The post How Do Landlords Address Winter Maintenance During COVID-19? appeared first on Avail.
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With many tenants working from home due to COVID-19, and even a change in landlord rental property incomes, the time and money that landlords have available to make necessary repairs to their units are limited.
Still, as winter nears, there are numerous maintenance projects that need to be carried out. Here’s what winter maintenance can’t be skipped this year, what projects you may be able to put off, and what precautions every landlord should take while they’re addressing winter maintenance during COVID-19.
Follow This Winter Maintenance Checklist for Your Rental Property
While there are maintenance issues that can be put off because of COVID-19 concerns, some projects need to be taken care of regardless — especially those that pop up seasonally as the weather gets colder.
As a rule of thumb, any maintenance that impacts tenant safety and property habitability, that could cause long-term damages to the property, or that could become an additional expense for the landlord if not addressed are all essential to deal with as soon as possible. Examples of maintenance issues that could infringe on a tenants’s safety, such as heater maintenance or repairs, are essential and cannot be put off until later — even if a tenant has not paid their rent.
“I like to service a furnace twice per year as to not invalidate any manufacturing warranties if they are newer systems,” said Jonathan Faccone, managing member and founder of Halo Homebuyers in New Jersey. “Not only is this a good proactive maintenance schedule to ensure the longevity of your systems, but it is good business practice for your tenants to show that you care for their comfort.”
And as you make necessary repairs or maintenance to a property, be sure to remind tenants of winter tasks they are responsible for — like keeping the thermostat at a certain temperature even when they’re away to avoid freezing pipes — or if and when services like snow removal are provided.
Winter Maintenance That Can Be Put off During COVID-19
Before you decide something can be put off, make sure it’s not going to affect tenant habitability or your bottom line. But if it’s not urgent or essential, you can let your tenants know that you won’t be addressing minor repairs during COVID-19.
“Things like a loose doorknob, windows that stick, or a stove where all burners might not be operational were put off,” said Gary Zaremba, broker and owner at PepZee Realty in Dayton, Ohio, about the non-urgent maintenance needs in his rental properties.
Other landlords have chosen to leave the urgency of repairs up to their tenants. “For items that are less pressing, we generally leave it up to the tenants,” said James Watson, co-owner of Omaha Homes For Cash. “If a tenant notifies us of an issue, chances are they want it fixed.”
Still, keep in mind that if you do plan on putting off any maintenance, you might want to evaluate long-term costs or the cost of other related damages that could result after ignoring the issue.
“None of it costs much money,” said Glen DellaValle, founder and owner of DellaValle Management, Inc., a Lexington, Kentucky-based property management firm, of maintenance projects. “You are talking about $4 for a tube of caulk, a few dollars for smoke detector batteries, $4 for a furnace filter — versus the hundreds or thousands of dollars that you’ll lose by seeping heat, not optimizing hot water, or having a fire.”
Maintenance Precautions All Landlords Should Take During COVID-19
In addition to general building precautions, landlords should take extra COVID-safe measures to ensure everyone’s wellbeing if they enter a unit for maintenance, including:
- Wear a mask and ask your tenants to wear one, too.
- Communicate all upcoming maintenance to your tenants, address any concerns, and schedule repairs at a time that they can leave the unit, if necessary.
- Sanitize all surfaces that are touched.
- If hiring a contractor, communicate with both the contractor and tenant to make sure all the above safety protocols are followed.
Ensure Safe and Simple Maintenance During COVID-19
To maintain rental property maintenance while protecting yourself and your tenants during COVID-19, use an online maintenance tracking tool. Tenants can report maintenance issues and upload photos so you don’t need to go see the property in person, and you can provide updates to tenants via direct message as you assess the urgency of the repair.
Learn more about maintenance tracking with Avail and keep a general preventative maintenance checklist handy for all of your rental properties.
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]]>The post 6 Real Estate Investors Share Their 2021 Strategies appeared first on Avail.
