Are You Liable for a Vacation Renter’s Illegal Activity on Your Property?

Are You Liable for a Vacation Renter’s Illegal Activity on Your Property?

I was recently speaking to a host of a vacation rental property and he had several questions about their liability as it pertains to the people they rent their place to. The main one being that if they would rent to a sex offender and the neighbors were to find out what is their liability, or worse yet, what would happen if the renter committed a crime on their property or in their community?. What are the responsibilities of an owner of a property in vetting out a tenant? Especially in the many states that do not differentiate between the percentage of responsibility vs. the percentage of liability. Common sense would dictate that an owner may be liable for them especially if they rented their home to a criminal or sexual predator and something were to happen; although, after a quick internet search I really couldn’t find a bunch of cases regarding this issue.

I do believe that having as much information on someone you are renting too is extremely prudent and many of the short term (vacation) rental sites make it all but impossible to run a background check because they do not publish the parties’ full identities in order to prevent the parties from going around their back to make deals out their control.

We as property / home owners that utilize these short term rental sites have a responsibility to our community, friends and neighbors and one bad tenant that creates a lawsuit for you can easily erase months or years of your investment income. In doing some research you will find that more often than not there are no issues with short term renters but if you are unfortunate enough to find one that does it can be a nightmare, a nightmare they may have been found with a simple $30 background check.

10 Questions a Landlord Should Ask When Interviewing Management Companies

Finding a reputable property management company can be quite daunting as it is difficult to really know how well the company is run. We have put together a list of items you should ask when interviewing a potential property management company.

1. How long have they been in business?

You want to associate yourself with an established company, as this speaks to a company’s length of service in the community.

2. Do they manage other assets in your area?

A property management company should have a presence in your local area, managing properties that are in the same asset class as your property. For example, if you own an apartment building in West LA, you should look for companies that manage apartments in West LA. The properties they manage may be available on the webpage, if not, ask this question while interviewing them in your initial conversation over the phone.

3. Are they carrying the proper insurance coverages?

The company should at a minimum carry general liability and workers compensation for their business. In addition, it is always wise to look for a company that also carries Errors and Omissions insurance.

4. Do they have their own experienced maintenance team or do they have to hire maintenance companies?

Many times smaller property management companies will outsource their maintenance. In addition to asking if there is an additional service charge for this, also ask how the management company vets their vendors (do all of their vendors carry liability insurance, are licensed, and have workers compensation insurance).

5. Do they have emergency services?

The ability for a property management company to handle every property incident, particularly emergencies, is crucial. At any time, day or night, a property manager must be equipped to handle emergencies that occur on your property. Communication is key in any tenant / landlord- management relationship – a toll-free number that is answered by a human 24/7 should be a mandatory service provided by any reputable management company.

6. What kind of reporting do they offer the property owner?

Are the reports sent monthly, or do the owners have online access? If the management company offers online access to the monthly reports, do they charge extra for this?

7. How do they set up the bank accounts for your property and will you have access?

Is there one trust account, or do they offer individual property accounts for each of their clients?

8. How often will they visit your property?

You want to make sure your property maintains its great shape. A world-class management company will ensure the grass is being cut, maintenance requests are fulfilled, and property regulations are followed. Visiting the property on a regular basis will ensure all maintenance work has been completed to the highest quality, as well as check to see that any other issues are addressed.

9. How detailed is their tenant screening process?

A reputable management company should thoroughly screen their prospective tenants, running a background and credit check, as well as looking for any prior violations committed on other apartment properties, available with Incident Reporting from providers such as theRRD.

10. Do they keep up to date with current laws?

Different municipalities have different laws related to rental units. Are they familiar with the laws, do they update their information/forms to comply with these laws, and are they up to date on any changes in the labor laws?

10 Questions a Landlord Should Ask When Interviewing Management Companies

Key Mistakes Property Management Companies Make and How to Fix Them

We speak to property management companies across the country daily so it allows us the opportunity to ask how they are handling their operations and then relay some of their ideas on to you. I recently asked a few companies what they have seen as some key mistakes that they have made.

1. Not Charging An Application Fee – Everyone will apply if you are not charging a fee. Also, your screening company charges to qualify your prospective tenant, so it’s appropriate that they pay for this cost through their application fee. Additionally, when you charge the fee you only get serious potential residents and you get paid for your time and effort.

