What Can Go Wrong
In a perfect world, every tenant you deal with will pay rent promptly, avoid damaging the property, conduct himself or herself as a responsible neighbor, and make your job easy and rewarding. After conducting a thorough reference check, pulling an excellent credit report and hearing the right answers while interviewing your prospect, you decide to enter into a rental agreement. Then he and his co-tenant become a problem. Tenants have responsibilities (which should be defined in your lease) that can be expected. However, circumstances may alter an occupant's behavior or a history of poor behavior may have been hidden during your screening process. Changes in personal relationships, job loss, medical needs, poor business performance, and loss of a loved one can affect a tenant's personality, and the ability to perform according to your agreement. Some renters, despite good job history and the ability to pay, turn out to be problematic. Poor behavior can include:
- Failure to pay rent.
- Consistent late payments.
- Inappropriate or offensive behavior.
- Damaging the property.
- Allowing additional tenants without approval.
- Unsupervised minors.
- Criminal activity.
Problems can also arise between co-tenants and between tenants and neighbors. Frequent disturbances can cause conflict. So can poor pet control. Even personality clashes can disrupt a harmonious environment, and it will be important to manage tenant conflict swiftly and fairly (see below). Though it is extraordinary to have exceptional tenants one hundred percent of the time, there are steps you can take to avoid taking on a problem renter.
Avoiding Bad Tenants
Can you completely avoid a bad tenant from renting your space? No. There are ways, however, to minimize the likelihood of renting space to a "tenant from hell." By having a standard rental policy and screening process, you will not only streamline your operations but may also prevent claims of discrimination. Include the following in your screening activities.
1. Note prospects' appearance. Are the applicants' dressed neatly (hopefully appropriate for the type of space you are renting)? Do they appear clean and kept up? How do their children look? Appearance can indicate the level of concern they will have about your property.
2. Ask direct questions that require detailed response. Do your questions require more than a yes or no answer? Will the responses show the character, attitude, and perspective of the applicant? If you find inconsistencies or hear "red flag" elements in responses, ask the applicant to elaborate on his response. Look for movement or mannerisms that may indicate a lack of honesty or forthrightness. Also, question all parties who will occupy the rental; evaluate each person to see how he will affect the tenancy.
3. Examine the application. Is there missing information? Are there gaps in detail? Look for a consistent job history and references who you can verify, such as former property managers, employers, or professional associates. Any questionable details should be brought up during the interview.
4. Conduct a thorough screening process. What and where is the applicant's current job? What is her history of financial obligations? What do others say about her? Perform a criminal background check, credit report request, job history examination, and interview and verify listed references. Do as much as you can to understand the applicant's character before you agree to rent.
Your job is to manage your property that includes the people within it. If you scrutinize your prospects well enough, your job will be that much easier.
Do they appear clean and kept up? Even the best screening process does not rule out every potential problem renter, so you have to develop methods of handling issues.
Managing Troublesome Situations
How do you approach a situation where one residential tenant family is interrupting another's breakfast by chanting religious passages at the top of their lungs? The first rule is to follow the law. State laws govern most day-to-day issues, such as who is responsible for small repairs. The federal laws address primarily civil rights related regulations. Consult a lawyer and review your state laws prior to taking any action against a tenant.
The second rule is to abide by the lease. Whatever is written that was agreed to by all the interested parties is the next enforceable position. Common offenses, like noise and other disturbances, are typically included in most leases. The laws of the property's jurisdiction supersede (overrule) the conditions in the lease if there is a conflict between the two.
The third rule is to do what is in the best interest of your tenant base. You must protect and defend the interests of a greater tenant group, so if you are required to act on behalf of one party or the other, make sure that you take into account how even unaffected tenants might feel about your management approach. You may be involved in situations that are controversial but do not involve a legal standard, and it will be in your best interest to handle it fairly. A property manager should not risk losing tenants because of an unpopular action.
When considering your approach to handling tenant issues include the five most advised steps by property management professionals according to the National Association of Residential Property Managers (NARPM).
Investigate prospects before renting as thoroughly as possible; make a list of every possible problem that can occur and include a provision in your lease which protects you; handle every interaction with tenants the same way; remain professional when emotion is used by tenants; and document each interaction clearly.
1) Investigate your prospects as thoroughly as possible. The old saying "one ounce of prevention is worth a pound of cure" applies when it comes to examining your prospective tenants. By looking for signs of problem potential during the screening process, you can avoid a long, potentially costly dispute with an angry or an unhappy tenant.
2) Prepare for handling issues by developing an approach to possible scenarios. Consider as many possible issues as you can and develop a response to each. It looks better to tenants when you are following a procedure rather than making it up as you go along. A good game plan can help calm nerves and usually eases tensions surrounding tenancy issues. Establish a system that includes response times, communication channels, resolution approach, and follow up. However, there will likely be situations that you do not account for, being prepared will generally enable you to handle them effectively.
3) Treat every tenant the same way. Tenants have occupancy rights protected under state and federal laws that require fair and reasonable treatment by property managers and property owners. For instance, most multiproperty residential managers must abide by the Fair Housing Act, which prohibits discrimination against protected parties. No matter what your personal feelings are about an issue or a tenant, handle the situation in the same manner every time.
4) Remain professional at all times. Nothing ruins a manager's reputation quicker than acting rude, emotional, or threatening. Keep personal attitudes and feelings out of your management. Speak in a clear, calm, even tone when dealing with hostile or upset tenants. If the situation is confrontational, try to diffuse the emotion by having each party clearly explain his position. If you feel a tenant is acting unreasonably, remind her of the agreement she signed. Your professionalism will go a long way in gaining the support of your tenant base.
