Have a question about your residential or commercial rental property? Get help and advice from our expert on how to get the most out of your rental property.
Join us for a "QuickBooks Community Ask the Expert featuring Janet Portman," of Nolo. Tap into Janet's real world experience working with property owners and tenants.
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Are you an owner or manager of commercial or residential rental property? Do you have questions about leases, security deposits, screening tenants and making repairs? Send me your questions and we'll talk.
Hi Janet,
I have a question about screening tenants. We own 18 units in New Haven, CT and after seven years of good luck have recently had several evictions. What do you recommend as an inexpensive way to credit screen tenants for prior evictions/arrests?
The law of averages has caught up with you -- most landlords don't enjoy seven years of eviction-free renting without first screening out applicants who have recent evictions. Fortunately, there are some tools you can use that, taken together, will give you a good picture of your applicant's past:
1. Use a thorough rental application that asks about rental history, evictions, and criminal records.
2. Order a credit report (you can do so online, just type "credit report" into your browser) and make sure the report corroborates the answers on the application. Not every credit report will list an eviction, but you may see a landlord's attempt to collect unpaid rent (wage garnishments or bank account attachments), and notations of uncollected debts.
3. Consider getting a background report, which you can also order online. These reports should list evictions and convictions (most will not list arrests unless they resulted in a conviction). But beware: these reports often contain false negatives and false positives. To make sure it's correct, follow up by calling prior landlords and employers.
Thorough screening is essential, but you need to make sure you proceed within legal limits. To learn the practical and legal information you need, consider Every Landlord's Guide to Finding Great Tenants from Nolo, which includes over 40 forms to help you get the job done: www.nolo.com (type the title into the Search box).
Tenants (a couple/college teacher) in the deck apartment created a problem when the new tenants (a couple) moved into patio apartment on 8/1.
At 4am on 8/3 the tenants in the upper duplex (deck apt) knocked on their door and told them that they were bothering them with too much noise. Apparently the lower level duplex (patio apt) tenants were talking at 4am in a regular conversation as they were looking for some of their belongings that were packed away. On August 3 deck apt tenants verbally assaulted new tenants as new tenants were leaving for work in the morning on 8/3. The new tenants were in the process of moving in and had not done anything but move in creating the usual moving noises.
The upstairs tenants (deck apt) then came to my office demanding to be let out of their lease agreement which they signed and renewed on 6/15/2006. I sent them a 3 day notice of which they refused and want to stay until 8/31.
I believe that they have breached their agreement as I don't believe that they can demand to be let out of their lease agreement just because they have judged the new tenants and have decided that they do not like them.
It seems to me that your upstairs neighbors are looking for a way out of their lease. While it's certainly true that they are entitled to the "quiet enjoyment" of their rented home -- which includes freedom from unnecessary noise from neighbors -- it's also true that when one lives in a multi-tenant environment, one has to accept a certain amount of noise from neighbors. Normal moving-in sounds, and occasional conversations at odd hours, aren't unreasonable. When noise does become intolerable, it is indeed up to the landlord to deal with it, which often means speaking with the noisy neighbors and terminating their tenancy if needed.
I'm wondering, however, why you responded with a 3-day notice when they demanded to be let out of their lease. If you wanted to hold them to their lease (and their continued obligation to pay rent, minus the rent you collect when you rerent their unit), you might have simply said no. By terminating their tenancy, albeit earlier than they liked, you gave them a ticket out. Unless you've rescinded the notice (in writing), they still have your blessing to leave, which they can exercise until you revoke it.
Before you decide to hold them to their legal obligations, think about the fall-out of keeping such troublemakers on your property. Your new downstairs tenants may continue to be harassed, and could themselves break their lease on the grounds of lack of quiet enjoyment! From a practical point of view, it may make better sense to let the unpleasant pair go, keep the peace with your new tenants, and carefully screen any applicants for the upstairs unit (you might make a point of mentioning that there are tenants below!).
Question:
Guidelines to evict Aug 15, 2006 09:18 am
I own a small building. I would like to evict one of my tennants. In the lease I can give them 3 days notice if they have not paid rent. They are 14 days late right now. What other guidlines do I have to follow. They are a telemarketing company and out of control.
Thanks, Sue
I'll answer your question by assuming that these are commercial tenants (that is, they aren't living on the property and running a home business). If this is so, the first thing you must do is check your lease. It may have a clause titled "Breach," or "Remedies," which spells out what you can do when the tenant hasn't paid the rent. Unlike residential tenancies, commercial tenancies can provide for all sorts of solutions when either the landlord or tenant fails to live up to the terms of the lease. For example, you may be required to use the security deposit, or draw on a letter of credit, or turn to a guarantor, before terminating the tenancy. And the lease may provide for a longer "pay or quit" period than state law provides, as explained below.
If your lease is silent on the issue, look at your state's rules for terminating tenancies. You must follow them closely, abiding by the notice periods (many states use a 3-day "pay or quit" period, but not all). States also typically specify how to phrase your notice, how to deliver it, and what to do when you can't deliver it to the tenants personally.
Question:
Purchasing a property management company Aug 15, 2006 10:22 am
I am in the process of trying to purchase an existing property management company & had a question for you. The current owner is telling me that the standard selling price for a property management company is 1 1/2 times the annual income of the company. Is this correct?
