- Emails sent from or received by an email address set up for association-related communications become part of the official records and subject to inspection by the membership unless the content is otherwise privileged.
- When adding multiple people into an email communication, there should be an identification of those people and the reason they are included on the email. For example, if you are asking your attorney for an opinion on a parking matter, you may want to advise your attorney that you've included Bob and Mary, your fellow board members, Joe the manager and Mrs. Smith who has requested the accommodation to move to another spot.
- Remember if you include a non-board member like Mrs. Smith on your email communication, you have jeopardized your attorney-client privilege.
- Auto complete can be a very dangerous thing, particularly if you are sending email communications on sensitive topics. You may think you have sent your email to Joe Warren when in fact you have sent it to John Walsh. Again, auto complete can result in the destruction of attorney-client privilege as well as just being a source of embarrassment should a communication wind up in the wrong inbox.
- Ask yourself why you are adding ten people on an email communication. Will doing so help achieve your board's objective or is it being done to either grandstand or as a "cover your tracks" tactic?
- Know that most people who receive an email with many listed recipients will automatically hit "Reply All" to that message. If having the reply go to everyone was not your intention, then you need to either state in the email to whom the response should be sent or resist the urge to send open-ended email communications in the first place.
- Naturally, blind copying people on your email communications usually results in hurt feelings or worse.
QUESTION: I recently saw a sign that our association posted at the pool that says if anyone currently has or has had diarrhea in the past 14 days, they should not use the pool. That seems inappropriate. Is the sign necessary?
ANSWER: Yes, the sign is necessary. The California Building Code (CBC) was recently amended to require such signs at all public pools as follows:
A sign in letters at least 1 inch (25 mm) high and in a language or diagram that is clearly stated shall be posted at the entrance area of a public pool which states that persons having currently active diarrhea or who have had active diarrhea within the previous 14 days shall not be allowed to enter the pool water. (CBC §3120B.11.)
“Diagram?” Seriously? Stick with words. Signs can be purchased from various pool supply companies throughout the state in a variety of languages. If a substantial number of your membership speaks a language other than English, you should consider posting signs in those languages.
“But wait,” you say, “our pool is not open to the public!” For the purposes of this sign, “public pool” is broadly defined to include associations:
Public pools include those located in or designated as the following: commercial building, hotel, motel, resort, recreational vehicle or mobile home park, campground, apartment house, condominium, townhouse, homeowner association… (CBC §3101B)
Wayne Louvier, Esq.
Adams Kessler PLC
Can someone with diarrhea still go in the pool if they wear a swim diaper? That is a bad idea. See “Fecal Teabags.” For more information about diarrhea and swimming pools see the information posted on the Centers for Disease Control website.
AND FHA CERTIFICATION
Recently, the Federal Housing Administration took the rather silly step of refusing to certify condominium developments that exempted banks from transient housing restrictions (which, by the way, was an accommodation to the agency).
The FHA has relented. Under its newly revised, newly adjusted, new, new policy, condominium associations have two choices:
1. Amend their governing documents to remove the offending language, or
2. Provide a dated and signed statement on association letterhead that no units in the development are leased for a term of less than 30 days and tenants are not provided services commonly associated with hotels.
Option two is the better option. If you go through the expense of amending your CC&Rs, the FHA will just change their guidelines again. To read more, see CAI Announcement.
IN THE MINUTES
QUESTION: Our minutes contain a summary of our financial condition and we are not inclined to share this information with employees, contractors and bidders. Is it acceptable to omit the association’s financial information from the openly posted version of the minutes?
ANSWER: Yes, you can omit financial information from the set posted in the common areas. Members, not renters, visitors, guest or vendors, have a right to the association’s financial records. Because members have a right to the information, you should either include financials in monthly billing statements or post them in a password protected portion of your website. That way you keep everyone informed without public consumption.
Buying a Condo #1. I so wish real estate agents would provide “Buying a Condo” to all their clients. It’s concise, honest and excellently written. If potential buyers were made aware of what condo life means before they buy, it would go a long way toward helping managers retain some sanity. -Trudy M.