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A global pandemic shaped the real estate market in 2020, causing more foreclosures, evictions, and government relief in order to keep landlords, renters, and homeowners afloat. Now investors are looking to 2021 to see if they should keep expanding their portfolio or wait it out.
Knowing that interest rates are low, but rent collection rates are also much lower than this time last year, many are asking: What’s the best course of action? We reached out to several real estate investors around the country to find out what’s driving their investing strategies for next year.
Investment Strategy for 2021
“To purchase 1 to 2 investment properties — single-family homes with lots large enough to add 2 Accessory Dwelling Units and rent out all 3 units in a residential coastal neighborhood in San Diego,” Olsen said of her investment strategy for the coming year.
“In 2020, the California governor passed multiple bills that make it easier to build an ADU. An investor does not have to live on the property which was a significant shift from previous laws.”
For Olsen, this means that her and her husband are able to invest in more real estate without having to relocate themselves.
Thoughts on the 2021 Real Estate Market
“I feel positive and think that people will continually move to more residential single-family properties,” Olsen said. Because of COVID-19, the U.S. saw renters moving from apartments and properties in cities to more residential homes, equipped with the necessary space to work from home.
“The real estate boom in San Diego specifically was due to families moving out of bigger cities like Los Angeles and San Francisco looking for more space, especially outdoor space. I believe this will continue as companies recognize that employees are capable of working remotely,” Olsen said.
She believes that this trend will continue even after a vaccine is widely distributed, saying that, “even as life progresses and goes back to a “new” normal eventually, I believe the shift to multigenerational housing will stay due to both the California housing crisis and people’s values focused more on family and what is truly important to them.”
Portfolio: Adding To, Holding Steady, or Cashing Out
“We plan to add 1-2 properties to our portfolio. We only have 2 units on one property and have been waiting for the right opportunity,” Olsen explained, mentioning the competitive nature of investing even during a pandemic. Many investors are noticing the opportunities that lie with ADUs, which is showing with the amount of bids placed on a single property. “It’s still a sellers’ market,” she said.
Investment Strategy for 2021
“Our strategy for investing in 2021 is to buy off-market single-family investment properties in markets where we can get a 12% gross rental yield (1% rule) — meaning a $100,000 home rents for $1,000 a month — with a growing population and a median home price below $200,000,” Frank and Katy said. Their strategy? “We purchase them for 70% below market value, fix them up, and lease them as long-term holds.”
Thoughts on the 2021 Real Estate Market
“We’re very confident in single-family housing since that’s what everyone wants with COVID, and with all the government money printing/spending you’re going to see a devaluation of the dollar and a rise in asset prices,” Frank and Katy said of their expectations for next year. “Interest rates are also at rock bottom prices with the Federal Reserve intervention into the markets,” which means investors will have less of a financial strain when purchasing more properties for their portfolios.
Portfolio: Adding To, Holding Steady, or Cashing Out
Frank and Katy also plan to continue adding to their portfolio as they see the investing possibilities created by the COVID-19 pandemic. “We will be adding steadily to pick up as many properties as possible, likely from homeowners who are struggling given the COVID economic situation and expiring unemployment benefits.”
Investment Strategy for 2021
“Assuming the real estate market continues on its current trajectory of low inventory, low-interest rates, and a trend towards suburban migration, we will continue to look for opportunities in newly developing and newly growing suburbs and opportunities in overlooked commercial properties near or in those developing suburbs,” Samuel said of his investment strategy for the upcoming year.
Thoughts on the 2021 Real Estate Market
Like other investors, Samuel noticed the high competition in investing during a pandemic. “It certainly does not feel like a buyer’s market.” Despite the eagerness of property investors, Samuel mentioned that taking on more rentals during a period of time when tenants might not be able to pay their rent could be more of a financial burden than they bargained for.
“The government’s response to COVID-19, including eviction moratoriums, requires additional caution when evaluating buy-and-hold rentals, particularly when buying properties with tenants in place,” Samuel said. “In the new year, we will be approaching the residential real estate market cautiously.”
