VOLUME 10 - ISSUE 3 LEGAL UPDATE
- Your Resident’s Ledger
- Top Traits of Successful Property Managers
- Managing Association Owned Units
- Replacing Appliances
- The Fair Housing Lady Q & A
by Harry Heist, Attorney at Law
There is a good chance that somewhere, sometime, one of your residents will experience an appliance failure. While many appliances can be repaired, often they cannot, requiring a sometimes costly replacement. Outside of a reference to refrigeration, Florida Residential Landlord/Tenant law does not address appliances, so we need to look to common law principles, general contract law and the lease agreement.
Whose Responsibility are Appliances?
Unless specifically excluded in the lease agreement itself, it is the responsibility of the landlord to have the appliances that exist on the premises in good working order throughout the tenancy. If they fail, they must be repaired or replaced by the landlord at the landlord’s expense, unless it can be proven that the failure was caused by intentional damage or negligence by the resident. Appliances would include any appliance on the premises when the resident rented the unit, the refrigerator, washer/dryer, stove, oven, microwave and dishwasher being the most common ones.
You may want to exclude appliances, or in some cases, certain “features” of appliances. For instance, sometimes the ice maker or water dispenser on a refrigerator can fail and cannot be repaired due to the age of the refrigerator or non-availability of parts. This can be easily excluded in the lease, as the refrigerator will normally still work even if the icemaker and/or water dispenser does not work. Any exclusion has to be clearly defined in the lease with no room for interpretation. Remember that if the landlord provides the wording of the lease language being contested, which is usually the case, any ambiguity within that lease verbiage will be construed in favor of the resident, not the landlord or the landlord’s agent. If the landlord completely disclaims responsibility for a particular appliance, the landlord must deal with the fact that if a resident is forced to buy a new or used replacement appliance, he or she often will take it upon vacating the premises. This sometime comes as a shock to the landlord when the realization sets in that an appliance is gone at move-out.
If an appliance is in used condition when the resident takes possession, there is nothing to prohibit the appliance being replaced by a used appliance with similar functionality and features. If a side by side refrigerator with icemaker and water dispenser fails, then it should be replaced with the same type of appliance with the same features, UNLESS the lease addresses this. A wise landlord or property manager will examine the appliances carefully prior to the lease inception and make a determination if the appliances will be replaced with similar ones, or if they will potentially be replaced with ones that have fewer features. If the decision is to replace with fewer features, the lease needs to give the landlord that leeway. Some items may be made completely exempt from repair or replacement obligations. The extra refrigerator in the garage, the deep freezer in the garage and the garbage disposal all must be kept in working condition UNLESS otherwise excluded. The key is to carefully examine the property to be managed and assess what will happen in the event of a failure. Commonly there is an extra refrigerator in the garage. If not specifically excluded under the lease, the landlord will need to replace or repair. This will come as a surprise to the landlord who assumed that it simply was an extra and not important. It is these little things dealt with at the beginning of a tenancy that sets a real quality property manager apart from the rest.
Ideally an appliance can be repaired, or an owner will authorize the replacement of an appliance with a new appliance. In multi-family settings, often there are vacant units with appliances, so it is easy to simply take a working appliance from another unit. Look carefully to see if the used appliance has the same or similar features. If there is a large dispute as to the features, or the used appliance clearly does not have the same or similar features, it may be wise to give the resident a small rent discount agreed upon by the owner and memorialized in writing with a lease addendum, signed by all the parties. If you cannot come to an agreement, it is recommend that a new appliance be purchased absent a lease clause permitting a substitution of an appliance with less or different features. Finally, always confirm in writing with the property owner the existence of any warranties or service contacts. If the owner is not asked about this, it is often not disclosed. This can result in the property manager having to pay for the repair or replacement and not being reimbursed by the owner. Your property management agreement should clearly state that the owner will provide you with any service contracts or warranties at the beginning of the relationship, but it is up to you to ask and receive your answer in writing.
Color of Appliance
If an appliance is swapped out or a used one is purchased, take care in matching the color. Although nothing in the law entitles a resident to have a particular color of appliance, you should look somewhat to aesthetics if possible. Replacing a bright white appliance with a mustard colored one is not going to go over well with most residents. When dealing with appliance replacements, ask yourself if you would be satisfied with the outcome, and govern yourself accordingly.
