Chapter Seven - For Landlords
Managing both buildings and people at the same time is very hard, and often thankless, work. Hopefully these tips will help make it all worthwhile. Read them all, particularly if you are a new landlord or if you only manage a few properties. These tips will give you some ideas to help you make money – or at least save you some.
A wise landlord, large or small, will review Rentwise! thoroughly because his tenants surely will. You own it. They pay to use it. Tenants are more likely to take good care of a property when they see the landlord taking good care of their property.
Pets: They sometimes cause problems, but half of American families include a dog or cat. Advertise that you accept pets, and you'll have no trouble getting prospective tenants. However, pets can do a lot of damage to your property, including soiling carpets, scratching or chewing doors and woodwork, wearing out your grass, tracking in dirt and infecting your property with fleas, ticks or worms. Ask for an extra pet deposit and/or fee, and consider adding "pet rent" to the monthly bill. A standard pet policy is essential and the age of the pet is important.
Your lease should state how many pets and the type, breed, size, and age of pet you will allow. For example, your lease might say “A maximum of one dog is permitted. The dog must be less than 50 pounds, at least 9 months old, and spayed or neutered. No vicious or dangerous breeds such as Pit bulls, German Shepherds, Doberman Pincers, Chows or Akitas are allowed. A maximum of 2 cats are permitted. The cats must be spayed or neutered, and at least 3 months old."
Extra Tenants: Your lease agreement should state that only those persons listed on the lease are legally permitted to reside in the property. The lease should state that no additional persons can occupy the property without prior written approval of the landlord. If additional persons move into the property, the tenant has violated the lease agreement and the tenant is subject to eviction. If you have knowledge of a second tenant and accept payment of rent from them, it can be construed as a verbal lease, and the tenant may have a defense against eviction.
Insurance: If you own income property, you have special insurance needs and need a good advisor. As a landlord, you will need to acquire fire insurance and personal liability insurance at a minimum. Depending on the location of your property, you may need to insure against additional risks, such as flood or earthquake. Flood and earthquake insurance must be purchased separately. Litigants will show no mercy when they go after your assets. Ask your insurance company to inspect your property and suggest ways to reduce risk (and premiums). Look for uneven walkways, poor lighting, sharp protrusions, loose railings and toilet seats, slippery steps or anything that might trigger a liability suit. Ask tenants in writing to report unsafe conditions & suggest corrective actions. File any responses as documentation and follow up.
Decorating: When it comes to keeping tenants long-term, the fewer rules the better. However, you may need to discuss the least-damaging methods of hanging heavy things from plaster walls and ceilings and prohibit certain types of hangers that cause damage to sheetrock and paint. Install inexpensive mini-blinds to avoid tenants using bed sheets for window coverings. Wall-to-wall carpeting increases “rentability” because of its warm, homey look and soundproofing quality. Choose inexpensive but good carpeting in a neutral to dark tone. Don't take long-term renters for granted. Paint and carpet as needed to keep good tenants happy. If they move out because you refuse to update the unit, you will have to repaint and install new carpet anyway and you may end up with less desirable tenants in the long run.
Bankruptcy: When a tenant files Chapter 7 or 13 and includes rent as debt, you can't enforce your contract rights to evict. You can, however, petition the bankruptcy court to evict the tenant and list yourself as a creditor. You must appear in front of the judge in the bankruptcy court to make this petition.
Detainer Warrants: Issue the warrant to "Defendant and Occupants" to sue for both possession and back rent. It can be served by the sheriff, registered mail or a private processor. The Landlord/Tenant Act requires that you serve a written notice of non-payment of rent before you have a right to terminate tenancy.
Screening: Always check with former landlords and personal references. Verify income and length of time on the job. Always run a credit check and ask about judgments and charge offs. Don’t rent to a tenant who already has a court-granted judgment from a previous landlord for non-payment of rent. Don't be afraid to say "no"! If you reject an applicant because of poor credit, you must name the credit reporting bureau that provided the information you relied on to make your decision. Tell the applicant he or she has the right to request a free report from that same credit reporting agency and give the contact information.
Lease: Obtain a prepared lease form for the state of Tennessee from an attorney or at an office supply store. There are multiple templates. You can find them online here. Go over each provision with all tenants. Always provide them with a copy!
Required Disclosures: If you rent a unit with defects that are not readily apparent, disclose them to the prospective tenant. If utility bills will be high, the tenant should be warned.
Landlords are required by law to reveal the presence of material or environmental hazards that may be harmful to the health and welfare of tenants, including lead based paint, hazardous mold and mildew, asbestos, radon, sewage/septic problems, etc. Landlords must inform tenants of the presence of lead-based paint and provide a federally approved pamphlet on lead poisoning prevention. It can be found online here. Properties constructed prior to 1978 potentially contain lead based paint. Lead from paint, paint chips or dust can pose health hazards particularly for young children and pregnant women.
Knowledge is Power: Get a copy of the Landlord/Tenant Act and familiarize yourself with Rentwise! Tenants are becoming more aware of their rights, and you can use this guide to point out their responsibilities.
Complaints: Respond to repair requests promptly; if you can't fix a problem immediately, give the tenant a realistic date to expect service and then stick by it.
Decrease Expenses: When the tenant causes damage, the tenant has to pay. But many landlords don't bother to charge back expenses as they happen. Bill the tenants for the broken window now and make them act responsibly. Don't wait to charge everything to the damage deposit when they move out, or you will most likely have more damages than the deposit will cover!