Buying a Condo #2. Excellent advice, unfortunately our condo is exactly the type you describe to avoid. Over the last three years our rental population has ballooned. Despite the best efforts of the board, it continues to grow and we spend more time with violations, move-ins & outs, noise issues and the downward spiral of the general appearance of the property. How does this association reverse this “slow death” and regain the “eye” of good Realtors? -James P.
RESPONSE: Despite the interference of the California Association of Realtors in controlling rentals, there are still CC&R amendments that can help your situation. Contact me for more information.
Buying a Condo #3. Condos are a horrible investment when you consider that other people are making decisions that effect you financially. These people (the board) do not think of the money as their own, so they end up being charged multiple times a common sense cost. I was hit with a $50,000+ assessment days after buying a condo after being told the community required no maintenance. I ended up on the board for five years and ten years later we still have the same ignorance controlling the purse strings. -Sam M.
Buying a Condo #4. Thank you for the info you covered on this issue. So many new owners (plus old ones) think that the HOA pays for everything and it will not cost them a cent. -Barbara K.
Buying a Condo #5. I wish I’d gotten this information 7 years ago before we bought a condo. Fortunately we got a pretty good one. I am going to save it now. Thank you! -Lori G.
Buying a Condo #6. Another consideration is the size of the HOA. I bought in a 16-unit development liking it was small. But the downside is that all expenses are assumed by a much smaller homeowner base and fees rise at a higher rate than larger developments even though we don’t have as many common amenities as a larger development. -Joyce W.
RESPONSE: Excellent point. I will add it to the website.
Buying a Condo #7. Your article about buying a condo was OUTSTANDING! Thank you for a wonderful, informative article. -Ellen M.
Buying a Condo #8. As usual – GREAT newsletter. After almost forty years of dual citizenship in two single family home CIDs, your feature “Buying A Condo” really applies to all CIDs. -Bob P.
Adrian Adams, Esq.
Adams Kessler PLC
We are friendly lawyers. Call us for your association’s legal needs at (800) 464-2817 or email@example.com.
By Tracey March
At the core, rental owners are in the rental business because they want rental income. If tenants don’t pay their rent, rental owners don’t get paid and they may have to initiate costly and time-consuming evictions.
Property management professionals know that the method used to collect and process monthly rent impacts whether tenants make on-time rent payments. A good rent collection and payment system should meet two requirements. First, it should make it easy for the property owner or manager to collect and track payments. Second, it should make it easy for your tenants to pay their rent. Many rental owners hire property managers because they don’t want to deal with rent collection. If you self-manage your rental home, here are three tips for making your payment system easy and efficient.
Collecting and tracking physical payments like rent checks or cash is a pain. Several web-based services, including APM parter Yapstone RentPayment.com, allow rental owners to collect rent payments online, over the phone, or via direct bank transfers, while keeping their checking account information private. Rent payments can be automated or paid around the clock for guaranteed on-time collection, and they can be paid using mobile phones. RentPayment.com even allows property managers and rental owners to input customized late fees and penalties so they are automatically tallied when appropriate, and to accept application fees and security deposits so leases can be closed without a wait.
2. Insist on receiving one payment for the full amount of rent.
When you have tenants who are roommates, have them choose one amongst them who will be responsible for collecting rent from the others and paying rent to you in one payment. This rent collection policy makes life easier for you because you only have to collect and track one rent payment. It also minimizes your involvement in your tenants’ personal financial situations. In addition, make sure that roommate tenants are jointly and severally liable for the rent, meaning that if one roommate doesn’t come up with his or her share, the others are responsible.
3. Review your rent collection policy with your tenants.
Have a formal, written rent collection policy. At move-in go over it with your tenants, have them sign it, and give them a copy. Consider offering incentives for on-time payment as well as penalties for late payments. Enforcing the policy consistently from the beginning of each tenancy sets a professional tone and lets tenants know your clear expectations about on-time rent payments.
