2018 Property Management Wrap-Up: What to Expect in 2019

by | Dec 17, 2018 | Tenant Screening

As the year wraps up, it’s time to think ahead to 2019. Here are some property management strategies that will help make 2019 a prosperous new year:

Rent Control

One of the more surprising twists that occurred this year was the defeat of a statewide rent control initiative in California. The otherwise liberal to moderate-leaning voters in that state rejected the idea that rent regulations would solve the affordable housing problem.

The move gave fresh fodder to landlords across the country who are fighting against similar initiatives:

According to a policy analyst in California, rent control means an increase in administrative costs to enforce the rules. Additionally, property values — and property taxes — would fall, and landlord incomes and corresponding income taxes would be greatly reduced. That, experts concluded, would cost state and local governments tens of millions of dollars each year.

The analysts also predicted a decrease in investment that would stifle any new supply of rental housing.

Earlier this year, a study conducted by Stanford University indicated that both affordability and inventory might suffer in cities with strict rent-control ordinances. Focusing on San Francisco, researchers discovered housing supply there dropped by 15%, causing a 5.1% city-wide rent increase.

The Stanford group suggests government subsidies for individuals, not a blanket cap on rents, as a way to achieve affordability.

Another alternative: Minneapolis is running a pilot program that offers landlords the incentive of lower property taxes in exchange for a promise to cap rents.

Tenant Screening

TransUnion credit agency reported that tenant fraud is on the rise, and more widespread than many landlords realized. Online applications are a major factor. Adopting policies that flag fictional identities, document tampering, and identity theft is crucial in 2019:

Ask for a photo ID before providing a tour of the property;

Meet the applicant first before providing a rental application online. Use a vetted application form, not a third-party version;

Check references. Confirm that the references are talking about the same person;

Run credit reports — the content cannot be tampered with. Look for discrepancies, like a young applicant with a lifetime of credit;

Run eviction and criminal history reports and cross-check against the application and credit report;

Pay attention to discrepancies in the applicant’s story, like driving a car not listed on the application, or information on a personal check that doesn’t match up; and,

For landlords using Experian at http://www.tenantverification.com, to run credit checks, be wary of applicants who can’t pass the authentication process. These are simple multiple-choice questions about personal history that the person should know.

Criminal History
An initiative referred to as Clean Slate is making major inroads into federal and state governments. This initiative strives to erase criminal history and make it easier for those who have committed crimes in the past to obtain rental housing. Clean Slate may impact the way some landlords conduct tenant background checks.

Regardless of Clean Slate legislation, it remains important to run a tenant background check that includes criminal history in order to avoid landlord liability should a tenant with a criminal past harm someone at the property.

Pay attention to contact information on applicants. It’s more difficult to match up criminal reports that don’t always use SSNs or aliases. Ask for full legal name, alias names, birthdate, and previous addresses on the rental application to verify the match.

Omitting or misrepresenting information in a rental application is a potential crime, so warn applicants before they fill it out. It is possible that Clean Slate legislation will require landlords to change the language of the rental application so tenants are not asked to provide information that is sealed, such as criminal convictions more than 10 years old.

Use more than one tenant screening report so that if there is no recent criminal history, any credit or eviction problems that might have resulted from criminal activity will be uncovered.

Don’t run the criminal background check until after the rental application is verified, references have been checked, and the person is otherwise qualified. If the person isn’t qualified, it won’t be necessary to delve into criminal history.

Lease Agreements

Landlord leases should be reviewed annually. This year, consider:

Marijuana legislation
Landlords affected by new voter initiatives to legalize pot will need to adapt. For those wishing to ban marijuana smoking, an existing ban on cigarette smoking appears to be an effective strategy. Growing plants in rental properties also will need to be addressed.

New legislation varies dramatically from one state to the next. For instance, some states allow only medicinal marijuana while others also legalized recreational marijuana. Some renters may be allowed to grow their own plants. There is no one-size-fits-all strategy, so consult with a local attorney or plan to attend one of many education seminars offered by local landlord associations.

Eviction restrictions
More and more cities are looking at just-cause eviction restrictions that require landlords to pay relocation fees when taking a property out of service. That, combined with high demand for housing, means that more tenants may be staying longer. Adapt the lease to accommodate these long-term tenancies:

Incorporate a maintenance plan so that repairs and upkeep stay on schedule throughout the tenancy rather than waiting for a tenant to move at the end of the year;
Work out rent increases in advance so tenants know what’s coming;
Provide for and conduct routine property inspections throughout the tenancy; and
Beef up guest policies so it is clear who is living at the property. All long-term occupants should undergo a tenant background check and be liable on the lease.

Short-term sublets
Subletting rooms to vacationers remains a popular way for tenants to earn income off the landlord’s property. Many landlords are allowing these sublets in return for a cut of the profits, so tenants may be confused about their rights. Landlords should take a position on short-term sublets and spell out any restrictions or policies in the lease agreement.

Popular amenities
Tenants have indicated that package delivery protection is high on the list of preferred amenities in multifamily properties. Tenants are avid online shoppers, and unfortunately, the leasing office is not always big enough to accommodate the onslaught of packages that arrive, especially this time of year.

Landlords who are swimming in cardboard boxes might want to consider investing in a package locker. There are a half dozen or more companies offering this service. By outsourcing the delivery system, landlords avoid liability for lost or damaged packages, and save a ton of time otherwise lost to coordinating package pickups. These services also may provide a revenue stream to landlords by way of tenant registration fees.

Any policies and fees associated with the use of package lockers should be included in the lease agreement.

Landlord Liabilities

Natural disasters
The past year, landlords and tenants incurred major income loss through natural disasters. If a disaster plan is not already in place, develop one now, before hurricane and wildfire season. Speak with an insurance agent to determine the best coverage, and always keep current emergency contact information on tenants, including the number of occupants and pets in each unit.

Several landlords this year ran afoul of reasonable accommodation rules that protect applicants and tenants with disabilities, and HUD has vowed to continue to make those prosecutions a priority. These are costly lawsuits that are easily avoided:

Do not apply pet rules or restrictions to emotional support animals that are prescribed to the applicant with a disability;
Provide accommodations like close-in parking and first-floor units to tenants with disabilities; and
Allow tenants to make reasonable modifications that allow them to take full advantage of the unit, common areas, and amenities.

Another 2019 priority of fair housing advocates is protecting families with children:

Avoid rental ads that appear to place a preference on single tenants or couples without children;
Use caution when rejecting families over occupancy limits, especially families with young children; and
Avoid placing restrictions on children or families that do not apply to all tenants.

Rent Growth

Market reports this year are predicting a continued high demand for rental housing, but also indicate that rents already are at or near the max that renters are willing to pay. Rent growth in some cities has been impacted by dramatic increases in new inventory, a willingness to move to the suburbs, and simple affordability — many tenants already are at the very top of their budgets. Unless wages go up significantly, some landlords may have to settle for smaller rent increases in 2019 in order to retain their best tenants.

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.

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