NEPA Real Estate

Friday, January 29, 2010

Habitability

What is habitability and why is it so important? Essentially, it is anything that endangers the livability of the property and the health and welfare of the tenants. Many common problems are heat, plumbing, major roof leaks, unsafe electrical, carpeting, stairways, or sidewalks, etc. Very few things can be more costly to an investor than ignoring anything that involves tenant safety.

If a problem exists and the property owner does not provide the maintenance required to solve the problem, they can incur major losses of rents and/or damages. The court has a very dim view of property owners that ignore the safety of their tenants. The court puts the burden of proof on the owner.

In some states the Uniform Residential Landlord and Tenant Act, the URLTA has been passed; a number of states have based their statutory law on this act or the Model Residential Landlord-Tenant Code. Pennsylvania’s law is the Landlord Tenant Act of 1951, however the legal principles of habitability were not well established in the original law. In Pennsylvania, the Supreme Court in the case of Pugh v. Holmes established the rule of “Implied Warranty of Habitability”and over the years, courts have made many habitability rulings based on this case. Interpretations can vary with different judges and in different jurisdictions. Many people are unaware of the existence of this case its impact on tenant relations.

When faced with a difficult case between Landlord and Tenant, a judge will often consult the many points of law before rendering a decision. Important Federal and State Landlord/Tenant Law often stems from these judgments.

Landlord-tenant law in the United States originated from English common law developed within an agricultural society. Habitability stems from this. The basic points are:

▪ Are there any documented code violations
▪ Are there any dangers or hazards in the dwelling
▪ Does the electric and plumbing system
▪ Has the same problem reoccurred numerous times

Unfortunately, many property owners often ignore the potential liabilities of maintenance that involves “habitability.” These actions have lead to major legislation, such as Fair Housing; lead based paint, and mold, which has a far-reaching effect on property owners and tenants.

As professional property managers, we have the expertise to help your investors with these issues. Have your clients contact us so we can assist them with their investment.

Peter N. Lamandre is a Licensed Real Estate Broker, Consultant, Speaker, Mentor and Licensed Real Estate Instructor in Scranton Pennsylvania. He currently owns and operates Better by Design Real Estate, LLC a full service Real Estate Brokerage in Scranton, PA. One of the areas of specialty for Better by design Real Estate, LLC is property Management. Peter is a member of IREM (Institute of Real Estate Management), the National Association of REALTORS®, the Pennsylvania Association of REALTORS® and the Greater Scranton Board of REALTORS® where he services on various committees and taskforces. Peter can be contacted at his office at (570) 969-2105 or by visiting BetterByDesignRE.com. Nothing Contained within this post shall constitute the creation of an agency relationship between Better by Design Real Estate, LLC and the reader of this post. An agency relationship shall only be created upon mutual written agreement. The Real Estate Law requires that I provide you with a written consumer notice that describes the various business relationship choices that you may have with a real estate licensee. Since we are discussing real estate without you having the benefit of the Consumer Notice, I have the duty to advise you that any information you give me at this time is not considered to be confidential, and any information you give me will not be considered confidential unless and until you and I enter into a business relationship. At our first meeting I will provide you with a written consumer notice which explains those business relationships and my corresponding duties to you. Nothing contained within this post shall be construed as providing legal advice. Anyone with specific questions regarding legal matters should consult the advice of a licensed attorney.

Wednesday, January 20, 2010

What Are The Benefits?

Many times owners are hesitant to use property management services because of management fee costs. After quoting our fees to a prospective client, we often hear - “you want that much money for just collecting the rent?” Of course, there is much more to managing rental property than “just collecting the rent,” and we are sure that you realize this as well. Although our management fees show up prominently on our statements, if you look at the complete picture, the fees are absorbed many ways.

Tax Benefits

The most obvious benefit is that all management fees are tax deductible, immediately reducing the full cost of the fees on the bottom line.

