disappearance” of their tenant’s valuable possessions. The tenant will claim they were lost or taken when the landlord locked them up or removed them. Using a neutral law enforcement officer to enforce a judge’s eviction order will avoid these unpleasantries.
Article from www.Nolo.com

How Evictions Work: Rules for Landlords and Property Managers

An overview of the eviction process, including the termination notices required for different situations.

A landlord can’t begin an eviction lawsuit without first legally terminating the tenancy. This means giving the tenant written notice, as specified in the state’s termination statute. If the tenant doesn’t move (or reform — for example, by paying the rent or finding a new home for the dog), you can then file a lawsuit to evict. (Technically, this is called an unlawful detainer, or UD, lawsuit.)
State laws set out very detailed requirements to end a tenancy. Different types of termination notices are required for different types of situations, and each state has its own procedures as to how termination notices and eviction papers must be written and delivered (“served”).

Notice for Termination With Cause

Although terminology varies somewhat from state to state, there are basically three types of termination notices for tenancies that landlords terminate due to tenant misbehavior:

• Pay Rent or Quit Notices are typically used when the tenant has not paid the rent. They give the tenant a few days (three to five in most states) to pay the rent or move out (“quit”).
• Cure or Quit Notices are typically given after a tenant violates a term or condition of the lease or rental agreement, such as a no-pets clause or the requirement to refrain from making excessive noise. Usually, the tenant has a set amount of time in which to correct, or “cure,” the violation. A tenant who fails to do so must move or face the possibility of an eviction lawsuit. Read the rest of this entry »

Bankrupt Tenants: How the New Bankruptcy Law Affects Evictions

The new bankruptcy law makes it easier for landlords to evict bankrupt tenants.

It’s not uncommon for tenants with significant financial burdens to declare bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect on October 16, 2005, makes it easier for landlords to evict bankrupt tenants. The steps you’ll need to take depend on whether the tenant files for bankruptcy before or after you get a judgment against the tenant awarding you possession of the rental.

Tenant Files for Bankruptcy After You’ve Won Possession

If you sued the tenant for eviction and won a judgment for possession before the tenant filed for bankruptcy, you can proceed to evict the tenant, even if the tenant then files for bankruptcy in an attempt to stop the eviction.
New bankruptcy law vs. prior law. Under prior law, tenants could stave-off eviction by invoking bankruptcy’s “automatic stay” with a last-minute bankruptcy filing. Under the new bankruptcy law, in this situation landlords can usually proceed with the eviction without having to ask a judge to lift the automatic stay.
Exception in some states. In a few states, and only in evictions based on nonpayment of rent, and in very narrow circumstances, a tenant can stop an eviction at the last minute by filing for bankruptcy — if the tenant files a certification and pays back rent and forward rent. As the landlord, if you file an objection to the tenant’s certification right away, you’ll get a hearing in the bankruptcy court. If you convince the judge that the tenant’s certification is not true, the court will lift the stay and you can proceed to evict the tenant. Read the rest of this entry »

How Evictions Work: What Renters Need to Know

Landlords can’t just lock you out, even if you are behind on rent. They must get a court judgment first.

Your landlord can’t evict you without terminating the tenancy first. This usually means giving you adequate written notice, in a specified way and form. If you don’t move after proper notice (or reform your ways — for example, by paying the rent or finding a new home for the dog), the landlord can file a lawsuit to evict you. (This type of lawsuit is sometimes called an unlawful detainer, or UD lawsuit.) In order to win, the landlord must prove that you did something wrong that justifies ending the tenancy.
State laws have very detailed requirements for landlords who want to end a tenancy. Each state has its own procedures as to how termination notices and eviction papers must be written and delivered to you (“served”). Landlords must follow state rules and procedures exactly.

Notice of Termination for Cause

Although terminology varies somewhat from state to state, there are basically three types of termination notices that you might receive if you have violated the rental agreement or lease in some way:

• Pay Rent or Quit Notices are typically given to you when you have not paid the rent. These notices give you a few days (three to five in most states) to pay the rent or move out (“quit”).
• Cure or Quit Notices are typically given to you if you violate a term or condition of the lease or rental agreement, such as a no-pets clause or the promise to refrain from making excessive noise. Usually, you have a set amount of time in which to correct, or “cure,” the violation.
• Unconditional Quit Notices are the harshest of all. They order you to vacate the premises with no chance to pay the rent or correct a lease or rental agreement violation. In most states, unconditional quit notices are allowed only if you have:
  • repeatedly violated a significant lease or rental agreement clause
  • been late with the rent on more than one occasion
  • seriously damaged the premises, or
  • engaged in serious illegal activity, such as drug dealing on the premises.

