There are a wide variety of legal issues that affect rental properties and even more that can affect properties managed by a third party. Property managers often find themselves in a difficult situation: stuck between the property owner and the tenant. As such, they have to balance the demands of both parties while keeping their operation ethical, profitable, and running smoothly.
Not surprisingly, a study from a few years ago shows that the top legal issues for property managers were tenant-related: debt collection, frivolous lawsuits, and wrongful termination. But other problems can also arise, as in the case of conflicts with the property owner and head butting with city and state officials concerning ordinances and zoning changes.
Below are a few of the most popular issues we’ve encountered and how you can deal with them:
Sixty-nine percent of the respondents in the above survey called debt collection a very serious issue. Getting money from delinquent tenants can be a huge hassle—and costly in and of itself! There comes a point where many property managers are tempted to let the debt slide, but that’s just not advisable.
Much like you see in old mob movies, if you let one renter get away with it, you’ll likely have another who wants to get away with it, too. If you can’t persuade your tenant (or hopefully previous tenant) to give you the money you’re owed by playing nice—certified letters, documented and witnessed personal visits—a collections agency can sometimes be your best friend.
Collections can be costly, though, and often property managers often opt to go through small claims court. It may seem like a pain to hire a lawyer (if you haven’t got one on retainer) and go through the court system, but if you can’t convince your tenants to cough up the cash of their own free will, you’re going to need a little legal help.
Many debt collection disputes either start because of or are exacerbated by violations (or perceived violations) of a tenant’s rights. While you may manage the property in which they’re living or have placed their business, they have certain rights that are inviolate. These can be things from the right to 24 hours’ notice before an inspection/visit, to a limitation on rent increases.
For a complete list of state regulations that might apply to your tenants, visit the U.S. Department of Housing and Urban Development’s website.
When it comes time to give your tenants the boot, be sure that you follow the law to the letter in order to avoid lawsuits. Specifically, landlords must first terminate the tenancy through written notice, give tenants a set period for moving out, and monitor the situation without harassing the individual. If tenants still don’t quit the premises, you can file an unlawful detainer lawsuit in which the courts will legally evict them for you.
As the property manager, you have the legal right to terminate a tenancy for a variety of reasons, which vary by state but may include the failure to pay rent, violations of the terms of tenancy, or possibly even turning the property into a “house of ill fame.” Be sure to check with your legal counsel to ensure that you’re within your rights before beginning the process.
If you’re the property manager, the owners are your bosses. Dealing with them can be difficult at times because you’re juggling relationships with them as well as your tenants.
In fact, Jenn Danko (writing for Lowes Professional services) says that the number one complaint filed by owners against PMs relates to an assumption that property managers are making inspections of the rental property when they really aren’t. Avoid liability lawsuits: never make any assumption or assurances that you know what the tenant is doing with the property unless you’re ready to go to court over it.
City legislation is just as convoluted as it is in the United States Senate—just on a smaller scale. Ordinances and regulations pertaining to property usage change all the time. While the city does have a certain duty to inform property owners and managers of the changes, those notices may occur in the form of a public announcement in the local newspaper, making them easy to miss.
In order to stay on the right side of the local law, it’s a good idea to keep abreast of issues in your town or city that will affect you. Attend meetings, speak with the planning board and zoning commission, and keep an eye on communication from the Department of Buildings (or similar local agencies). It’s a necessary part of your job to know how various ordinances will affect your role as property manager.
And if one of these changes does affect you, the easiest route is to roll with it. If an ordinance or building code changes, you can opt to accept the change and get your properties up to par. Alternatively, you can file a grievance or start a petition in order to get the city council or other involved bodies to reconsider the issue at hand.
It’s often much easier to influence these types of things before they’re enacted, which is why attending public hearings and council meetings in advance is the better option.
As always, the best way to protect yourself from potential legal entanglements is to seek the help of a qualified legal professional (not necessarily just a friend “in-the-know”) before anything happens. Property management attorneys – including those that work with UpCounsel – specialize in the complex tenant-manager-owner relationships, and can give you advice on how to proceed with sticky situations to avoid complications down the road. Post a job today to get the help you need!