Surprising Things Tenants Want in 2020

by Chris on January 13, 2020

Rental leasing trends for 2020 are revealing a few surprises:

Tenants Want to Report Rent Payments

On average, tenants spend about 40% of their income on rent, and they want credit for it — literally. Tenants realize that paying rent on time every month can raise their credit scores, and they are looking for landlords who report rent payments.

What is surprising about this trend is that tenants appear to have caught on to the benefits of reporting rent payments before landlords and property managers.

Reporting rent payments is a highly effective property management tool that dramatically increases on-time rent payments, and landlords should be the ones pushing for it. More on-time rent means less time spent chasing down tenants, collecting late fees, or filing evictions. Yet, some landlords haven’t signed up to Report Rent Payments. It’s what tenants want. What’s holding you back?

Tenants Prefer Face-to-Face Property Tours

The latest technology allows apartment-seekers to tour properties on their own. That has never been a good idea for landlords. Self-guided tours are a lost opportunity to screen tenants and as experience has proven, increase the risk of crime.

But, surprisingly, most tenants don’t like to go it alone, according to the National Multifamily Housing Council, which surveyed more than 370,000 tenants. Most of those tenants said they want to meet the landlord.

Tenants Are Staying Off the Roads

That same NMHC survey reveals that over 40% of tenants say they telecommute, at least some of the time. That trend may impact landlords. Tenants are around more, so landlord-provided utility costs could go up. There also may be an uptick in noise complaints, because working adults will be around while little kids are hopping around to their favorite morning cartoons.

At the same time, where a unit provides good space to work, being situated close to public transit might not rate as high on the list of tenant preferences, giving an advantage to landlords in the suburbs.

Tenants Are Willing to Move

According to a study conducted last year by Freddie Mac, 44% of tenants who were struggling with rent were forced to move to find something cheaper. In numerous studies, tenants rank increased rent as the top reason for moving out.

Data from John Burns Real Estate Consulting indicates that tenants are willing to give up on amenities for affordability.

Investors who are looking to add value with new amenities and then spike the rent and landlords who go over market may be surprised to find that tenants are willing to bolt, even in a tight rental market.

Increased turnaround also increases a landlord’s costs and liabilities. Landlords will need to find new tenants, orient those new tenants, and spend more time restoring units. One Midwest property manager says that frequent turnover isn’t worth a spike in rent. Routine but reasonable rent increases are her secret to holding on to good tenants and avoiding the cost of vacancies.

Inexperienced landlords suffer from the misconception that the best tenants are the ones who will pay the highest price — those with the most income. But savvy landlords have learned that the tenants who can most afford an expensive unit are out chasing better deals. It’s the tenants who can’t qualify for anything else who are willing to go for overpriced properties. Keeping rent at slightly below the market rate is the best strategy for attracting good tenants and avoiding rental income loss from property damage, defaults and prolonged vacancies.

Another aspect of rent increases that landlords must keep in mind is the rental history of the property. If the need arises to sell, low tenant retention and unscheduled vacancies can lower the overall value and give fodder to buyers to lowball.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 0 comments }

4 Potential Problems with Your Lease Agreement

by Chris on January 13, 2020

With all the variations in city, state, and federal rental laws, drafting the perfect lease agreement is a moving target. If your lease has never been reviewed by an attorney, or if it has been a while since it was updated, you might want to check for these potential problems:

Rent Incentives

A proper rent incentive involves offering a rental applicant some perk for signing a lease. That might include a couple free weeks or allowing someone to move in early free of charge.

Where landlords can get into trouble is using a rent incentive to encourage on-time rent payments. It usually works like this: the rent is $1,200 per month, but if paid on or before the 1st, it is reduced to $1,000.

There are two potential problems with this lease provision. First, the tenants who have cash on hand are the ones most likely to take advantage of this deal. If it turns out that the bulk of the tenants who scramble to pay on time and seldom receive the reduction also fall within a protected minority, that policy could be viewed as discriminatory.

Additionally, judges who have evaluated on-time rent incentive clauses tend to favor the view that the rent is the lower amount, and the higher figure represents a late fee. So, in the example above, the rent is $1,000, and the remaining $200 is a late fee. The question then becomes whether that $200 is an excessive late fee. Chances are high that it is, especially if that amount is charged each month, or rolled into the next month’s rent.

There’s a safer and easier way to encourage on-time rent payments. Sign up to Report Rent Payments to a credit bureau, and include the Notice to Tenant in the lease agreement.

Standard Security Deposit Deductions

While it may be appropriate to offer examples to tenants of what things might cost should the tenant fail to clean the unit when they move out, standard deductions are problematic and don’t belong in the lease agreement.

The lease easily could be interpreted in such a way that the landlord is limited to the amount stated. If the landlord says $100 for carpet cleaning, but the vendor must go over it three times, the landlord loses out.

But the more costly problem comes from taking wrongful deductions. Landlords cannot charge for items that were not completed or are redundant. If the tenant paid to have the carpet cleaned, they cannot then be charged for the landlord to do it, too. If it doesn’t cost $150 to haul away a bag of trash, then the landlord is not entitled to take that deduction.