Portfolio: Adding To, Holding Steady, or Cashing Out
“We are always looking for opportunities to add to the portfolio, and with our buy-and-hold philosophy, we rarely consider cashing out,” Samuel said. That being said, he expects expanding his portfolio to be difficult due to the competitive nature of investing at this moment. “It will become more and more difficult to find opportunities to add to our portfolio.”
Investment Strategy for 2021
“My strategy will continue to involve finding distressed deals in nice high-income and middle-income neighborhoods at a deep discount,” McCorkel said, noting that the pandemic and 2020 will not have a large impact on his overall strategy. “Our primary focus is buy-and-hold for small/medium size multi-unit properties, but we will also take on single-family homes that we can fix up and flip.”
McCorkel also plans to expand the kinds of properties he will be investing in, such as those that are bank-owned, pre-foreclosure, or sheriff sales that are increasingly more available due to the impacts of COVID-19. There are other opportunities that interest McCorkel as well, such as wholesaling single-family homes to investors or developers when the time is right.
“There will be many motivated buyers looking for properties who are willing to pay much higher prices than I’d be willing to risk, which makes wholesaling a viable option to raise extra cash,” McCorkel said.
Thoughts on the 2021 Real Estate Market
“Real estate is hyper-local, and Central Pennsylvania continues to be very undersupplied, like many areas of the country,” McCorkel said. “With a low cost of living and low supply of housing, there are a lot of motivated buyers competing over a limited number of houses. Coupled with federal stimulus and low-interest rates, these market forces will continue to force prices up and keep us in a sellers’ market.”
McCorkel believes this will continue into 2021. “I do believe we will see a wave of foreclosure properties as mortgage forbearance expires, which could be a good source of deals, but I don’t think this will be enough to cause prices to fall.”
Portfolio: Adding To, Holding Steady, or Cashing Out
“I’m always adding to my portfolio, but the deals need to make sense from a cash flow and fundamental standpoint,” McCorkel explained. “I completed a big 1031 exchange in 2020 (sold 3 single-family houses and bought a 2 unit, 3 unit, and 5 unit) and I could possibly do another one in 2021. Bottom line, I’ll be always searching for the right deal and ready to close quickly when it comes along.”
Investment Strategy for 2021
“My strategy for 2021 is going to be extreme caution,” Mandel said. Though some investors are encouraged by the current real estate market, Mandel is still aware of the possibility of a recession come 2021 and the continuation of the global pandemic. “Too many economists have been predicting a recession. Why it hasn’t started yet is anyone’s guess, but I am going to stick with conservative.”
Thoughts on the 2021 Real Estate Market
Mandel will continue to think conservatively about investing in real estate during 2021, citing trends and predictions for the market in his area as a reason to not get too eager. “Though the market in my area (Portland) keeps skyrocketing up, it is going to top out at some point. It will probably correct to some degree, and nobody knows how much. Again, conservative will be the key for me this coming year.”
Portfolio: Adding To, Holding Steady, or Cashing Out
Even when thinking cautiously, Mandel says that he will still invest in a property if the right opportunity arrives. “I will jump into a fixer property if the numbers work and I can turn it around quickly. With lower values looming as stated above, I do not want to get into something I cannot unload,” Mandel said. “While I used to buy and hold, I have in recent years focused solely on flipping.”
Investment Strategy for 2021
Tomaro doesn’t see an increase in renters who can’t pay rent due to COVID-19 as a reason to stop investing — in fact, she thinks it’s an opportunity to expand her portfolio and save the profits. “We were very fortunate with our awesome tenants that we only had a couple move out due to the pandemic,” Tomaro said. “But the uncertainty of how long things will last has made us want to increase our cushion and sock money away in case tenants can’t pay rent, and we can’t evict them due to moratoriums. It also just makes good sense to take advantage of historic low-interest rates.”
