Posts Tagged ‘Tenants’

Best Practices For Late Fees and Notices

Tuesday, August 17th, 2010

At the beginning of every month we are prepared to deal with the tenant who, for all kinds of reasons, is not going to make their payment on time.  All of our leases are structured with a five day grace period.  After day five, the late fee in the lease is applied.  From that point on we have standard procedures to follow that are only handled differently if an owner chooses.  Occasionally, an owner take mercy on a tenant and considers special circumstances.  We discourage this as it tends to become habitual.  We also request any tenant who believes a late fee should be waived to submit this request in writing for us to forward to the owner.  Unless approved, on the 6th of the month, all tenant accounts that have not been paid register a late fee and a first notice is sent via email to the tenant.

From this point on we are in pre-eviction mode.   Once in a while when a tenant who has never been late is late, and we think there may be an issue unrelated to finances, we may give a courtesy call as well to serve as a reminder.  The late fee is still accrued but this provides them a chance to settle quickly before we move into posting for eviction. 

Our schedule of notices is as follows: 

  • Rent is DUE on or before the first of each month; and late if received after the close of business on the 1st
  • Late Fees per the contract are automatically added to the tenant’s account on the 6th.  All tenants receive an email notice when this charge is posted.
  • A current statement is available on the Tenant’s web site showing the amount owed.  This is explained to all tenants and is available until the end of the lease or the Tenant is evicted.
  • Pay or Quit notices are posted around the 10th day (depending on Holidays/Weekends)
  • Eviction is filed around the 15th (Evictions can be stopped at any time up to the hearing and order from the court)

 We stress to all tenants that just because there is a grace period  for Late Charges to accrue - the rent is still DUE on the first of the month.  Therefore, it becomes “Late” if paid after the first (which is why we are owed a LATE charge is it is allowed to stay late for five days).

One other issue is tenants who “short pay” or do not pay the full lease amount.  They too are considered late as the balance was not paid in full.  All the above rules and time lines also apply.  If an owner chooses to accept something different, we will follow their direction.  Short pays still accrue full late fees and the probability of an eviction notice.

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Posted in Eviction, Late Rent, Owners, Procedures, Property Manager, Tenants | No Comments »

Family Dinner Time, Your Phone Rings..Do You Take The Call?

Friday, July 23rd, 2010

After months of getting your investment property prepared, the first call comes right as you sit down with your family for dinner.  You are not sure who is calling, but from now on every unrecognized number may be a tenant…a source of revenue to offset the payment and expenses you have incurred.

You ask your family to excuse you as you slip off into another room.  Sure enough, it is somebody calling to find out about the three bedroom home for rent.  As your heart skips a beat, you describe all the personal touches, along with the not so personal touches.  All the fresh paint, and efficient windows, and the extra storage.  The caller sounds nice enough and now they ask if they can see the property!

“This is going to be easy” that little voice in your head tells you.  The caller says they are free after work tomorrow.  You say great, forgetting for the moment that tomorrow is Jimmy’s playoff soccer game.  Remember, you need to get this home rented.   After confirming the time, you hang up and realize that you do not have the caller’s number.  Maybe it is on caller ID…but no…they must have used a blocked number.  You return to dinner as the table is being cleared.

That night your wife reminds you about Jimmy’s soccer game tomorrow night.  Immediately, you realize the conflict and wonder how you can find these callers to reschedule.  That fails, so you hope your best buddy can show it to them tomorrow.  He has plans.  So, you are stuck.  Maybe a quick showing and race across town and still catch the second half.  

The thought hits you, maybe you really should have budgeted for help with this hobby.

The showing time arrives.  You bring two rental applications found on line..just in case.  Not sure how you will get the background checks or credit pulled but you  will figure that out once you have the applications completed. 

 At the agreed time…no prospective tenant.  Fifteen minutes late, they pull up in a 20 year old van falling apart and very dirty.  It is exhuming exhaust.  The prospects both grind out their cigarettes on the driveway as they get out.   Both possible tenants begin to unload children from the rear.  First one, then two, then three and finally four and five.  Lets see, 7 occupants in a 3 bedroom 1000 square foot home.   Your heart sinks a little.