Security deposit deductions must be based on precise out-of-pocket expenses and nothing more. No puffing, no rounding up, no predetermined amounts. The risks are simply too high. Under local rental laws in many places, the landlord who takes an unauthorized deduction owes more than the amount deducted. In some cases, the landlord could owe the tenant two or three times the amount wrongfully withheld, or two or three times the entire deposit.

The Lease May Be Incomplete

The numbered paragraphs that make up the body of the lease may not be the entire agreement. In many cases, there are additional disclosures that are mandatory and must be attached to the lease agreement.

Sometimes, those disclosures or attachments must be provided prior to the tenant signing the lease. Others simply need to be included.

Omissions might be the result of a simple clerical mistake, like mentioning a smoking ban or house rules and then not attaching the page that lays out the details. Or, it may be the landlord is not aware of the disclosure requirement.

A common example is failing to provide the federally mandated lead paint disclosures for properties built prior to 1978. Some local governments require disclosures concerning other environmental hazards, anti-crime mandates, or tenant protections from eviction, to name a few examples.

The stakes are high, and landlords who fail to comply with mandated disclosures risk paying fines or losing their rental licenses. That’s why it’s important to ask an attorney to review the draft lease before providing it to tenants. Another good strategy is to join a local landlord association that might provide the proper forms and offer landlord education.

Landlords Can’t Charge Penalties

The word “penalty” should not appear in a residential lease agreement. Private landlords generally cannot charge private citizens punitive fines or penalties. Common examples of penalties are excessive late fees or early termination fees, liquidated damages, acceleration or “due on demand” clauses, or fines assessed for bad behavior.

Some of these items might be palatable in commercial leases or in other contracts, but residential leases are also governed by rental regulations and judge-made law that tend to paint tenants as naive victims. Unlike with other contracts, the fact that the tenant signed the lease and agreed to all of the terms has little or no impact on whether the landlord can charge the tenant those amounts.

So, provisions for a $20 per day late fee, increasing the rent by 15% for every late payment, $100 for a noise violation, or a flat fee of three-months’ rent for early termination should be reviewed by a local landlord attorney. Those charges may not be enforceable, and some may be expressly prohibited under local rental ordinances.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 0 comments }

California Landlords Must Accept Section 8 Vouchers

January 13, 2020

California is among at least 15 other states and over 100 cities that have passed prohibitions against source of income discrimination. This month, California broadens its rules to include rental applicants using Section 8 vouchers. Several California cities already have passed this provision, but the new law makes it illegal throughout the state to discriminate […]

Read the full article →

City’s Anti-Crime Ordinance May Be Illegal

January 13, 2020

The Department of Justice announced last month that it is suing the city of Hesperia, California, along with the San Bernardino County Sheriff’s Department, for enforcing a nuisance ordinance that it says violates the Fair Housing Act. According to the complaint, the city, with the help of the sheriff, enforced an “anti-crime” ordinance that required […]

Read the full article →

Are You Missing These Opportunities to Screen Your Tenants?

January 6, 2020

Stop tenant fraud, and you’ll prevent the resulting income loss. A little detective work early in the tenant screening process can expose a would-be nightmare tenant. But in the rush to fill a vacancy, some landlords miss important opportunities to screen tenants: Tenant Screening on the Phone The first phone call with the applicant in […]

Read the full article →

Lease Confusion Forces Tenancy Off Course

January 6, 2020

When a tenant first rented a unit, the landlord agreed in writing that the tenant could have a roommate, and if that roommate moved out, the tenant could remain. So, not a co-tenancy agreement. Later, after the first roommate moved out, the tenant found another roommate. The landlord had the tenant sign a new lease, […]

Read the full article →

Tenant Causes Damage, Blames Landlord

January 6, 2020

A British Columbia landlord was able to stave off a claim by his tenant who wanted over $9,000 in damages — including loss of furnishings, hotel stays, meals, a temporary rental, two month’s rent, moving costs, and hydro — because of mould in the unit. The tenant drew the conclusion that the unit had black […]

Read the full article →

Toronto to Require Short-Term Rental Licences

January 6, 2020

Toronto is moving forward with its plans to limit short-term rentals, including overnight vacation listings on Airbnb, to principal residences only. The registration bylaw was passed in 2018, but enforcement was paused after a legal challenge brought by landlords of properties purchased solely for the purpose of renting short-term on sites like Airbnb. However, this […]

Read the full article →

What Landlords Need to Know for 2020

December 16, 2019

Now is the time to get ahead of recent trends and start your new year off on the right foot: Sticking Landlords with the Affordability Problem Tenant screening restrictions Affordable housing — or the lack of it — is the prevalent issue in many metro areas today. There are various theories as to why there […]

Read the full article →

Rent Growth Projections Make 2020 a Happy New Year for Landlords

December 16, 2019

Rents are rising and will likely continue to accelerate in 2020, that according to the latest Market Report from Zillow. Apartment rents grew 2.3% year-over-year, driving the median U.S. rent up to $1,600 per month. At the same time, housing values showed the lowest growth since February 2013, and inventory of for-sale homes fell. With […]

Read the full article →