Putting a value on an existing business is a tricky job. Many variables come into play, including the business' assets, its goodwill and client list, the terms of payment acceptable to the seller (an installment sale over a long period typically results in a higher price than one that spans a shorter time, because the risk that the buyer will default lasts longer), the demands of the market (are there many competitors for that niche?), economic forecasts for that business line, and so on.
Because so many factors affect a business' value, it's tempting to fall back on "industry standards." Unfortunately, these simplistic formulas do not take into account the real-life issues mentioned above. I suggest that you start with the formula you've been given, then look at the business itself and make adjustments as needed (and expect that a savvy seller will do the same). For legal and practical guidance in buying a business, consider The Complete Guide to Buying a Business, by Fred Steingold (Nolo), available at www.nolo.com.
I have a tenant whose rent is now 2 months overdue - ($1100./month X 2 = $2200. plus $25. late charge X 2 = $50. Plus there is $871. in misc expenses still owed. Total owed equals $3121.)
The tenants appear to have financial management issues and over the past 6 months have been making partial rent payments, but slipping slowly behind...
I have sent a letter expressing my concern and have asked for a "catch up" payment schedule they can sign their name to. I should receive that schedule today.
I was wondering what else I should be doing at this time. And I have never had to evict a tenant and would like some advice in doing so if it comes to that.
One more question...
I have reason to believe that illegal drug activity happens in this rental unit and don't know the tactful way to reveal this to law enforcement effectively. The tenants are aware that I will not tolerate this.
Thanks for your help!
You've allowed this situation to go from bad (months of unpaid rent) to worse (your suspicions of illegal drug use on your property). It's time to end this tenancy, but you may have trouble doing that since you've agreed to a payment schedule. However, chances are that your tenants will not abide by it, and when this happens, serve a "pay or quit" notice immediately (be sure to follow your state rules regarding the amount of time, phrasing, and delivery).
If you suspect not only illegal drug use but drug dealing as well, you need to act right away, and "tact" is not called for. Your grounded suspicions will support an unconditional quit notice (which tells the tenants they have a short amount of time to leave, period). Whether to contact local law enforcement is up to you. Keep in mind that if you tolerate drug dealing on your property, you put yourself and other tenants at risk.
I am a brand new landlord in Michigan with one partially furnished house on the lake. Do you have any critical pieces of information that I may need to know? Any suggestions on specifics for the lease?
Congratulations on your new venture! You've taken the right first step, by asking about key terms you'll need in a lease. The most important thing is to make sure you have a state-law compliant lease -- one that reflects Michegan landlord-tenant law. Besides that, you'll need to know about your rights and responsibilities as a landlord, which are also heavily dependent on state law. For a thorough guide, see Every Landlord's Legal Guide, from Nolo, which also includes a lease and state-by-state information enabling you to create a compliant lease. Go to www.nolo.com and type the title in the Search box.
You can deduct the interest (but not the principal) on loans you take out for the purchase of rental property. Deduct it each year you pay it, and list it on Schedule E on the line labeled, "Mortgage interest paid to banks, etc."
Further, if you use the credit card or take out a loan to purchase goods or services for your rental activity, you can deduct the interest you pay to the credit card company or lender, even if you have to depreciate the principal amount of the purchase. A typical example is interest on a credit card or bank loan used to purchase supplies for your rental activity.
1. I don't want to rent to people who aren't legally in the US. Can I turn them down -- and how do I find out about their immigration status?
2. My tenant declared bankruptcy, and I'm pretty sure he's not going to be able to pay the rent. Can I terminate his lease now, before I get burned?
3. I've got a 2-bedroom house that I've been renting to an adult couple for the past two years. They're moving and have told their friends, a family of four, that the house is available. There's going to be a lot more wear and tear with two kids there. Can I increase the security deposit to cover it?
Wow, you've got a lot of good questions! Let's look at them in order:
1. No federal or state law prohibits you from adopting a policy of not renting to people who are here illegally. A couple of cities (Hazleton, PA; and Riverside, NJ) have passed ordinances this summer making it illegal for landlords to rent to persons who are "illegals," but it's doubtful that these laws will survive legal challenges. That does not mean that a private landlord cannot adopt such a policy, but be sure to apply your rules equally to all persons to whom you rent. If you demand proof of legal status of only certain groups, you're violating fair housing laws. And to find out whether a person is here legally -- that's tricky. You'll find a form and instructions on what documents to ask for (and how to understand them) in Nolo's Every Landlord's Guide to Finding Great Tenants (www.nolo.com).
2. A bankrupt tenant. No, you can't terminate him just because you expect he'll not pay the rent. In fact, rent payments are one of life's necessities, and it's likely that the bankruptcy judge will exempt from creditors the amount of rent your tenant needs to pay. And if the tenant does, in fact, fall behind on the rent, you'll need to go to the bankruptcy court and ask permission (called a "relief from stay") before you can proceed with an eviction filing and lawsuit.
3. Kids and wear and tear. You can set the rent to cover costs of dealing with wear and tear, but you cannot set a rent for tenants with kids that's higher than the rent for the same number of adults. That's discrimination against families, which is illegal.