Managing Tenant Behavior
During the course of managing income properties, you will likely come across problems in every phase of operations; many will occur because of your tenants, and the effects could hurt the bottom line. Whether the issue is damage to structures, disruptive neighbors, or a dispute between tenants, your response will go a long way towards the impact the issue has on income. Most states have laws addressing appropriate notification and response times and dispute resolution processes, but many times resolving problems is a manager's decision. So, how do you handle tenant behavior issues? Experts suggest establishing policies and guidelines, disclosing the rules early in the relationship, and enforcing them swiftly if the behavior is corrected.
Each jurisdiction establishes standards for community behavior, which extend to tenant activities. Although each tenant has the right to occupy his unit without unreasonable interference from the manager or property owner, if the tenant's behavior is affecting other tenants, the manager generally has the authority to intervene. You have the right to expect tenants to abide by neighborhood principles, including the right to enjoy your property without disturbances. Specific behavior guidelines should be expressed through the lease and address noise, visual offenses, and criminal activity.
Your approach should follow a series of rules. Your policies and guidelines should follow what has been established by federal, state, and local laws, and what is described in the lease. Because you should be fair to all tenants, make sure that your problem management will satisfy your tenant base's expectations. Most legal requirements indicate that property managers must respond adequately and in a timely fashion, and allow reasonable response procedures from tenants prior to eviction. When you prepare your policies, make sure to include necessary intermediate steps between problem or complaint and resolution, such as a notice to cure (which gives a tenant the opportunity to resolve the issue).
Five Common Problems
1. Handling troublesome co-tenant situations. Conflicts between co-tenants (or roommates) can lead to behavior that affects you. For instance, a disagreement about living costs can become a late rental payment, or worse. However, most property managers agree the best strategy is to stay out of a dispute, until it affects the community or operations. Then you should address the issue. State laws govern the occupancy status of multiple co-tenants. Explain before executing a lease agreement that each tenant is equally and collectively responsible for lease violations. This means one co-tenant's actions may represent all co-tenants.
If the delayed payment is being withheld because of a tenant complaint, you should react quickly (24 to 48 hours according to many state laws) to resolve the issue. If the complaint is resolved then the tenant must immediately pay the overdue amount. Most leases require a tenant complaint to be made in writing; tenants should understand your notification policy so that delays in notifying you of problems do not cause their rent to become overdue.
3. Handling disputes with tenants. Most of the common disputes such as payments due, maintenance conflicts, disturbances, and damage to the property should be addressed in the lease. A process of conflict resolution is typically defined in the contract, which may include court action or alternative dispute resolution (ADR) methods, such asmediation or arbitration. Many times, you can avoid official action by dealing directly with the tenant in dispute. Small claims court is often used to resolve disagreements. Notification of complaints, actions, and other activities related to the dispute should be documented and abide by legal and contractual requirements.
Knowing the housing laws that govern the property is critical in handling disputes; a tenant might not know their rights at the time of the dispute and seek legal advice, or may uncover a rights violation later on, and could be awarded damages. Keeping emotion in check is important as well. Manage the situation according to the standards that appear reasonable and have been agreed to through the contract. If possible, deal with the issue on a face-to-face basis and communicate frequently, this helps alleviate miscommunication issues. Often arbitration is an effective resolution process. As always, document clearly each communication and step taken to resolve the issue.
4. Handling disputes between neighboring tenants. Conflict between neighbors should be generally handled as disputes between co-tenants, steer clear unless it interferes with business or other tenants. You normally have the right to protect the commercial interests of the property, so if the dispute causes disturbances then you can intervene to restore a peaceful environment. Remember to consider how other tenants may view your resolution process.
5. Handling damage or repair issues. Damage to the property typically occurs because of neglect, accident, or wear and tear; the key is determining what (and who) contributed to the damage. If repairs are needed because of normal use of the property, then the manager or property owner generally is responsible. It is important to inspect periodically the property and each rental space; you can avoid unnecessary deterioration with preventative maintenance, and this activity will show your willingness to provide a fully functional space. If a tenant causes damage, address the issue quickly (delayed repairs could indicate negligent behavior) and immediately discuss the tenant's responsibility to pay for repairs. If a dispute arises, most jurisdictions give the property owner the authority to make repairs and include repair costs as part of the rent. If the charges are not paid, the manager has the right to evict.
Tenants may have the right to withhold direct rent payment if the space is deemed uninhabitable by a certified building inspector; some laws allow tenants to deposit the rental payment into an escrow account through which the manager can collect when repairs are made. Documentation must show the tenant made repeated written requests to correct the deficient condition. A deficient condition is a situation that, if not corrected, can affect the health, safety, or well being of the tenant. Some examples of deficient conditions include the following.
- Lack of heat, light, electricity, or water (unless the stoppage was due to tenant's unpaid bill).
- Lack of adequate sewage disposal.
- Rodent infestation.
- Lead paint hazard.
- Structural defects.
- Fire or health hazard.
Overdue rent and violations of the lease are offenses that may lead to eviction. It is critically important to follow the eviction process and requirements governed by the property's jurisdiction. A manager must provide a notice and allow a period (as little as a few days in some areas) for the tenant to cure the issue. If the issue is not resolved, you can deliver a notice to quit or notice of termination, which officially ends the tenancy agreement, but usually offers the tenant another opportunity to correct the problem. Some jurisdictions allow managers to provide anotice to cure or quit, which can speed up the eviction process. If the issue is still not corrected, the manager or property owner must file a petition to evict through the court system. The tenant then either successfully responds to the complaint or loses by default the right to occupy the unit.
If the manager is successful in court, he can issue a notice of eviction. The notice of eviction requires the tenant to vacate the premises within several days. A law enforcement officer who will return to force the tenant out if he does not move voluntarily typically delivers it.