You show off your pride and joy and learn that there are some mysterious circumstances about where these people currently live.  A reference to how nice it will be to actually live in a home instead of the van by one of the kids catches your attention.  At that moment, you decide to ask what they do for a living.   One is unemployed..the other just got a job after months of unemployment.  The job involves selling magazines and appears to not really be as an employee but as a contractor.

Of course, they love the house and request the applications.  You hand them out and ask them to fax or email them back as you really need to run.  They do not have fax or email and want to fill them out now.  You are screwed.  Jimmy scores the winning goal..you miss it.  You waste an hour with a family that you are not even sure how to screen to officially reject.

Why is it again that you are doing this yourself?

Mistakes you learn by and the next time you will be smarter.  No answering the phone during dinner…but what if?  More pre-screening on the phone…but what if they call during dinner and you are in a hurry?  At least get a phone number…that one you can do every time!  How many more summer evenings meeting tenants before you find one?  Then, won’t it be fun to increase the return on this hobby by being there to service the leaky faucets and the oven that does not work on Thanksgiving?  Oh, and collect late fees when rent is late.

Leasing and property management sure sounds like fun when you have a life and a career..doesn’t it?  Most people actually have to enjoy experiences like this to decide that they understand why management and leasing companies exist. 

Save yourself the headaches.

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Posted in Best Practices, Owners, Qualifications, Rent Preparation, Responsibilities, Screening, Selecting A Manager, Tenants, Uncategorized | No Comments »

What Happens To The Security Deposit When Changing Property Managers?

Wednesday, July 7th, 2010

Recently, one of our owners lost their investment property (that we were managing) to foreclosure.  In the new day we currently live in, this change in ownership (from individual to bank) will mean little to the tenant.  Unlike just two years ago, the banks are honoring leases under the Protecting Tenants In Foreclosure law passed in 2009. 

Where a bank is not traditionally handling property management, they have had to go out and find companies to handle this task for them.  Unfortunately, the banks have chosen to handle tenants and management the same way they handle property services…wholesale.  The banks are hiring large companies to serve the property management function.  These “wholesalers” are providing nothing more than a back room and a local person with little or no property management experience.  Without going into too much more depth as to the ramifications of this approach, having an inexperienced field person working the transition of a property to a new manager created some issues when it came to the handling of the security deposit.

This issue is relevant to both a tenant and owner.  We hold every dollar of deposits in state regulated escrow accounts.  This money belongs to the tenant unless they violate their lease in a way that creates a need to reimburse the owner.  So, just because Wells Fargo is knocking at the door demanding we hand over the security deposit, we don’t just write a check.

Likewise, if you, as an owner, are transferring property managers, we expect all parties to handle their fiduciary responsibilities as to the security deposit in a manner that honors the tenant’s interests.  Tenants have the right to be made aware that a property manager is changing.  The correct way to handle a change in managers is to:

Utilize a letter explaining the transition.  This letter should be generated by the new property manager and ideally also signed by the owner and tenant.

Issue a check for the security deposit to both the tenant and the new property manager. 

We will usually take this check to the tenant for endorsement with the letter.  In this way we are able to introduce ourselves as the new manager, answer any questions, and have a written record of receipt of the transfer letter and endorsement of the security deposit funds into our escrow account.

Needless to say, the field person hired by the wholesale property management company hired by the bank had no connection to any procedures like this.  Basically, stating that they had the full power of the US government supporting their actions, they insisted that we hand over our lease and write them a check for the security deposit.  The resulting conflict took a few days and a call with the wholesale property manager.  We gave them a check made payable to the wholesale manager and the tenant.  I wonder what happened after that?

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Posted in Best Practices, Owners, Procedures, Property Manager, Responsibilities, Security Deposits, Tenants | No Comments »