Notice of Termination Without Cause

Even if you have not violated the rental agreement and have not been late paying rent, a landlord can usually ask you to move out at any time (assuming you don’t have a fixed term lease) as long as the landlord gives you a longer notice period.
A 30-Day Notice to Vacate or a 60-Day Notice to Vacate to terminate a tenancy can be used in most states when the landlord does not have a reason to end the tenancy. (The length of the required notice can be slightly longer or shorter in some states.) Read the rest of this entry »

So You’re Being Evicted? Tips for Tenants

Introduction

Most tenants who are facing eviction are being evicted as a consequence of nonpayment of rent. Others may face eviction for a variety of reasons, including violation of lease terms, creation of a health or safety hazard, or even a personality dispute with a landlord.
While landlord-tenant law, and the laws governing the eviction process, can change substantially between jurisdictions, there are some generalities which apply for most jurisdictions. If you are facing eviction you should check with a lawyer or tenant’s union in your area, so you can learn the specific laws which apply to your situation.
The following information is of a general nature, and may not apply where you reside

Nonpayment of Rent

In most jurisdictions, there is an expedited process for evicting a tenant for nonpayment of rent. Typically, the tenant is served with a legal notice requiring that rent be paid by a specific date (e.g., within seven days of service), after which time the landlord can commence an eviction action. Many times, a landlord will agree to accept a partial payment during this time, with the promise that any remaining rent arrears will soon be paid in full.
If the landlord accepts partial payment (no matter how small) prior to obtaining a judgment on a nonpayment action, upon learning of the acceptance of the payment most jurisdictions will dismiss any eviction proceeding premised on nonpayment of rent. The landlord must then start the process over, in relation to any additional rents owed.
Typically, even after judgment the tenant has a period of time during which the rent arrears can be paid, so as to avoid eviction. Read the rest of this entry »

Before You Buy Renter’s Insurance

Renter’s insurance is something every renter should have. It is inexpensive, depending on the amount you take out and your area you will likely pay between ten to twenty dollars a month for the coverage. It will protect you from theft and loss from fire. Most people have been robbed or know someone who has been robbed. This policy will protect you from paying for everything out of cost.
What Does Renter’s Insurance Cover?
Your renter’s policy will protect you if you are robbed, or if your apartment burns down. Additionally renter’s insurance includes liability protection. This protection will cover medical expenses if someone is hurt inside your apartment. This insurance will help you to replace items that are damaged or stolen. The liability insurance is also nice, because it will protect the assets and savings that you have acquired.
What Isn’t Covered by Renter’s Insurance?
It is important to realize that a renter’s insurance policy does not cover everything. Most insurance policies will not cover a flood. You will need to purchase an additional policy to cover flooding. This is especially important if you live in a flood plain area. Many apartments will let you know if they are located in a flood plain.
How Much Coverage Should You Purchase?
You need to determine the amount of your insurance policy. When you do this, you should carefully consider the costs of everything you have. If you are robbed, you will likely only need to replace jewelry and electronics. If you are the victim of a fire, then you will need to replace your clothing, your furniture and other personal effects in addition to your electronics.
Read the Fine Print for Limits and Exclusions
It is important to read your policy carefully. Some insurance companies put a limit on the amount that they will cover in different areas. They may limit the total amount that they would pay in electronics to $500.00. If this is the case, then you would need to purchase an additional policy to cover those items. If you work from home, you need to consider the cost of the equipment that you use. You may need an additional policy to cover your liability in relation to your job.
Take Advantage of Discounts for Your Policy
When you purchase your renter’s insurance, it is important to shop around. You can receive a discount when you get it through the same company as your car insurance. You should check for discounts through your job, professional associations, and alumni associations as well.
By Miriam Caldwell, About.com Guide

I have a rental property, now what?