Reduced Maintenance Costs

Reduced maintenance costs offset management fees several ways. Because our company handles maintenance on a volume basis, we are generally able to procure reliable vendors at a better rate than many property owners can, particularly if they do not live locally. A savings on a major repair, such as exterior painting or carpet installation, can add up to several monthly management fees.

It is a necessity for us to be current on what labor and maintenance costs should be. For example, if an owner has not shopped for a roof replacement in years, they may be unaware of current prices and newer materials. They could pay more than they should for the job and still not obtain the best workmanship.

Additionally, because we take the “preventative approach” to maintenance, this can mean great savings over time, further reducing both maintenance and management costs.

Professional Expertise

A major benefit to our management services is our professional expertise. It may seem that a vacancy is too long, but we know that the wrong tenant can be a much more expensive experience. Moreover, knowing and implementing current legislation can reduce costly mistakes when handling tenants. There are owners that have paid, literally, millions of dollars because of mold, lead-based paint, and other similar lawsuits. Again, we use a preventative approach to save you unnecessary legal costs.

Peace of Mind

Many owners simply find that just having someone else worry about the many details of handling a tenancy is simply worth the management fee. Reduced stress can only be a major benefit for everyone.

Pass these benefits on to your clients and refer them to us for a successful investment experience.

Friday, January 8, 2010

Handling Pets

Many owners are concerned when you mention pets in their property and have difficulty in making decisions in this area. This is a reasonable reaction since there are times when tenants allow their pets to cause considerable damage. However, when facing the issue of pets, investors often need to use a logical approach. Saying “no” to a pet right away can often lead to illegal pets or possibly missing a great tenant.

The Application

Whether or not an owner allows a pet, it is always advisable to have an area for disclosing pets in an application-to-rent. It is important to obtain as much information on the prospective tenant, particularly if you want to determine if they have pets. If another property owner reveals that the applicant has a pet that he or she did not disclose, this is solid ground for refusing the applicant.

Pets Negotiable

When the property is on the market for rent, use the term “pets negotiable.” The problem in stating a definite “no” is the prospective tenant may be the right person for the property. Well-qualified applicants generally extend the care for their pets to caring for the property. It would be better to have them list their pets, examine the information, and then make an informed decision.

Do Pets Work in The Property?

This is a logical step to consider. Obviously, a townhouse with a postage stamp backyard generally is not suitable for a German Shepherd, Springer Spaniel, or a Great Dane. Common sense must prevail when renting the property to someone with a pet or pets. Owners should look at the property objectively and discuss the issues with their property manager on what pets are suitable for the property before putting it on the market.

Avoiding Some Pets

There are pets to avoid and mostly this means “dangerous and destructive.” Examples of pets many people consider dangerous are Pit Bull, Rottweiler, Doberman, snakes, rats, etc. Any animal that is vicious, poisonous, or dangerous, whether large or small, can cause problems. That is not to say that all Pit Bulls, Rottweilers, etc are dangerous these animals can make wonder full pets to the "RIGHT PERSON". Good tenant screening often takes care of this problem. It is a good idea to have a list of unwanted pets that are completely unacceptable. Many insurance companies have a “dangerous pet” list and owners should find out what animals they list that could cause claim problems.

Service Animals are NOT Pets

Under Federal Fair Housing, you cannot charge any amount of deposit for a service animal. This is the most common area where property owners find themselves in trouble because they charge handicapped persons a pet deposit.

We have the expertise to counsel investors in making good decisions on whether to allow pets in their property. Have your clients contact us for Professional Property Management so they can avoid the pitfalls of pets in their property. If they have a positive property management experience, they are more likely to contact you to invest again or sell their property. Don’t wait, call us today.

Friday, December 18, 2009

Retaining Good Tenants

It is obvious why an investor would not encourage bad tenants to remain in their property, just as it is understandable why a property owner or manager would want to put effort into retaining good tenants – it is simply a matter of financial common sense. Vacancies are costly – turnover means high expenditures, not to mention stress. A good tenant is really worth their weight in gold because they make timely payments, care for the property, and take responsibility for reporting problems to the property manager and/or owner.