Current landlords and property managers: do you have any rent collection tips?
- Time Constraints People often cite their jobs, families and outside interests as reasons for not wanting to fill a director seat in their community. Board service does take time and the commitment varies depending upon the community type and location. Even many retired people who traditionally made up the majority demographic for volunteer directors are no longer as willing to commit precious spare time to the endeavor of community service. Sometimes all it takes is holding the regular board meetings on the same night as one's favorite TV series to make board service an impossibility.
- Fear: Let's be honest; the press associated with being a condominium or HOA director has not been all pretty. Some would-be directors may fear being seen as the proverbial "condo commando" or may fear that covenant enforcement and delinquent assessment collection will prove confrontational. Some potential candidates for board service also may fear the legal liability associated with the role even with the safeguards of Directors' & Officers coverage in place.
- Philosophy: Some people who are willing to live in a shared ownership community still have a profound distrust and distaste for board service. For these folks, they are just as happy to allow someone else to handle the distasteful job of being the "enforcer".
- Ineligibility: Most of us agree that it is a good idea to set some ground rules about who can serve in a fiduciary position as a community association director. These parameters in Florida have evolved over the years to exclude convicted felons whose civil rights have not been restored, delinquent owners and co-owners. Although the pool of eligible candidates has been narrowed over the years, it is still not narrow enough for some people who would like to see seasonal residents added to the list of folks who cannot serve on the board.
- Hostile Environment: Most people do not enjoy being uncomfortable or upset and they tend to avoid situations where those feelings might occur. Dysfunctional communities who are most in need of a change in leadership are the ones least likely to secure the best candidates for directors since the messy politics has poisoned the pool. It takes a tenacious soul ready to jump into shark-infested waters to make a real change.
A friend called and said his daughter was buying a condo. He asked what she should look for when buying one. Following are my recommendations.
1. Maintenance. Don’t assume the association takes care of everything, it doesn’t. Find out what your maintenance responsibilities are so you can budget for them. Inspect the common areas. If the paint is peeling on buildings, trees are overgrown, lawns are shabby, sidewalks are tilting–roofs and plumbing are probably in a similar condition. Poor maintenance means you can expect stagnant property values and special assessments as water starts infiltrating common areas through roofs, windows, water lines and drain lines–leading to mold and litigation.
2. Reserves. This is an extension of the maintenance issue. Does the association have healthy reserves so it can repair large ticket items? If not, special assessments are inevitable. Reserves in the 70% to 100% funding range are excellent. Reserves below 50% mean probable future special assessments. The lower the reserves, the more imminent the special assessment. If reserves are below 30%, look elsewhere for a condo.
3. Insurance. How much insurance does the association have? If it’s at bare minimum levels, you face a higher risk of a special assessment in the event a claim is filed against the association. Is the development in an area deemed high-risk for an earthquake? If so, does the association carry earthquake insurance? If not, are you prepared to lose your investment in the event of significant damage?
4. Litigation. Ask the seller about litigation over the past ten years. Also ask for the past two years of minutes. A slip and fall lawsuit is not a problem. If the association has had ongoing litigation with members over the past ten years, run for the exit. The association is dysfunctional. There will be no peace until the litigants all move or die.
5. Rentals. Inquire about the percentage of rentals in the development. A high rental population creates problems for rules enforcement, maintenance and oversight of the property. If the rentals are nearing or exceed 15%, you should be cautious. If they exceed 30%, it does not matter how beautiful the condo is, you’re stepping into quicksand. At 50%, the development is in a death spiral.
6. Pets. If they don’t have pet restrictions, is the property a dog patch? If so, barking dogs at all hours of the day and night plus dog doo-doo in the common areas will be a challenge. If they have restrictions, do you have pets that violate those restrictions? If so, are you willing to give up your loved ones for the condo? If your Realtor tells you the rules don’t matter because the association will never discover the violation, get a new Realtor.
7. Parking. Is there sufficient parking in the development? If not, it will create problems for you and your guests. Visit the property on a weekend when everyone is home and see what parking is like.