Help Out: Make it easy for tenants to start their utilities and garbage pickup by providing information on the utilities that serve the property and information about garbage and recycling pick-up.
Discrimination Complaints: Avoid them by ensuring that procedures and qualifications are uniform for all applicants. If you rent three (3) or more units, put your non-discrimination policy in writing, post it, and distribute it to all employees. Document any employee training that includes information on the Fair Housing Act. You need not fear evicting a member of one of the protected classes if your enforcement of rules, warnings, and documentation are standardized. Read the section on Discrimination in Chapter One to see what qualifications you may require from applicants.
Labor-For-Rent: Always put these arrangements in writing and specify material, time-frames, and who pays for what.
Insurance: The landlord is not liable for loss of a tenant's possessions by fire, flood, theft, etc. (unless the tenant proves negligence), but seldom do tenants know they are vulnerable. Always advise them to buy Renter's Insurance.
Rules: Some landlords attach a list of regulations to the lease. If signed by tenant, it is binding. If a tenant breaks a rule, it's fairly standard to issue a 14-day warning notice stating that if the situation isn't corrected, eviction can begin with only 14-days additional notice. Rules should be consistently enforced.
Housing Inspections: The landlord cannot enter the tenant's unit without permission except in an emergency or in case of abandonment, unless the lease states that a landlord may enter the property at specific intervals to ensure the property is being adequately cared for and the tenant is not violating any conditions of the lease. (See The Law starting in Chapter 3).
Disabled Tenants: Owners can't deny the right of physically disabled tenants to construct "reasonable modifications" in order to have "full enjoyment of the premises." However, you can require the tenant to pay for them and, under some circumstances, to restore the unit to its original state when vacating.
Illegal Activity: You can legally evict in 3 to 5 days with very good evidence of drugs, prostitution or violence. The Federal Crack House Statute enables neighbors to present good evidence to the District Attorney who can then force the landlord to quickly evict. It allows the Justice Department to prosecute property owners who knowingly and intentionally allow others to use their property to distribute or use drugs.
City Code: It is unlawful to rent a dwelling which is in violation of City Code or is unfit for habitation due to dilapidation or defects which increase the hazard of fire or other accident.
Eviction: You cannot legally file a detainer warrant unless you've given proper notice in writing. You must sign an affidavit that you delivered the notice, and bring a copy to court. You cannot turn off utilities, throw tenants out, or threaten them during this process.
Damage Deposits: This is the tenant's money. It is unlawful to bank it with your rental income. The location of the escrow account must be supplied to tenants. If you sell the building, the account must transfer to the new owner. By law, you must inspect the property within 4 days after the tenant vacates and estimate the cost of each damaged item.
Profits: Use a simple bookkeeping system (on a computer if possible) to keep track of the profitability of each unit. Record rent receipts and actual costs such as property taxes, maintenance, insurance, legal and advertising fees, utilities, loan payments, and the cost of vacancy. This way, you'll know whether you're making 10% on your investment or losing 12%. Consider hiring a bookkeeping service, or a property management company to do this for you.
Diminished Value: If your failure to make repairs results in some "loss of use" of the unit, determine what percentage of value was lost, and offer a rent reduction accordingly. This will increase tenant's patience and may ensure that he or she won't withhold rent or call City inspectors.
Maintenance: Glue instructions on preventing frozen pipes inside a kitchen cabinet. Post warnings about storing possessions in basements that flood. If tenants negligently ignore them, you may possibly escape liability. Give notice when temperatures will fall below 32 degrees.
Rent Raises: Retain good tenants by giving a 60 days’ notice of a rent increase. This gives them a chance to check out the competition and decide if they can live with the raise.
Tenant Relations: Leave a "WELCOME" flyer in each unit telling tenants who to call in emergencies (you, plumber, fire, police, etc.) and how to turn off the water and gas. Provide them with community information such as what day garbage is collected, where and when the Neighborhood Association meets, the location of schools, youth centers and other services. Also leave them a copy of Rentwise! so the tenant is aware of their rights and responsibilities.
Keep Up: Join the Chattanooga Apartment Association, subscribe to a professional newsletter, attend conferences, get to know a landlord/tenant attorney and become a member of the neighborhood association representing the boundary in which the rental property is located. Keep abreast of all applicable federal, state and local regulations and agencies. Research landlord responsibilities. Landlords should be familiar with the Uniform Residential Landlord and Tenant Act.
Repair Requests: Act promptly on requests. Even if repairs are unsuccessful, an attempt to repair can bar damage awards. If repeated attempts fail, or the cost is prohibitive, lower the rent. In the long run this may cost less than legal fees from resulting disputes.
Good Neighbors: The Housing Code states that it is the responsibility of the landlord to haul bulky residential trash to landfills (open from 8am to 6pm Mon-Fri and 8-11 on Sat.) If a pick-up or small trailer is used, there is no charge. Larger loads cost $25 per ton.
The City’s Office of Economic and Community Development is focused on improving services and property values by coordinating all city departments and related agencies. Warning letters and then Citations and fines will be issued for overgrown properties, dumping and unsafe structural conditions, etc.
Paperwork: Ease the burden of documentation by using standard forms from an attorney or office supply store. Your library of documents should include a lease that fits your needs, application, warning notice, eviction notice, promissory note, move-in and move-out condition lists. Don't put off paperwork, and keep a standard file on every tenant. Written records protect you in court cases.