About Boston's Fort Point

A guest post by Brian Davis, Ezlandlordforms.com, Moorestown, NJ

Building a strong relationship with a new tenant and protecting your real estate investment is of paramount importance when crafting a lease agreement. There are a multitude of considerations at this juncture that are essential to understand. Brian Davis, Vice President of EzlandlordForms.com, is a seasoned landlord and top expert on landlord-tenant relationships. Here he offers his top tips for new landlords as a helpful tool for navigating lease creation and the ongoing considerations of managing a rental property.

1. Understand the Fair Housing Act and how it applies to your rental. When advertising for a new tenant, it is critical that landlords and property managers understand and comply with the Fair Housing Act. The Fair Housing Act prohibits landlords from using any of the following criteria when evaluating potential tenants: race, color, national heritage, religion, gender, disability, and familial status. While that may sound simple on the surface, consider that stating in a rental listing “perfect for a single professional” is a violation of the Act (bias against familial status). Advertising only in your church’s newsletter discriminates by religion. What landlords can and should use to evaluate potential tenants is financial data, credit histories, and other background data.

2. Know your tenant by thoroughly screening each prospective renter to avoid problems down the road. This can be accomplished by a few simple steps. First, conduct a professional credit check to learn an applicant’s credit history and if they have been fiscally responsible in the past. Bad credit can serve as a red flag and you may wish to avoid such tenants.

Next, ask for references from past landlords. However, be on notice that while references from prior landlords are worth a quick phone call, they aren’t particularly telling, because tenants can give fake names and numbers, and even if they don’t, the old landlord may well be painting a rosy picture of the tenant in order to get rid of them.

What a landlord should verify are the rental applicants’ credit, employment/income (and historical stability), criminal background, and eviction history. When landlords run these checks, not only can they determine the best rental applicant, but the landlord can defend against any discrimination lawsuits by producing hard data used to choose one rental applicant over another.

3. Build an airtight lease agreement by knowing the laws that apply in your state through a state-specific lease. Each state has slightly different laws that impact a landlord-tenant relationship. Accordingly, use a state-specific lease instead of a general lease to best protect your real estate investment. For example, California requires all lease agreements to include clauses mandated by Megan’s Law, and every state has different limits on security deposits, late fees, etc.

While not an exhaustive list, other elements a lease agreement should clearly define include: Who is responsible for paying the utilities, which appliances are included and who is responsible for maintaining them, whether the lease auto-renews and for what term, details surrounding fees and deposits, and whether is there an option to purchase – and if so what are the terms?

4. Understand the eviction process. Although many of us don’t wish to think about worse case scenarios, it is important to become familiar with the eviction process and be ready to start the process immediately when a tenant violates the lease. While the specific documents required are different in each state, all states involve the same general eviction process. The landlord or property manager must serve the defaulting tenant with a particular notice, wait a specified period of time, file in court, attend a court hearing, schedule a date for the actual eviction, and so on, and landlords are well advised to understand this process before actually having to go through it, because it is extremely expensive and takes far longer than most landlords anticipate.

5. Devise a Moving In and Moving Out procedure and be sure it is clearly defined. One helpful tool is a comprehensive walk-through checklist. This document will be used for the landlord/manager to walk through the rental unit with the tenant and document the condition of the unit upon move-in and move-out.

6. Offer performance incentives: While most lease agreements include a late fee, landlords can further incentivize timely rent by offering a reward for early rent payment, renewing for a longer term period, and/or any other behavior you want to encourage. Rewards can range from the simple, such as rent discounts, to the complex, such as point systems where tenants earn points and exchange them for rebates, gift cards, updates to the rental unit, etc.

7. Establish a relationship with at least two good contractors. Landlords and property managers need at the very least a licensed contractor who can handle large jobs, and an inexpensive handyman who can affordably fix minor issues. Don’t wait until your tenants’ heating system stops working in January, or the roof collapses, as the time lost in trying to find a contractor by that time will cost real money. Instead form these relationships before you actually need them, and then you will simply be able to make a phone call and have the problem resolved immediately.

8.Stay capitalized. One of the most serious problems small landlords face is lack of cash, as being a landlord involves unexpected expenses. These range from tenants suddenly ceasing to pay their rent, to unexpected repairs, to lawsuits, but the only predictable aspect to these unexpected expenses is that they will happen, and with some frequency. Set aside a hefty amount of cash specifically for rental expenses, and resist the temptation to use it for anything else.

By Ben Holubecki, STML Realty Group, Glen Ellyn, IL

Transfer policies are often a detail overlooked by landlords and property owners who own/manage multi-unit properties. A tenant requesting a move from one unit to another presents challenges and can add unnecessary and unexpected costs for property owners. Ignoring these requests or not addressing them properly can open landlords up to potential resentment from tenants and even legal liabilities if not properly documented.
There are a lot of reasons why a tenant might request a transfer to another unit within the same property and there are positive and negative impacts resulting from this type of request. The most common reasons for these requests in my experience are:

- Problems or issues with current neighbors
- Maintenance issues within their current unit which they feel were not or will not be addressed
- Lack of upgrades due to extended tenancy (newly remodeled units are obviously more desirable)
- Preference regarding location within the property (different floor, closer to parking, amenities)
- Moving from 1 unit type to another such as moving from a 1 bedroom apartment to a 2 bedroom

Regardless of the tenant’s reason for the transfer request, there are both positive and negatives that you should consider.