8. Noise. Ask the seller about plumbing noise, crying babies, TV and stereo sounds, etc. from surrounding units. If there is a unit above yours, ask about noise from hardwood floors. If all the above can be heard through walls and floors, it indicates cheap construction–a harbinger of future maintenance problems. It also means you won’t get any sleep at night.
9. Finances. Ask for a copy of the budget and annual financial statement–and read them. Ask about delinquencies. A delinquency rate above 15% means that higher dues to make up the deficiency are probable. Also ask about past dues increases. If they proudly tell you that dues have not increased for ten years, it means they kept their dues down by deferring maintenance for ten years. It also means large increases and special assessments are looming.
10. Sales Activity. If you see a lot of “For Sale” signs in the association, you better find out why. Like rats fleeing a sinking ship, they might know something your Realtor isn’t telling you.
RECOMMENDATION: It does you no good to sink your last penny into a condo and then lose it the next year when you get hit with a dues increase and large special assessment to cover delinquencies, litigation, artificially low dues and underfunded reserves. Any Realtor can read the MLS and drive you around to look at condominiums. What you need is a Realtor who is knowledgeable of how associations work and respects them. A good Realtor with condo experience will provide invaluable guidance.
There was too much feedback to include it all. Following is a sampling re earthquake insurance and speeding tickets.
Earthquake #1. For the past 27 years we have had earthquake insurance. Our members just voted to discontinue our insurance. California is known for “shake and bake” and I’m keeping my fingers crossed that “the big one” doesn’t hit. I can’t afford a huge assessment. -Ellen M.
Earthquake #2. Just a quick email to let you know your July newsletter was very informative–earthquake insurance is one of those “damned if you do…” issues that every association struggles with in California. Your insight into such issues is very much appreciated. Keep up the good work! -Eric S.
Earthquake #3. Our HOA focused on the cost versus benefit issue. According to our current policy, there would be a $4M deductible for the 95-unit complex which translates into roughly a $40,000 per household assessment. Frankly, if the complex is leveled in an earthquake or even damaged beyond repair, most people will walk away, myself included. This type of costly and ineffective coverage is a joke, but not a very funny one. Honestly, a major earthquake in California would probably bankrupt the insurance companies issuing earthquake coverage and maybe even the reinsurance companies as well. The state fund for earthquake coverage could not begin to cover the costs. And if people think the Federal government is going to step in and write checks, forget about it. At the moment, I can’t think of any intelligent answers to the issue of earthquake coverage. -John A.
RESPONSE: Earthquake insurance is a conundrum. Nobody wants to pay for it until an earthquake hits…then they want to sue the board for not buying it.
Earthquake #4. The California Earthquake Authority (CEA) offers an option in their package for condominium owners: earthquake insurance which is payable IF there is earthquake damage AND the HOA bills all members equally for repairing the damage. Personally, I felt the rates to be very reasonable–and you can continue to use your local insurance agent to obtain the policy (e.g., Farmers, State Farm, All State, etc.) -Richard B.
Speeding Ticket #1. I have a concern for how associations can enforce speed limits on non-invited drivers, public utility service trucks and worst of all, UPS and FedEx delivery trucks. Even when they are called on their driving behavior, with so many different drivers the word doesn’t seem to get around. -Charles J.
RESPONSE: You’re right, UPS and FedEx drivers are difficult to control. Pulling them over and issuing warnings helps. Repeat offenders can be reported to their employer and banned from delivering in the community.
Speeding Ticket #2. Just finished your most recent informative newsletter. I am pretty sure that HOAs in California already write tickets for violations on streets that are privately owned and maintained. I just don’t know if their right to do so has been challenged in any California Courts. But my wife actually got a speeding ticket while driving to our son’s baseball game in Canyon Lake. She was “pulled over” by a blue and white Canyon Lake POA security car, and issued a citation for speeding. She paid a modest $25 fine, or could have challenged the ticket by writing an answer. When she got the ticket we called and were politely informed that Canyon Lake POA has their own posted traffic rules and that violation of them results in traffic citations. -H.B.