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Your Resident's Ledger
by Harry Heist, Attorney at Law
One of the most frustrating things for us as attorneys is trying to decipher your resident’s account ledger that your management accounting software produces. We often have to do this before we are filing an eviction to make sure that the amount you are giving us is proper, and that the amount showing on the Three-Day Notice is legally supported as rent.
The Three-Day Notice must only contain rent. Rent is the base rent and anything else that is “defined as rent” in the lease. Usually late charges are defined as rent in a good lease, thus that amount can be placed on the Three-Day Notice in most counties, BUT the ledger often has a balance that represents all kinds of charges that are not considered “rent” or are problematic in some other way. These charges include, but are certainly not limited to, fines which may or may not be supported in the lease, bad check fees, excessive late charges, unpaid utility charges, damage charges, unpaid administrative fees, deposits or any other amount which the resident may or may not be legally required to pay under your lease or Florida law. When the Three-Day Notice is prepared, many property managers simply put in the ledger ending balance onto the notice, or the notice is prepared automatically by the software, which of course will insert the ending ledger balance. You see, your software does not know the law, but you must, and this means that the ledger balance must often be overridden, like it or not, when the Three-Day Notice is prepared.
You property management software will add in late charges and the daily late charges, if applicable, which will end up in the final balance on the ledger. If your lease defines late charges as additional rent, it is usually fine to have these late charges included in the balance on the Three-Day Notice, we must examine them first. Are these late charges excessive? What is excessive? No one knows, and it is completely up to a judge to decide. What does become a real problem is when a resident incurs a late charge months ago and then pays the usual rent each month not including the past charges. Some software will continue to add late charges each day, and all software will carry the late charges forward and reflect them in the balance on the ledger. The problem here is waiver. A judge may feel that you have waived your rights to collect these late charges by failing to enforce the payment of them in prior months. Now when you have them on your Three-Day Notice, your attorney tells you they should be removed and a new Three day Notice served. When preparing your Three-Day Notice, examine the late charges to see if they are old and stale or new and recent. If old, you should not put them on the Three-Day Notice, and if you did or still decide to do this, serve a new clean Three-Day Notice without the late charges, and let it expire before you send the file to your attorney for eviction.
Bad Check Charges
If bad check charges are considered additional rent in your lease, they can usually be added to the rent amount demanded on the Three-Day Notice. Again, we have to ask how old this bad check charge is, due to the possibility of a successful waiver defense. The bad check charge must be legal as well. Florida law places limits on the bad check charge. You may want to reference our article on bad checks to see if your bad check charges are in fact legal. The amount you can charge varies in part based upon the amount of the check.
Occasionally a resident, resident’s child or guest may damage the property somehow. Possibly a child vandalized something on the property, perhaps breaking a window with a $100 repair cost. Possibly the resident was locked out and damaged a screen climbing in through a window. These amounts can usually legally be charged to the resident, but often are NOT defined as rent in the lease. Therefore if a charge for damage is on the ledger and reflected in the ledger balance, it should be removed from the amount appearing on the Three-Day Notice.
A resident may move in and fail to immediately put a utility in his or her name, or the utility may be sub-metered and the resident simply becomes delinquent. The utility charge may end up on your ledger and carried over month after month, maybe even triggering late charges. If the utility charge is old, you may have a waiver issue, and if it is not defined as additional rent, it should be removed from the amount due when preparing the Three-Day Notice.
Occasionally a resident will submit a separate check for a deposit or administrative fee, and this check then bounces after the resident has moved in. This unpaid deposit or fee will end up on the ledger, and the resident may not pay it at all or may partially pay it. Most likely a deposit or administrative fee is not defined as rent in your lease; therefore, it must be removed from the amount which will appear on your Three-Day Notice, even though it appears in the ledger balance.
As you can see, your ledger ending balance should not always end up on the Three-Day Notice. When preparing your Three-Day Notice that will be sent to your attorney in the event of an eviction, take the time to look at your ledger carefully, and remove anything that is not considered rent from the amount that you put on your notice. If you are not sure, a call or email to your attorney will often result in a quick answer. It is much better to get the answer in this stage of the process, rather than waiting to file the eviction and having your attorney tell you it must be redone, or worse yet, having to explain your ledger in court, where a less than patient judge may throw your case out, exposing you to potential high attorney’s fees if the resident is represented by an attorney.