At Renting Authority, we have so many customers who accidentally have a rental property. What I mean by that is that we have customers who bought a house and couldn’t sell it so they decided to make it a rental. These are average every day people who are building wealth and don’t even know it. Here’s a scenario:
Bob Johnson lives in a basic 3 bedroom/2 bath home when the real estate market is going great. He buys another property when the market is going well and plans on selling his other house after the fact. Well, once he buys the 2nd house he can’t sell the 1st house for whatever reason and you have an accidental real estate investor.
Like I said, we have customers like Bob Johnson by the dozen and they are great people who are doing a great service for our country. See, not everyone has a 20% down payment and can buy a home. Not everyone has perfect credit. These people need good solid places to live and with the interest rates where they are now, these people can rent these homes under affordable circumstances.
One of the most important things someone can do when in this situation is to setup as a business entity first. If you have a rental property you should keep that property separate from everything else you have. When you rent a home you don’t want the liability of that property to effect you personally should something happen and that means to create a basic entity like and LLC and put that property under that umbrella.
Next, when you decide to rent the absolute most important thing about the rental property is who you rent it to. This is a marriage in a sense so it is key that you are comfortable with that person and that the rent is being paid and able to be paid. Let me be very clear, don’t rent a house to your friend if you friend has no job and a history of drug abuse. Unless you want to make 2 mortgage payments every month, be very picky about who you rent to. It is better that the home has a lapse in a renter than getting the wrong one.
Good renters: pay on time, treat the home like their own, have good communication with you about the property. Can fix things themselves if necessary.
Bad renters: Don’t pay on time, break rental/lease agreements, damage the property or don’t care about the property and are high maintenance.
When I say ‘high maintenance’ I’m talking about the renter that is always calling you for something. It might be a squeaky floor board or a light bulb issue. Maybe the water pressure isn’t exactly up to that persons expectations. You don’t want that person.
People ask me how I can tell if I’m getting a good renter and I ask them to always do a solid background check on the renter and then ALWAYS call past landlords. Find out about their history and take the extra 5 minutes to get it done right.

The Importance of a Property Inspection

Does anyone know the average price of a property inspection? I called around and in reality the average price of a property inspection is under $500. In reality, is that a lot of money in comparison to purchasing something for hundreds of thousands of dollars?
The most common issue found during an inspection is improper surface grading and drainage. That means that in some homes water drainage runs too close to the foundation. When that happens it can cause obvious damage to the integrity of the home itself. This can be very expensive to fix but is better to fix than to ruin the home altogether. Home inspectors can identify that issue for you that you wouldn’t find without. If you are able to identify the problem prior to purchasing a home it can save you THOUSANDS in repairs.
What about a roof? Same thing applies. For a minimum fee prior to purchasing, your inspector can and should identify any issues with the roofing system that would/could result in a lot of money for repairs.
Obviously you’ve heard of several stories of issues with termites or the structural integrity of a house. An inspector can/should identify any issues along these lines that you’d want to find out PRIOR to purchasing your home. If not you are looking at thousands in repairs that you may not have budgeted but also you can’t live in a home with unresolved structural issues.
One thing that I always suggest is that the heating and cooling systems are really looked at. Both are a major monthly expense that you want working at their peak at all times. By not having those things inspected you may be costing yourself money each day that could’ve been identified and fixed rather inexpensively if caught early enough.
Anyway, if you are looking at a rental property to purchase then make sure you get a quality inspection done. It will save you so much money and headache. Sure you may find that the house is 100% fine, but that piece of mind is great to have.

What type of property should I invest in?

June 24th, 2013

What a great question. We get this one a lot and the answer really lies completely in the middle class. What do I mean by that? What I mean is that the best place to purchase for an investment property is the property that most people in the country are looking for, 3 bedroom and 2 baths.
The 3bed/2bath home is the single most sought after property type in the country. How big? 1200-1800 sq feet. Very average middle american home. Why is that the best investment type? #1. Most people are looking for it. #2. Historically it has shown to increase in value over time. #3. Newer families want it and families that have kids leave the home want it. #4. Affordable. Most every city has an affordable market and this home is what sets the standard for everything else.
If you don’t want a home then that is fine also. Many people invest in ‘units’ or apartments and go that route and it has proven to be a very successful way to go about things. When people ask me about this I am always curious what their long term strategy really is. Do they want to make money month to month or do they want some long term equity? If someone wants month to month money then I tell them to go ahead and go for the units but if they want long term equity they really need to look at the land the units are on. IF the units are in a good area with good growth around them then go for it, but if the units are in a slum or somewhere else then i tell them to run away because over time they won’t make real money on the equity of the property.

