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Biggest and Most Common Mistakes Landlords Make – By Patricia A. Harris

Posted on 01. Jun, 2013 by in all, Magazine Articles

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 Over the years, your AOA Advisors have been presented with several scenarios that again and again cause landlords unnecessary grief, time and money.  Below is a compiled list of members’ questions we have received and mistakes you’ll want to avoid to ensure you run a successful building, save money and stay out of the courts.

Not Having a Written Criteria List for Applicants

I turned down Applicant A’s request to rent for having an eviction, but decided to overlook an old eviction on her friend’s report (Applicant B) because she was employed at the same company for over 10 years.  Applicant A is claiming this is discrimination and has filed a case against me.

Solution: Having a written criteria list for your rental applicants is pertinent in your rental business and serves several purposes.  By attaching a copy of your rental criteria to each blank application form, you are informing all applicants of a list of conditions that must be met for them to be considered as a future tenant in your building.

By using this list, all applicants will know exactly what is expected to qualify renting at your building and it will also help eliminate any misunderstandings. Some other reasons all professional landlords use this list are: 

  • It will help you to avoid discrimination lawsuits
  • Applicants who have evictions on their records or unfavorable credit will not waste your time
  • Those who do not qualify financially will be dissuaded
  • Applicants with criminal records will choose to apply elsewhere
  • With your prospective tenant’s compliance, you will have all the information you need for proper screening procedures

The key avoiding discrimination lawsuits is to be consistent with all applicants and adhere to your list of qualifications for all who apply. 

For a “sample” copy of a criteria list, visit www.aoausa.com and see the “Sample Qualification Criteria for Renting” listed in the forms section in the members only area.

Improper or No Tenant Screening Performed

I rented my unit to a “nice man” who just arrived from out of state and wanted to move-in immediately.  He offered me three month’s advance rent in cash and once he took possession, he began having loud parties, is disturbing my other tenants and the smell marijuana is coming from his apartment.   

Solution:  Take caution and always beware of the “cash-offering” tenants who want to move in right away to avoid proper screening procedures.  As Benjamin Franklin said, “An ounce of prevention is worth a pound of cure”.  Before allowing a tenant to move in, screen them carefully by requiring: 

  • Favorable rental history from previous landlords
  • Verification of employment
  • Credit, eviction and criminal history reports (Use the AOA “4-Star” Report) For more information visit: http://www.aoausa.com/tenant_screen/

In most cases, if a tenant tries to talk you out of obtaining the above, they are hiding something they don’t want you to know.  Don’t ever make a decision to rent to someone when they are standing in front of you. Proper tenant screening can prove to be “a pound of cure!” 

 No Move-In Checklist Performed

My tenant just moved in two months ago and is already complaining about all kinds of things she wants repaired. There are scratches on the linoleum she said were there before she moved in and I’m sure she did it during move-in.

Solution:  Always execute an “Enter/Exit Checklist” (AOA form 131) signed by the tenant.  Walk through the unit with your new tenant before occupancy and note the conditions of each item.  This form will also serve as proof and help to eliminate any discrepancies both during the “Move-In” and the “Move-Out” process. 

Tenant Takes Possession Without Paying Rent or Security Deposit

I allowed my new tenant to move in a few days early and now he won’t sign the rental agreement or pay rent and the security deposit.  When I go to see him, he never answers the door.

Solution:  You should never, ever, never – under any circumstances – give tenants keys without a signed lease and total move-in fees in the form of cashier’s check or money order.  Once they gain possession and fail to perform, you will most likely have to begin eviction proceedings to get them out and this will cost you attorney’s fees in addition to lost rent.

Tenant Wins Security Deposit Refund Dispute

My tenant moved out and I returned his security deposit refund letter and balance due from his security deposit within the required 21 day period.  He disputed the amount I returned, took me to Small Claims court and won!!  I thought I did everything right, but he claimed I never offered him the right to request an initial move-out inspection, therefore the judge ruled in his favor.  What is this?

Solution:  The AB2330 Move-Out Process and California Civil Code Sections 1950.5 require that landlords must notify tenants of their legal right to request an initial final inspection which must be held (unless the tenant notifies you, in writing, of his intent to waive such inspection) no earlier than two weeks prior to the termination of the tenancy.

This purpose of this inspection is to notify the tenant of deductions that will be made from their security deposit allowing them to remedy the damages prior to move-out.  If a landlord does not present the proper AB-2330 forms to the tenant prior to move-out, chances are high that no matter what condition the premises were left, a tenant will most likely always prevail in court. 

Visit www.aoausa.com where you can print out all the AB-2330 Move-Out process required forms along with instructions and make it your practice to initiate this process on every move-out.

Tenant Hasn’t Paid Rent for Two Months

Due to an automobile accident, my tenant is now two months behind in rent.  He keeps telling me that he was expecting an insurance check and would pay all the monies due at that time.  I felt sorry for him so I didn’t take any action, and soon he will owe me three month’s rent.