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Managing Association Owned Units
by Harry Heist, Attorney at Law
Many condominium and homeowner associations faced with owners who have walked away from their units or otherwise have failed to pay for monthly or quarterly dues or assessments have exercised their rights by placing liens on the units and foreclosing on these unit owners. The result is that they now hold title to these empty units. To recoup some of their costs, the associations are renting these units out, and many are wisely hiring property managers rather than trying to do it themselves. Most association management companies are not equipped to handle rentals, and that is where you, the experienced property manager, comes in. As an experienced property manager, you will know that in almost every case when a unit owner stopped paying his fees or assessments, he also is delinquent in his mortgage payments, usually extremely delinquent. No owners in their right minds would stop paying association fees or assessments on a unit if it were owned free and clear. This means that the bank or mortgagee is lurking out there. Eventually, the bank will decide to file a foreclosure or complete a foreclosure that has already begun. When this happens, the association will no longer have title, as the bank/mortgagee’s lien is superior to the association’s title. In other words, the bank/mortgagee will own the property eventually. It just is a matter of time.
Someone is going to manage these units, and you may choose to be that person. If you manage a property that is near foreclosure, in foreclosure, the property is somehow distressed due to the owner’s or prior owner’s financial condition, or the property is being held by the association, the key to success is disclosure. However, to whom does the disclosure need to be made? The disclosure needs to be made to the potential renter of that unit. There is a high probability that a resident in an association owned unit will at some point be served with foreclosure papers, as the bank/mortgagee is required to serve them on any residents who are occupying the unit in addition to serving the mortgagor. Getting served usually causes the resident to go ballistic, with the property manager being the first person that is called. Residents served with foreclosure papers often do not understand what is happening, may be told untruths by the process server as to how long they have to move, and many of these residents will immediately feel that it is blatantly unfair that they have to pay rent while the unit owner has not paid the mortgage. Even though the association is the title owner, the mortgagor is still on the hook, and a real foreclosure action will be in effect. Simply put, if you decide that you want to rent a unit that is held by an association, you should disclose the status of the property to any prospective resident, or face the legal complications and headaches caused by the resident being surprised by the foreclosure action. The first step is to get permission from the association you are working for to disclose the status of the unit to any prospective resident. If this permission is not given, you do not want to manage the property. If permission is given, we recommend the following document as a starting point of disclosure.
The following is the wording we recommend to be placed in a disclosure. It needs to be signed by the resident, the association representative or agent and you as manager. For this disclosure, we are using the word TENANT rather than Resident:
TENANT understands and acknowledges that the subject property is owned by the ASSOCIATION by virtue of a lien foreclosure and is currently _________ in foreclosure by the bank, OR __________ may be close to being in foreclosure by the bank, and that TENANT may be forced to vacate the property prior to the natural expiration of the lease due to a foreclosure and/or new ownership of the property. TENANT voluntarily chooses to rent the property and accepts the full financial responsibility associated with all expenses incurred by TENANT, including moving expenses, that may result if and/or when the TENANT is forced to vacate the property prematurely.
HOLD HARMLESS: TENANT agrees to hold harmless the ASSOCIATION, the ASSOCIATION’s legally appointed representative (MANAGEMENT) , its agents, employees, assigns, successors and heirs, should the TENANT incur moving expenses and/or any other expenses or losses associated with moving and/or vacating the property.
RENT: .TENANT agrees to pay rent to MANAGEMENT and/or ASSOCIATION as per the lease agreement unless BY COURT ORDER is directed to pay rent to another party. If TENANT is forced to vacate prior to the natural expiration of the lease as a result of a foreclosure, and/or new ownership, then the ASSOCIATION and/or MANAGEMENT shall prorate the rent for the last month of tenancy. TENANT agrees that any foreclosure or pre-foreclosure proceedings have no bearing upon the TENANT’s responsibility to pay rent, and TENANT agrees to pay rent in full without any deductions through the actual date that the TENANT vacates the property, and upon vacating, shall notify MANAGEMENT and/or ASSOCIATION in writing.
SECURITY DEPOSIT AND/OR ADVANCE RENT: . TENANT agrees that the security deposit and/or advance rent, if any, shall be processed by MANAGEMENT or ASSOCIATION pursuant to the terms of the lease, and TENANT agrees that such security deposit and or last month’s rent, if any, may be transferred to the current or the new property OWNER or property manager at the sole discretion of MANAGEMENT, and TENANT holds management harmless for any loss of the security deposit and/or advance rent held, if any. TENANT understands that the security deposit and/or advance rent may be at risk in the event of a foreclosure or in the event the monies are transferred.