RESPONSE: Many large associations issue tickets. But there was always the question whether they could. California has yet to rule on the issue but the Illinois Supreme Court said “yes” and backed it up with sound reasoning. I believe California courts would do the same.
Speeding Ticket #3. Regarding Poris v. Lake Holiday, it fits in neither tort nor criminal law. It would seem you are suggesting a new category, probably feudal law. It is for the legislature to determine whether there should be an expansion of police powers to HOAs. As legally astute minds, I am surprised your office can support and suggest expansion of the holding for this case. -Steve G.
RESPONSE: I’m all-in for feudal law. I’ve already been assured I could have my own fiefdom.
Speeding Ticket #4. As a sworn peace officer in California, I can’t even initiate a vehicle enforcement stop on private property for speeding without the association posting signage at all entrances stating the California Vehicle Code is enforceable on the private property. The last thing we need is a security officer pursuing someone onto public streets. -Mike M.
RESPONSE: Private security officers do not have the authority to enforce state laws nor should they. Instead, associations should adopt and enforce their own traffic rules on their own streets (which was the point of the Illinois case).
Adrian Adams, Esq.
Adams Kessler PLC
We are friendly lawyers. Call us for your association’s legal needs at (800) 464-2817 or firstname.lastname@example.org.
- The association's insurance agent should be contacted to ensure that the association is protected for the actions of volunteers;
- The local police department should be enlisted to teach the Neighborhood Watch program what can and cannot be done legally. Typically, this includes a strict adherence to an "Observe and Report" protocol;
- The volunteers for the Neighborhood Watch should be screened to ensure that they have not had problems in the past with violence;
- Written guidelines should be created specifically outlining the scope of the Neighborhood Watch's authority and the role of each volunteer on the Watch;
- The volunteers should sign releases protecting the association in the event they are injured or killed while undertaking their Neighborhood Watch duties; and
- The association should regularly check on the Neighborhood Watch's activities to ensure that the program is safe and that all volunteers are complying with the protocol.
Although California has not yet addressed whether homeowner associations can ticket persons for speeding on their streets, Illinois has.
Flashing Lights & Tickets. Earlier this year, the Supreme Court of Illinois ruled that associations can (i) stop drivers and issue tickets for violating the association’s traffic rules, (ii) use amber flashing lights on security vehicles, and (iii) not be liable for false imprisonment when pulling over vehicles on their private streets, provided they have a strong and honest suspicion the person violated the association’s rules.
Only Logical. The Illinois court wrote “We can discern no logic in allowing a private homeowners association to construct and maintain private roadways, but not allowing the association to implement and enforce traffic laws on those roadways.” I believe that California courts would (and should) reach a similar decision.
RECOMMENDATION: Based on the court’s discussion and reasoning, associations should:
- Not attempt to enforce the Vehicle Code. Instead, associations should adopt and enforce their own traffic rules.
- Ensure that if their security officers ticket a member’s guest, the member is responsible for the fine not the guest.
- Ensure that if a security officer stops a person who is neither a member nor invitee of a member, a warning is given not a ticket.
To read the decision see Poris v. Lake Holiday POA.
THAT IS THE QUESTION
QUESTION: Several times over the past ten years the board has gone to the membership for a vote on earthquake insurance. Each time it was soundly defeated. The high premiums, high deductibles and low pay-out simply didn’t make sense to the majority. Is the board obligated to set aside the vote and purchase earthquake insurance anyway?
ANSWER: That is a tough question. Unless required by their governing documents, associations are not obligated to buy earthquake insurance. Even so, the better course of action for condominium associations in high-risk areas is to buy earthquake insurance. This is especially true since individual members cannot insure the structure around their units, only the association can.
Fiduciary Duty. When members vote against earthquake insurance, they have no duty to act in the best interest of other members, only in their own best interests. Boards, on the other hand, have a fiduciary duty to make decisions that are in the best interests of the association as a whole. Since earthquakes can be devastating, that would argue in favor of overriding the membership’s vote if the association is located in an area vulnerable to earthquake damage.