Thoughts on the 2021 Real Estate Market
“As a realtor, I feel optimistic about the market for the most part,” Tomaro said. “I worry about the first-time buyers who have decent jobs but debt. I worry that they are going to get squeezed out of the market and not be able to buy due to rising prices.”
Portfolio: Adding To, Holding Steady, or Cashing Out
“We are planning on adding one or two units, but we may cash out on a few to take advantage of the seller’s market and then reposition, meaning sell some of our units that are one-offs in further-out locations and buy units that are closer to ones we have,” Tomaro explained, noting that despite rising property prices there are still opportunities to acquire more real estate. “Long-term, we would like to have our units in a closer cluster, and we have our eye on some areas that surprised us with how well we did with them, so we’d like to grow in those areas. We’ve been at it for about 15 years, so we are really looking to capitalize on what we’ve learned.”
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During the most recent election cycle, Oregon became the first state to decriminalize the possession of small amounts of illegal drugs. Oregon Measure 110, which passed with 59% of the vote, makes personal, non-commercial possession of cocaine, heroin, methamphetamine, MDMA, psilocybin, LSD, methadone, and oxycodone, no more than a Class E violation, with a maximum fine of $100.
Oregon (along with the District of Columbia) also decriminalized psychedelic mushrooms.
If this trend of decriminalization continues in other states, what could it mean for property owners around the country, and what would it change?
Decriminalization vs. Legalization
First, it’s important to note that there’s a difference between decriminalization and legalization — although it’s a subtle difference, according to Thomas J. Simeone, attorney and managing partner at Simeone & Miller in Washington, D.C. “Decriminalized means that it is no longer a crime, subjecting you to criminal penalties, such as jail time,” he said.
However, Simeone says something that’s decriminalized can still be illegal, and result in other ways to be penalized, such as fines. “An example is traffic violations: run-of-the-mill speeding is illegal — it is against the law and can subject you to a fine.” However, he points out that going over the speed limit is not criminal because it is not a felony or a misdemeanor, so you’re not subject to criminal penalties.
How Decriminalizing Drugs Can Affect Rental Property Rules
When substances are declared to be legal, they have to be permitted when the law changes, according to Simeone. “However, landlords are not required to permit every legal action,” he said.
For example, he says it’s legal to own a pet, but some leases prohibit pets or charge extra for them. “Similarly, leases can ban smoking, which is legal for adults, so a landlord who wishes to ban the use of now-legal substances may need to add a provision to the lease.”
And Nick Wilder, founder of The Wilder Law Firm in New York City, anticipates an overwhelming response from landlords incorporating language in new leases that prohibits the use of such drugs as heroin, cocaine, and methamphetamine, etc. on the property.
Learn more about customizing rules in a rental lease.
He agrees with Simeone that just because a drug is decriminalized doesn’t mean it can’t be prohibited by a private company, like a property owner. “Restrictions will not end with mere drug use on the property; like people going outside for a smoke, a use-on-property only prohibition could lead to the unsightly specter of people going out in front of the building to shoot up.”
Wilder predicts that landlords will also prohibit renters and guests from entering the property while they are under the influence. “Sometimes, it may be hard to prove someone is under the influence when entering,” he said. ”But unfortunately, often it wouldn’t be hard to prove in many cases, since people who use these drugs tend to have a severe addiction which will show itself eventually.”
However, he also believes that different properties will have different levels of stringency, and says that some may become known for their lax drug use policies.
“One might ask whether any landlords would try to profit by making their property openly ‘drug friendly,’ however, the most important issues to landlords are paying rent on time, being responsible, and not causing any trouble — the last things hard drugs users are known for.”
Will a No Smoking Policy Suffice for Landlords With Concerns?
Gary Zaremba is a broker and owner at PepZee Realty in Dayton, Ohio, and he says that marijuana use is already legal there, so he has a no-smoking policy. “Since this applies to all smoking, it is not discriminatory,” he explains. “It allows folks who want to use marijuana to use it orally without affecting the ‘quiet enjoyment’ of others.”