THE POSSIBILITY THAT I/WE MAY BE FORCED TO VACATE THE PROPERTY AT TENANT’S EXPENSE PRIOR TO THE EXPIRATION OF THE LEASE HAS BEEN FULLY DISCLOSED BY THE AGENT FOR ASSOCIATION PRIOR TO THE EXECUTION OF THE LEASE.
ALL PROVISIONS OF THE LEASE AGREEMENT SHALL APPLY UNLESS IN CONFLICT WITH THIS ADDENDUM, IN WHICH CASE THIS ADDENDUM SHALL APPLY.
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20 Top Traits of Successful Property Managers
by Harry Heist, Attorney at Law
Over the past 23 years we have been able to observe many property managers. Some come and go, some are great, and some are… well, we won’t say here. The very top property managers, whether they work in multi-family or manage single family homes, all seem to exhibit some common traits. Ask yourself if you possess these traits, and if not, why. Many of these traits develop over time, some faster than others. In property management and life in general, there are basically two ways to learn. You can learn from your own mistakes, or learn from the mistakes of others. The latter way is preferable, a lot less painful and often way cheaper. How do you learn? Education and associations. Soak up as much education as possible, and join your local apartment association or property management association. You best sources are to go straight to the National Association of Residential Property Managers (NARPM) www.narpm.org if you primarily manage single family homes, duplexes, tris and quads, or the Florida Apartment Association at www.faahq.org if you are in multi-family management. Once you get into these websites, you will find the contact information for the association that fits your needs. Until that time, here are some of the top traits we observe.
1. Top Property Managers continually get education.
2. Top Property Managers are cautious and paranoid.
3. Top Property Managers expect the best but are prepared for the worst.
4. Top Property Managers know when to deny an applicant and can spot the warning signs.
5. Top Property Managers can quickly and easily communicate with owners and residents.
6. Top Property Managers don’t rely on their memory.
7. Top Property Managers use checklists for all tasks from application to move-out.
8. Top Property Managers inspect regularly and proactively spot problems.
9. Top Property Managers embrace technology.
10. Top Property Managers abide by the “Golden Rule”.
11. Top Property Managers emotionally remove themselves from all situations and treat everything as a business.
12. Top Property Managers have complete control over the resident.
13. Top Property Managers have complete control over the property owner.
14. Top Property Managers refuse to manage below par properties.
15. Top Property Managers know when to “fold” and settle a matter to avoid litigation.
16. Top Property Managers get involved with their local property management council or committee.
17. Top Property Managers don’t just learn new ideas, they implement them.
18. Top Property Managers have a form or notice for almost everything.
19. Top Property Managers know that systems, policies, procedures and checklists are the key to success.
20. Top Property Managers call on more experienced property managers and their attorney when they are unsure of an action and always take advantage of free legal advice.
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THE FAIR HOUSING LADY Q & A
by Nadeen Green, Attorney at Law
Dear Fair Housing Lady,
Is it a fair housing violation to ask an out of town applicant that is going to be a lease holder or co-signer to fax or scan and email their photo ID for their file? This would be in reference to an applicant that has not visited the community, but has leased the apartment through our community website or over the telephone.
I cannot see how this wise business decision could present a fair housing issue. You are asking for verification of identity before you commit to unseen renters or unseen co-signers. This way, folks cannot later say, “That wasn’t me – I didn’t sign this”. Just be sure that you are equally wise in applying this requirement to all unseen people. While consistency is not a fair housing requirement, I always like to point out that it is a darn good risk management process. That way if one of your “unseens” complains for example that, “This landlord tried to discourage me from renting by making me fax or scan my photo ID, because they are trying to discourage me because my name sounds Polish,” you can show that all “unseens” are required to produce photo IDs. And that is how the story of the “Case of the Unseen Resident” will have a happy ending.
Sincerely, The Fair Housing Lady
This Dear Fair Housing Lady article was originally posted on Nadeen Green's blog at fairhousing.forrent.com" Nadeen is known nationwide as a Fair Housing Law expert, and she is proud to be Senior Counsel with For Rent Media Solutions
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