What retains good tenants? Our company approaches tenant retention with the three R’s – Reasonable Management, Respect for Tenants, and Reward Good Tenancy.

Reasonable Management

We find that conducting reasonable management of the property is the first step. Offering fair market rent and conditions, providing a clean and safe environment, and practicing Fair Housing attracts “good tenants.” This starts everything off on the right track. Then, while the tenant is in the property, it is important to keep up maintenance, which discourages them from thoughts of moving to a “better” residence.

Respect for Tenants

Bad tenants and “slumlords” are the culprits who have created misconceptions about rental property. Everyone has heard the horror stories on how tenants have trashed the property, not paid rent for months, or sued the property owner. Conversely, many tenants feel the landlord and/or manager will not take care of the property, only wanting to raise the rent, while they (the tenants) are the ones really paying the mortgage. As property managers, we have heard it all.

Bad tenants and poor property owners do exist and create these misconceptions. Our experience is both are the minority; the majority of owners and tenants are decent human beings. It is important to treat tenants “with respect,” instead of expecting the worst.

Reward Good Tenancy

Next, reward good tenancy. There are many ways to do this – renewing their lease with the same rent or a reasonable increase; updating the property with new carpeting, paint, or a new appliance; rewarding them with a gift certificate during the year at an unexpected time. Rewarding and recognizing their good tenancy discourages the urge to move.

There are many reasons why tenants move despite using reasonable management, respect, and rewards. However, this approach will simply lead to other good tenants.

Refer your clients to us for “professional management” and we will work to maintain good tenancy and their investment. We can assist them, give them peace of mind, and when they are ready to sell their property, we refer them back to you.

Wednesday, December 9, 2009

Managing Risk

Most property owners purchase rentals for investment or tax purposes. The usual goal is to save paying more tax dollars to the government and, at the same time, increase the value of their financial portfolio. With today’s economy and the past few years of erratic stock market activity, investing in real estate has returned as a sensible asset.

However, owning rental property can have hazards and “risk management” is necessary to avoid the pitfalls and horror stories that you often hear. Many property owners feel that management is not complicated, but like everything else today, with the increase of lawsuits, it is “not that simple.”

Preventative Measures

Preventative maintenance is good sense, but also requires knowing the right workers and the right price to pay. Putting in working smoke alarms, proper locks on windows and doors, correcting electrical hazards, immediately fixing plumbing problems to prevent mold, ensuring adequate heating and hot water, removing hazards such as exposed carpet tacks and exposed tree roots, are just a few of the long list of items that can reduce risk for a property owner.

Other preventative measures are screening applicants, counseling tenants, using proper rental/lease agreements, serving notices when necessary, performing good move in and move out practices, complying with current state law on security deposits, and settling disputes.

Legislative Knowledge

No one can manage property with his or her head buried in the sand and good property management starts with knowing current local, state, and federal laws. There are many complicated laws that can lead to major lawsuits. Just a few of these are Fair Housing, the American Disability Act, Credit Reporting laws, the Servicemembers Civil Relief Act, the new Junk Protection Act, and lead-based paint laws. The courts do not excuse an owner for ignorance of the law.

Legislation affects every facet of property management - showings, applications, tenant screening, leases, notices, maintenance, habitability, and more. Each of these areas can lead to “great risk” for a property owner when they do not know the law.

Professional Management

Because many property owners often do not have the knowledge and experience with rentals, they “increase their risk.” It does not take long to reduce their investment because of an unnecessary maintenance or legal bill.

Professional Property Management can reduce an owner’s “risk.” Assist your clients by referring your clients to our company so that we can provide professional property management to “Reduce Risk” and enhance their investment. If they have a positive property management experience, they are more likely to contact you to invest again or sell their property. Don’t wait, call us today.

Friday, November 27, 2009

Normal Wear and Tear

One phrase that can trigger some smiles among property managers is the statement, "it's cleaner than when I moved in (the property)." Property managers hear this phrase from many tenants, from those who are clean to one who has lived as a pig in a sty. It is amazing how a tenant can view filth as “normal wear and tear.”