Accordingly, boards should consider risk factors such as the location of fault lines, the type of soil the structures are built on (are they vulnerable to liquefaction) and the type of construction in the development (wood frame, steel & concrete, etc.) plus premium costs, deductibles and pay-out levels.
Funding the Insurance. If the board decides to set aside a membership vote, it faces a practical problem–how to fund the insurance. The board can either increase annual dues or impose a special assessment. For most associations the cost of earthquake insurance is more than the 5% special assessment limitation imposed by the Davis-Stirling Act, which effectively eliminates this funding option.
The other option is to increase annual membership dues up to 20% to cover the cost. However, the dues increase only applies to next year’s budget. If the board wants to immediately purchase earthquake insurance, it can bridge the funding gap by borrowing money from reserves and repaying it within one year.
Not Overriding the Vote. If the board chooses not to override the members’ vote, its decision is governed by the Business Judgment Rule, which means directors are not subject to personal liability if their decisions are made in good faith, in the best interests of the association and with such care as an ordinarily prudent person would use.
RECOMMENDATION: Obviously, these are not easy decisions for boards to make. Whichever direction they go, to buy or not to buy, the decision should be well supported in the board’s minutes and explained to the membership.
QUESTION: Our CC&Rs, articles of incorporation and bylaws all state that our annual assessment shall not be less than $20 nor more than $70. What would the interpretation of that be?
ANSWER: Temporary insanity. Either that or the developer and his lawyer were in an alternate universe when they drafted the restriction–one where common areas never need maintenance and inflation does not exist. Fortunately, the California Legislature had a lucid moment when it invalidated all such restrictions. Accordingly, notwithstanding more restrictive limitations placed on associations by their governing documents, boards can annually increase regular assessments by up to 20% without membership approval. (Civ. Code §1366(b).)
RECOMMENDATION: Your assessment limitation is unenforceable. The next time you amend your CC&Rs, you should remove the useless and confusing restriction.
Adrian Adams, Esq.
Adams Kessler PLC
“Legal solutions through knowledge, insight and experience.” We are friendly lawyers. When your association needs legal counsel, call us at (800) 464-2817 or email us at email@example.com.
A California appellate court recently overruled a trial court decision that allowed a homeowners association board to advocate a point of view in an election to amend the association’s governing documents. Wittenberg v. Beachwalk Homeowners Association, which the court certified for publication on June 26, 2013, addressed whether the Davis-Stirling Act provisions that expressly apply to “any candidate or member advocating a point of view,” applied to the association acting through its board of directors.
The court specifically looked at two sections of the Davis-Stirling Act, which require associations to adopt rules to ensure equal access in elections. Section 1363.03(a)(1) ensures that once a member advocating for one point of view in an election receives media access (association media, newsletters, website), members advocating the counterpoint receive equal access to the media for election related matters. Additionally, Section 1363.03(a)(2) provides that all members, regardless of their point of view, must receive free access to all existing common areas for election-related matters.
During the course of three elections to amend the association’s governing documents, the board used cover letters, attachments to the ballots, newsletters, community bulletin board posts, and the association’s website to urge members to pass the proposed amendment. The board denied members opposing the amendment access to these media and denied access to the association’s common areas for opposition gatherings. The board finally passed the amendment after the third attempt.
In overruling the lower court, the appellate court held that “board members are treated as any other member for the purpose” of the equal access provisions of the Davis-Stirling Act. The court found that, “[h]aving engaged in advocacy, under subdivision (a)(1) the association was bound to permit other members equal access to association media.” Note that rather than void the election, the court simply reversed the trial court’s decision, leaving it up to the trial court whether to void the election.
It seems obvious in the context of an election on a proposed amendment to an association’s governing documents that the board is in favor of the proposed amendment or else the board would not have proposed it for member approval; it would seem strange if a board could not explain the reasons for proposing the amendment. So one could certainly argue a board should be able to provide its rationale for proposing an amendment. On the other hand, it is hard to argue that all members should not have equal access to present differing points of view, especially when the board goes beyond simply providing its rationale for the proposal and uses other association media resources for its advocacy efforts.