Solution:  As situations arise that may call for special circumstances in accepting late rental payments, waiting two months on a “promise” is usually a big mistake.  In fact, waiting any time at all to take action is usually a mistake.  Tenants must be trained that rent is due on the due date, not any time after – you are not a lending bank.

Common business practice, as brutal as it may seem at times, is if rent is unpaid on the due date, a 3-Day Notice to Pay or Move-Out (AOA Form 103) should be served the day after rent is due.  There is no grace period on the due date, even though late fees are applied after say three days.  In other words, even though you may have a late fee “grace period” if rent is not paid three days after rent is due, you should still serve the pay or move-out notice the day after rent is due. 

My recommendation on late fees is to initiate the lease with a late fee clause that is effective ONE DAY after the rent is due – if the rent is not paid on the due date, late fees will apply the very next day.  Giving a three to five day grace period is like telling the tenant that it’s okay to pay rent late.

Tenant Calls Housing or Health Department Instead of Landlord

My tenant continues to call the Health Department with complaints before calling me to rectify a problem.  An inspector comes out, cites me and then I am charged $201.50 for the inspection.  The inspector then comes back at later date to see if the repair was made and I’m charged again!!  How can I get this tenant to call me first?

Solution:  At the signing of the rental agreement, have your tenant read and initial AOA’s Rental Agreement clause number 13 which states, “Tenant must notify landlord with a written notice stating what item(s) need service or repair and give landlord a reasonable opportunity to service or repair that item(s). Should any charges be incurred by the City as a result of not notifying the Landlord in writing of such needed service or repairs, tenant shall be responsible for a minimum of $201.50 for each occurrence plus any additional fines or inspection fees imposed by a government office as a result of RESIDENT not notifying OWNER in writing of any deficiencies with the residence.”

It is also wise to provide each tenant with written repair requests that they can use when needing service.  You should date-stamp the request when you receive it, give it immediate attention, and log the date of repair, attaching any paper evidence of service for your files.  It is also good tenant relations to leave a note in their unit stating the repair was made and follow-up with a call to your tenant to assure everything was fixed to their satisfaction.

If you used AOA’s lease, any tenant who calls the city without giving you an opportunity to correct the problem should be presented with the bill for this violation.

Tenant Won’t Allow Entry for Repairs

Every time I schedule a repair for my tenant, he says the time is not convenient and he wants to be present when the worker comes.  Sometimes, we get there and he won’t let us in and says to come back.  What should I do?

Solution:  All owners have the right to enter the premises for the purpose of making repairs by giving a 24-hour advance notice in writing.  Serve AOA’s 24-Notice of Intent to Enter Premises (Form 130) letting your tenant know the approximate time you will be coming.  You and your service provider may then enter the premises whether or not the tenant is there.  You do not need your tenant’s permission to enter nor do you have to work around their schedule to enter the premises for the purpose of making repairs. 

It is also recommended that you accompany your service provider as a witness to avoid any possible false claims.

If your tenant physically refuses entry after your notice was served, you will then serve them with a 3-Day Notice to Cure the Violation or Move-Out (AOA Form 104), serve another 24-hour notice to enter and if they again refuse you entry, you may contact an attorney to begin eviction proceedings.  Even though you have the right to enter, you should never force your way in should the tenant refuse you entry.

Manager Sues for Past Wages

I just received a lawsuit from my previous resident manager who is claiming he worked more hours than he did and is now suing me for past wages of $360,000! 

Solution:  A resident manager is considered an employee and property owners should always set the hours, responsibilities and compensation in a separate “Employment Contract”.   To avoid this problem, require your resident manager weekly to turn in a signed, hourly time sheet reflecting their actual hours worked.  Keep these time sheets for your files.

It is also wise to have a separate rental agreement with all resident managers.  The reason for this is if you are unhappy with their services and decide to “fire” them, there will be no question as to how much rent is due once their manager responsibilities are terminated. (Don’t forget to adjust their rent each year if your building is subject to rent control.)

IMPORTANT REMINDER:  Whether you compensate your manager in the form of a rent reduction or salary, you are obligated to keep records, pay taxes, obtain a W-4 form and give your manager a W-2 form at year end.  Also keep in mind that:

  • Because you are considered an employer by the IRS, a landlord who hires a resident manager must obtain a federal identification number
  • You must also withhold all proper federal and state income taxes, as well as to make required payments for social security, unemployment insurance and disability insurance. [Calif. Unemployment Insurance Code §13020].
  • All landlords must carry Workers’ Compensation insurance to cover resident manager injuries on the job. (You can call (800) 227-7434 or visit aoausa.com/insurance.html to save money with AOA’s money-saving Group Insurance Program for all of your insurance needs!)

If you do not meet these legal obligations as an employer, you may face substantial financial penalties.

For details on your specific payment schedule, deductions and reporting requirements, speak with your accountant or contact the IRS at (800) 852-5711.

Patricia A. Harris is Senior Editor of the Apartment Owners News & Buyers Guide.   This article serves as a general guide and has no legal representation.  It is suggested that you contact an attorney for legal advice should the need present itself. Copyright March 2013.