Phoenix Market Picking up

July 11th, 2013

In September of 2011 the Phoenix market was considered one of the worst in the country. The low point hit when the median price for a house fell to 118k. When the market was at its peak the area got a value of around 266k per home and things were great.
Today an article was posted on the MSN MONEY page about the Phoenix market that I think everyone should read. I’ll post the link here. PHOENIX REAL ESTATE.

How to Screen a Tenant

Paying for Real estate education

August 29th, 2013

I know, what a strange topic right? In reality though I wanted to talk about something that has come up quite a bit lately in the news. Donald Trump is being sued by the State of New York for offering real estate education and having people pay for it and I’m not sure at all what he did wrong.
I’ve read the complaints where people claim that they paid for things that didn’t happen or didn’t take place. People complained about paying for services that never happened. I get that and I agree with them. If you pay for a service that isn’t provided then you have every right. Where I get a little bothered is where people pay for the service and the service is fulfilled and then they ask for a refund. This falls under the classification of education. If I attend college and I study criminal justice but I decide not to do anything with that degree then is that my fault or the schools fault. Do I get a refund? NO. Of course you don’t get a refund at all. When a company makes an agreement with an individual it goes 2 ways. One is the company promising to provide and educational service with the other party doing what they are supposed to do. If I charge someone 500 dollars to attend a real estate seminar and they attend and learn then I’ve done my part. That person has no right to a refund unless I do not fulfill my part of the obligation. But once the education is taught the responsibility falls to the person who received it. While, in theory, I could make a real estate transaction for someone it simply doesn’t fall into my responsibility as an educator. That’s where Trump is coming in. If people were told they would make specific amounts of money or anything outside of the area of education then Trump has to fulfill that but if people were sold education then it is that specific persons job to turn that education into action.
Would I pay for real estate education? Of course I would. I would pay for any type of education that can benefit me in my life. Some of the best and brightest minds have paid for educational services that have served them very well. Real estate is an area of life where people can make or lose a lot of money so it is best to know what you are talking about. Think about it, if you paid 5k for an educational experience and you learned something that saved you 15k on your current housing situation you would be very glad wouldn’t you?

Tax Time Doesn't Have to Be Taxing

Tax time is here again and you should be aware that rental income isn’t the only way to make money when you rent a property. There are many incentives and tax advantages given to rental owners that entitle you to larger profits. Some of these money saving advantages are available monthly, and some of which are available annually when filing your taxes

Were you aware that often the entire amount of your property loan payment is tax deductible? This means that both the principle and interest payments made towards your property loan may possibly be deducted from your rental income. In addition, the interest that you pay on credit card purchases for your rental property is also tax deductible. As a real estate investor, you want the rental income to match as closely as possible to the property expenses to minimize tax liability.

Some of the other common property expenses that are tax deductible include repair and maintenance costs, home office expenses, casualty or theft loss, all related travel to the property to make repairs or do regular inspections, professional fees such as an attorney or accountant, hazard insurance premiums, property depreciation beginning from year two of the rented property, and even a portion of your landlord association membership dues. The government provides us these tax exemptions to encourage greater real estate investing. Real estate investing plays a strong role in the economy, from the laborers who repair and build houses, to the mortgage broker who secures the property loan. Your investment dollars help to strengthen the housing sector in many ways and these tax deductions is our government’s way of saying “thanks”.

The major key to taking advantage of the available write-offs is good record keeping. A complete year-to-date file of your properties income and expenses will help ensure accuracy and assist your tax preparer in capturing the largest possible tax deductions for your business. So start by organizing your credit card statements, mortgage and insurance statements, and receipts. In addition, always check with a tax adviser or the IRS about other returns, deductions, or advantages that may be available for your situation specifically. The tax laws change often, so consulting with a professional who is familiar with real estate investments will keep you up to date with what’s available to you as an investor. And don’t forget that their fee is a write-off!

Also, talk to each other. Real estate investors can help one another by just sharing their own experiences. The tax rules for landlords are pretty favorable. Let us learn from our peers, and the professionals, how to only pay our fair share of taxes.

Katie Poole – Hussa is a Licensed Property Manager, Continuing Education Provider and Principal at Smart Property Management in Portland, OR. She can be reached with questions or comments at Katie@SmartPM.com