While it may still be possible for a board to provide some information to members without “advocating a point of view,” this case serves as a warning to homeowners associations. The bottom line is that if the board of an association wants to advocate for a result “in the midst of an election,” the board must be very careful when providing information to members or should be prepared to allow the same access to all of its members. When an association seeks to amend its governing documents or encounters a potential equal access issue during an election, the board should consider consulting legal counsel to avoid unnecessary litigation or a potentially voided election.
Note: All sections cited in the case, Civil Code sections 1363.03(a)(1)–(2) and 1363.09(a), will become sections 5105(a)(1)–(2) and 5145(a) in the reorganized Davis-Stirling Act on January 1, 2014. The language in the new code sections is the same as the previous sections and has no substantive effect on the ruling of this case.
Nathan R. McGuire is a principal with Neumiller & Beardslee and chair of the firm’s Community Association Law Group. He is an at-large delegate to CLAC in the Bay Area & Central Chapter and serves as one of CLAC’s legislative co-chairs.
Adrian Adams, one of the attorneys involved in this case, has 30 days to file a petition, and would like thoughts from other HOA attorneys on why the Court should review this case, i.e., how the appellate decision will harm HOAs, residents and boards, and how it creates conflicts with other statutory provisions and duties under Davis-Stirling, the Corp. Code, etc. Since time is of the essence, please send feedback at your earliest convenience to firstname.lastname@example.org.
To read the briefs filed in the case and the court’s decision, go to https://www.dropbox.com/sh/i74vsnep777s82v/8fQ5IlndHs If you have any trouble downloading the briefs, let Adrian Adams know.
Given the losses we've already suffered over the last few decades and the likelihood that these will continue or even escalate, perhaps it is time to roll up our sleeves and finally make a national catastrophe policy a reality?
By Tracey March
If you want to minimize the risk in your property investment business, you should understand that a key to your success isn’t just buying the right investment property–it’s finding the right property management–whether that’s you, or someone you hire. And a critical component of property management is finding the right tenant for your real estate investment property, which means tenant screening should be at the top of your priority list. Here are five things you can do to ensure that your tenant screening process helps you identify the best tenants and weed out the bad ones.
1. Let applicants know that tenant screening is mandatory. Just hearing the words “screening process” will make some potentially bad renters self-filter and save you time.
2. Use your tenant screening process consistently. A systematic and comprehensive screening process that you apply objectively to every applicant will protect you if someone claims you violated the Fair Housing Act. It will also help you to screen out bad renters.
3. Decide what your minimum qualifications will be, and stick to them. Will you have income requirements so you have some assurance that your tenants can make their rental payments? Will you accept tenants with criminal records? What if they haven’t had any arrests for more than ten years and a steady job? Think about these issues, make a decision, and apply them consistently.
4. Run a credit check. Credit checks are critical. You can find out applicants’ debt-to-income ratios and whether they pay their bills on time. Learn how to read a credit report. And never accept a credit report that a potential renter brings to you; get them directly from a credit reporting company.
5. Check references. Always call present and past landlords. A present landlord may give a good reference to get rid of a bad tenant; a past landlord may be more forthcoming. Ask about evictions, complaints from other tenants, pets, major maintenance issues, if rent was paid on time, and if the landlord would rent to the tenant again. Also consider getting and checking employment and personal references.
If you don’t have the time or the desire to do tenant screening, don’t cut corners–consider hiring a property manager to help you. Alternatively, All Property Management has partnered with leading businesses, including TransUnion, to offer services to our clients. TransUnion offers a tenant screening service called MySmartMove that provides credit and criminal records checks, leasing recommendations, and suggested deposit amounts to independent property managers and residential real estate investors.
Have you screened tenants before? What methods did you use? Have you used social media sites, such as Facebook and Twitter. Do you think that’s a good idea?