Property Management Blog - Tips, Articles and Advice from RentingYourHome.com

House Resolution H.R. 7126, proposed in September by Congressman Bill Richardson, would put a few new restrictions on landlords buying or selling homes in foreclosure.

Among the provisions are:

1. Landlord must notify the tenant that the property is going into foreclosure.
2. Tenant retains right to serve out the rest of their lease, even if that extends beyond the foreclosure date.
3. It also appears that the tenant cannot be evicted for a 6-month period beginning upon the foreclosure of the mortgage.

What does this mean for you? So far, it looks like Congress is putting reasonable restrictions on landlords who face foreclosure. If you're looking to buy up foreclosures to add to the number of rentals you own, this bill would require that you keep the existing tenants, which may not be such a bad thing.

Most foreclosed homes haven't gotten "tender love and care" in a while and need your cash for improvements. By retaining the old tenants but putting money into improvements, tenants see their homes getting better. This is a good way to retain good tenants. It's also a good justification to bump up the rents to market value if they leave.

So far, the bill is stuck in the House. But I'll keep an eye out.

I spent half the morning in the Somerville, MA small claims court, suing a broker who'd decided not to pay his debts. I'm not a court newbie, but I don't find myself there often and I was reminded again how much of small claims court proceedings (and life too) is just about showing up. About 75% of the cases were concluded on the spot, with no discussion, in favor of the one side that showed up. My guy didn't show and we chalked up another "win" for our side.

As a landlord, we often get caught up in "he-said, she-said" arguments over rent payments, damage to the property, and security deposits. The great thing about small claims court is that it's simple, you don't need a lawyer, filing fees are around $40, and most of the time the other side doesn't show and you win. Claims are capped at an amount that varies by state but usually around $2,000-$5,000, which is enough to cover most landlord disagreements.

I'm also a big fan of the "multiple fronts" theory of debt collection. Not only do we employ a professional debt collection company as soon as a debt is 30 days+ old, I'll file in small claims court, AND pursue an eviction if that's applicable. This gets the issue immediately reported on their credit reports (debt collection company), and gives you multiple chances to win in court–either money in small claims court, or them out of the property so you can stop housing them rent-free. Most of the time, bringing the full force against a tenant enables you to negotiate a settlement, e.g. "Tell you what, you owe me $1,000 but if you give me $250 and move out by next week, I'll drop the whole thing."

If you've never been to small claims court, I'd recommend you spend a half day there. Same for housing court. No question that it's a dreadful experience. But, you get a great sense of the process, how few people show up to their own court dates, and what kinds of excuses the judges hear every single day. Nobody likes to end up in court but it's best to be prepared.

Checklists are used to establish a baseline of damage to a rental. When the tenant moves out, damage is again assessed on the same checklist to determine what, if anything, changes exist that need to be repaired or replaced. Landlords use move-in checklists both to monitor the condition of the home, and to fairly assign damage expenses to tenants.

Typically, a tenant has 7 days after move-in to fill out a checklist and return it to you in order to document any damage to the rental, but each state has specific timelines. Make sure the tenant signs a copy of the checklist and retain it for your records until after move-out. If you do not use a move-in checklist, it becomes very difficult to validate in court whether a tenant was responsible for any specific damage to the rental, since there would be no documented baseline. Taking video or still photos of the rental both before and afterwards is also a great idea to protect your interests.

Here's a typical courtroom scenario where there is NO checklist:

Judge: Mr. Tenant, did you punch a hole in the wall?

Tenant: No Sir. I've never caused any damage. I don't even have fists to punch with!

Judge: Mr./Ms. Landlord what evidence do you have that the tenant committed this specific damage?

Landlord: Um…I remember what it looked like before…

Judge: Do you have any proof?

Landlord: Nope. Just what I remember.

Judge: Well, you've shown no proof that the tenant caused any damage. Case dismissed in favor of the Tenant.

Or, if you have a checklist, video and still photos:

Judge: Mr. Tenant, did you punch a hole in the wall?

Tenant: No Sir. I've never caused any damage. I don't even have fists to punch with!

Judge: Mr./Ms. Landlord what evidence do you have that the tenant committed this specific damage?

Landlord: Well, here's a video of that same room prior to the tenant's moving in. You can see the room is freshly painted and there are no holes in the wall. Here's a copy of the move-in checklist where the tenant certifies there is no damage; please note the checkbox next to "Walls = No problems / Great Shape". And, Your Honor, the tenant's hand is in a cast.

Judge: Case decided in favor of the landlord.

This article in the NY Times today reminds me that zoning laws can change in a heartbeat and, when they do, they can have a dramatic impact on a landlord.

To the extent that it's possible, if you're a gung-ho landlord, you may consider signing up for RSS feeds or newsletters that will inform you of proposed zoning law changes. They typically have pre-decision hearings where landlords can plead their case.

Tough luck for these folks.