The positive:
- Your tenant obviously likes the property enough to want to stay
- You have a history with this tenant so you know what to expect regarding care for the property and rental payments. No surprises. That is always a positive.
- You have the opportunity to make a tenant happy who otherwise may be dissatisfied with their current situation.
- There may be an opportunity to raise rent and extend the lease term guaranteeing more income from that tenant.

The negative:
- You have just incurred the expenses necessary to prepare a unit for rent which will now produce little to no additional monthly cash flow as you will lose the rent from the renter’s original unit.
- There is now likely additional expenses necessary to prepare the old unit for a new tenant.
- This old unit may be less desirable that the one the tenant is moving to due to location, layout, lack of upgrades, etc.
- This existing tenant may be a risk. They could be just making the current rent and may be stretching themselves to pay a higher price for a larger space. They may be dirty. It is one thing to leave them in their existing dirty unit. It is another to let them trash your newly cleaned and carpeted apartment.
- You may have this new unit committed to another applicant.

In almost all cases we have found that the negative impacts outweigh the positive financially. The exception is in properties with high vacancy or those being turned over. In those cases we can’t afford to lose any good tenants and it is in our best interest to allow any reasonable move request. The issue comes when dealing with the high occupancy or fully occupied property. As soon as we have a tenant vacate we expect some level of cost and effort to prepare the unit for a new renter. However, that cost will be offset by the income generated by a new tenant. When we are forced to move an existing tenant we double our preparation cost and generally double our vacancy time. This is a bad business model which many owners/landlords will avoid by implementing a strict no transfer policy. Tenants must complete their full lease term and can only transfer by applying for a new unit at the end of the existing lease. This is likely the strongest and most profitable stance to take if you have no problem with vacancy whatsoever. However, you will lose good tenants who will resent the fact that their “reasonable request” was not considered prior to lease expiration. Everyone who does not subscribe to this hard stance operates with some level of flexibility regarding tenant requests to transfer.

I am not recommending one policy over any other as there are many factors and variables that should dictate your position on the matter. However, no matter what policy you subscribe to it is in a landlord’s best interest to put this policy in writing and make it part of your lease. I have spoken to several landlords who have responded to formal fair housing complaints arising from this issue and every one of them have told me that the first question that they are asked is, “What is your transfer policy and is it in writing?” If a current tenant has asked to be moved to another vacant apartment in the same building and you ignore this request to place a new applicant there is nothing to stop a tenant from claiming that they were unfairly rejected or discriminated against during your selection process. Those complaints can result in fines that can make your head spin if things don’t go your way. An even bigger issue is the precedent that is set. If you allow willy-nilly transfers to a few tenants then every tenant in the property will expect the same flexibility when they make a request. This could be a crushing expense over time.

No matter what your policy, as a landlord of a multi-unit property it is best to determine a very clear policy by which you will operate and allow someone to move within a property. Once your idea is in place it must be put into writing. All of the possible variables need to be included such as when these moves are allowed (anytime, only the last 90 days of the lease, never), when will they be rejected and why (late payments, damage to property, etc), if you will maintain a waiting list for units not currently available, handling of security deposits, and any other important factors. Having a clear and concise policy virtually eliminates any variables and can help minimize your liability stemming from a possible complaint.

Here is a sample policy that a client of ours has utilized for some time. It is thorough and he has not had a single issue since implementing it two years ago. This was a constant issue prior to his addition of this clause to his leases.

TENANT TRANSFERS. Tenants may request transfer to another unit within the property during the term of their tenancy. Unit transfers will only be considered within 60 days of the expiration date of the current tenant lease. Each request will be considered based upon unit availability, rental payment history, positive (complaint-free) tenant record, and current occupancy plans (pending move-ins, deposits held, repair plans, etc) at the time of the request. Lessor will make a tenant transfer determination based upon any or all of these factors. Rental pricing for the Lessee’s previous (current) unit will have no bearing upon the rental amount charged for the new (transfer to) unit. Lessor has sole discretion to set rental prices as they see fit. Lessee will be required to sign a mutual release from the current lease (if one is in effect) and sign a lease for the new unit with a minimum term of 1 year. Transfer to another unit does not relieve the Lessee of their responsibility regarding security deposit within their original unit. Upon approval of the move, Lessee will be assessed a damage bill for the current unit and a charge will be entered into the tenant ledger to reduce the security deposit amount held by the Lessor to offset the cost of repairs. Upon signing the new lease, Lessee will provide payment in full for any security deposit shortfall required per the new unit lease. Lessor has sole discretion to set security deposit requirements as they see fit. Lessor may relocate tenants based upon need due to damages, repairs, or remodeling from time to time. These moves will be considered necessary and temporary relocations and will not be considered “tenant transfers” and do not fall under these guidelines. Necessary and temporary relocations will take precedence over any tenant transfer request and Lessee agrees to hold Lessor harmless in the event that a necessary relocation supersedes a tenant transfer request or otherwise makes a tenant transfer impossible. Lessor reserves the right to amend this policy at any time upon written notice to Lessee.