2. Not Running Credit and Background Checks – Running credit and background checks helps identify the best tenants for your community by showing accurate credit, criminal, and eviction reports. There are situations that can cause credit issues (i.e. stolen identity) so please be sure to have them give an explanation prior to discarding their file.

3. Not Getting The Full Deposit Before They Move In – If they can’t afford it before they move in, then they most likely won’t be able to pay once they are moved in.

4. Choosing the Wrong Tenant – Be sure the person you decide on can afford the rent payment, a good rule of thumb is the rent should be about 30-40% of their income.

5. Not Maintaining a Stern Stance on Late Fees – Once you give up on collecting the late fee, you will find that more often than not, the late payments will only get worse. Typically the ones you let off the hook will speak to other residents and they too will begin making late payments.

6. Not Walking Your Property – Be sure to inspect the property before you rent it and we recommend walking the unit with the new resident the day they move in and make notes of any issues with the property.

7. Not Communicating With Your Residents – Keep your residents informed of anything happening on your property and try to talk to everyone if possible, let them know you and your team.

These simple steps can save you a lot of extra effort with new residents and set your investment off on the right foot to get you the best ROI possible.

Key Mistakes Property Management Companies Make and How to Fix Them

Warning Signs to Look For in a Tenant Screening Report

Most property managers and landlords understand why it is critical to run a tenant screening report, determining a potential tenant’s credit is only part of the process though, as a credit report only shows the likelihood of a tenant paying their rent on time, it does not really give a clear picture of whether the prospect will be a good tenant. Running a full package with credit and background check is a must if you want to get the full picture of the potential tenant. All Landlords/managers have their parameters of what type of tenant they are looking for, below are a few warning signs to be aware of before you execute a lease.

1. Payment History

Late payments are a HUGE red flag – be sure to see if they have a track record of late payments or if there was a short amount of time they had an issue and if there was only a short time of late payments be sure to find out why.

2. Financial Stability

You should look out to see if they have a history of on-time payments, as well as if they have applied for a large amount of credit lately. Also, be aware of the amount of debt they currently have and how much of their total credit has been tapped.

Not all debt is the same so be sure to evaluate the type of debt depending on the source you received the information from.

3. Bankruptcy

A Landlord/Manager obviously does not like to see a bankruptcy but if it has been discharged you may be ok with looking at their more recent credit history and how they have performed in rebuilding their credit.

4. Judgements

If you find a judgement from a previous Landlord/Manager it may be wise to discuss with them as well as the potential tenant about what happened before you make your decision.

5. Criminal Convictions

While a past criminal record should not necessarily limit anyone from housing be sure to see detailed information about the previous incident(s). You as a landlord/manager have a responsibility to the rest of your tenants as well as your property. Always confirm the report includes the at least a national database as well as a sex offender database.

6. Previous Rental History

Try to verify an applicant’s previous rental history by calling their last two landlords and checking a rental history database. Be wary of a current landlord reference, as some landlords may paint a prettier picture to get rid of a problematic tenant. Lastly, when calling the landlord, ask them details of their rent, when they moved in, how much they are paying etc… all the details should match what is on the application, or you may not be talking to the real landlord.

Conclusion

There will always be some risk in choosing a tenant to live in your property, but by having the applicant’s credit, criminal and eviction history you will be able to make a much more informed decision since you will be able to evaluate the risk a lot better. There is always the option to negotiate the lease amount or security deposits according to their credit information, larger deposit or higher rents may be something to consider as you negotiate.

Evictions Due to the Holidays

Many property owners/managers are struggling with the fact that during the holidays many tenants held back on paying their rent so they have extra money to buy gifts for their family, which in turn makes for a tough decision for the owner/manager. When an owner/manager is faced with a situation like this they have a few options, start an eviction (which nobody wants) or work out a payment plan with the tenant, most opt to work it out with the tenant and let them catch up but some do go ahead with an eviction as they feel the tenant will just do it again next year or others may follow in their footsteps.

I wanted to put together a list of options that may help alleviate any of these problems for the 2017 holidays.

• Have them add a little extra to each month’s rent so when the holidays roll around they are ahead of the game.

• Work out a plan where the holiday month is added to the end of their lease.

• Work out a payment plan over two or three months after the holidays, but be sure to add interest (reasonable).

We all know that evictions are a time consuming and costly expense, so a proactive approach may make 2017 even more joyous.