“Normal wear and tear” can elicit very different viewpoints, depending on the person to which you are speaking – a tenant, an owner, a property manager, or a vendor. However, there are definite items that do not apply to the phrase. Here are some examples:

▪ It does not apply to filth and dirt, heavy soil, black marks on walls, rips, or dye stains on window coverings, bleach, or oil on carpets, etc.

▪ It does not apply to negligence, such as allowing mildew to collect on walls & tubs, or not reporting a roof or toilet leak.

▪ It does not apply to abuse, such as ripped linoleum from installing a refrigerator, punching a hole in the wall, stained or ripped window coverings, washing the drapes, etc.

How does our company handle the “normal wear & tear issues?” The first step is to screen the tenants properly as a preventative measure. We prepare the property and create a record of good condition before the tenant moves in.

Our property managers then counsel the tenant on what to expect during tenancy. Then both the tenant and management company sign the rental agreement that outlines the requirements while they live in the property and when they move out.

Later when the tenant moves, we check the property and compare the tenant’s move in with the move out information, followed by properly preparing their security deposit in accordance with state law to protect the owner.

Undoubtedly, there will still be tenants who claim many of the items listed above are “normal wear and tear,” and property managers and owners alike will continue to hear this litany. It is not always easy to cope with the tenant who cries, “'normal wear and tear," when it is actually damage. However, by using common sense, working on the "tenant's perspective," and having good documentation, fewer problems arise, and those that do can be handled as needed.

If your investor is tired of handling tenant screams about normal wear and tear, have them call our management professionals. We can assist them, give them peace of mind, and when they are ready to sell their property, we refer them back to you.

Tuesday, November 17, 2009

Recognizing a Drug House

It is very important for Real Estate agents, property managers, owners, maintenance personnel, or anyone else, to be able to recognize a rental used as a drug house. Unfortunately, they are now part of our society. In particular, “methamphetamine labs” or “clandestine drug labs” are very dangerous, and exposure is normally hazardous. Additionally, drug houses can be located in all economic areas of housing, not just low income.

Agents, managers, and/or property owners can be liable for ignoring the signs of a drug house and not taking action. Fines and legal fees can be extensive. However, managers and/or owners must be careful to avoid discrimination or legal action by wrongfully accusing a tenant of drug activity. Nevertheless, if signs of drug dealing are evident, it is more perilous to avoid them.

Any combination of the following may be an indicator of a drug house:

▪ Constant pedestrian traffic, such as many people coming and going at all different hours and staying short periods, are a definite warning sign.

▪ There is usually constant vehicle traffic, coming and going, parking out front, engines left running, or one or more persons waiting while another goes into the property.

▪ Any heavy traffic, coming and going during late hours, is another sign because drug dealers feel people coming after dark reduce attention.

▪ Extreme security precautions become obvious, such as surveillance equipment, extra motion lights, security cameras, large locks, bars on windows, and dangerous dogs such as a Pit Bull or Rottweiler.

▪ Heavy chemical or suspicious odors are coming from the residence.

▪ The tenant exhibits suspicious activities, such as never coming outside, looking out windows when people leave, avoiding other neighbors, lack of upkeep of yard or house, and a lot of activity in the garage area even though the door never opens.

If any of the above activity is noted, there are steps to take or not to take, if drug dealing is suspect.

▪ Do not attempt to handle the problem without professional help from law enforcement.

▪ Do not enter the property if you suspect a drug house or lab. Instead, seek advice and assistance from local law enforcement, the local Narcotics division, or narcotics detectives.

▪ If a problem is occurring right at the moment, call the police or sheriff and make a report.

▪ Do not call 911 unless there is a life-threatening situation, but definitely call 911 if you suspect personal exposure to toxic chemicals.

▪ Contact the neighbors or a neighborhood watch leader if available.

Above all, beware of activities surrounding the property, be careful, document everything, and do not attempt to solve this on your own. Awareness of drug activity is very important to your success and that of your investors. Call us to provide your clients with professional Property Management services.