However, Simeone warns against using general language. “For example, a no-smoking policy could be held by a court to refer only to cigarettes, cigars and pipes, since those are what most people think of when they think of smoking,” he said. “By listing the specific behavior to be prohibited, the landlord is more protected and less likely to have disagreements with the tenants and bad rulings from a court.”
Quiet enjoyment is the right to undisturbed use and enjoyment of a property by the tenant. It’s implied in all rental leases, even if it’s not specifically stated.
But to be clear, these smoked substances present a real threat to landlords. “This is both a fire hazard and potentially damaging to the property in the form of odor and discoloration,” Simeone said. “Having a tenant who smokes can lead to higher insurance premiums, as well.”
Other Rental Property Unknowns Regarding Decriminalizing Drugs
One phrase — the tenants’ rights to have ‘quiet enjoyment’ — will be a determining factor in whether illicit drugs are accepted or not, according to Zaremba. “If one tenant is snorting cocaine in the shared common spaces while another tenant is breastfeeding their child, is there an effect on either tenant’s quiet enjoyment?”
In this type of scenario, Zaremba says that some tenants would object to one of these actions, some would object to both, and some wouldn’t object to either. “If tenants complain to the landlord, we will be turning to our attorneys and the courts to sort this out.”
He also points to a scenario in which tenants might withhold their rent because they feel their lease rights are being violated. “This is similar to what some do when the tenant next to them blasts music and the complaining tenant believes the landlord or managing agent is doing nothing about.”
And Zaremba introduces another question to think about: “Will I be able to advertise a drug-free building like I do with a smoke-free or pet-free building (except for service animals)?” Or would that be a housing violation? “I believe these issues will be sorted out as different stakeholders claim their territory going forward,” he said.
For landlords in Oregon and elsewhere who are concerned about prohibiting certain drugs from their rental properties, using a customizable lease with specific clauses is the best way to address the issue and protect landlords from tenant or court disputes. Learn more about using a customizable, lawyer-reviewed, and state-specific lease to protect your rental property.
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In June of this year, Nashville voted to raise the city’s property taxes by 34%. In September, the mayor of Minneapolis proposed a 5.7% property tax increase. As cities grapple with how to find the funds to meet their budgets, increasing property taxes may become a more viable option that gains widespread acceptance in cities across the U.S.
Of course, the budget shortfalls are either directly related to — or at least compounded by — the pandemic. And this public health crisis has directly affected landlords. “NYC is experiencing a crashing rental market where many tenants have fled the city and few are waiting to replace them,” said Michael Shapot, licensed associate real estate broker at The Shapot Team/Compass in New York City. “Working virtually has enabled renters to move to less expensive areas outside normal commuting zones, leaving vacancies in the high-rent districts, many of which are available at a significant discount.”
And it’s not just the U.S. that’s struggling with falling rent. Waylon McGill of Fast Ontario Home Buyer in Toronto, Ontario owns six rental units with around 20 tenants. He says that many college students and young people have moved back in with their families. “And the problem is exacerbated by the fact that a lot of the major urban centers have significant numbers of AirBnBs and most of these are struggling badly,” McGill said. “So those landlords are converting those short-term rental units into long term rentals — and this is causing a major increase in supply in those markets.”
Falling Rent Puts Landlords Between a Rock and a Hard Place
According to an analysis by Apartment List, since March 2020, rent has fallen by 21.7% in San Francisco, 15.3% in New York, 14% in Seattle, 13.6% in Boston, and 12.2% in San Jose. Washington, D.C., Oakland, Arlington, Minneapolis, and Fremont round out the list of the top 10 cities with the steepest rent dips.
If more cities decide to increase property taxes, but rent is falling in some cities, and holding steady in other areas, what can landlords do to offset these higher taxes?
Gary Zaremba, broker and owner at Pepzee Realty in Dayton, Ohio, admits that he can’t speak to all markets. However, through his business and conversations with others in the residential rental business in Southern Ohio and New York City, he doesn’t see a lot of options for landlords. “Right now, with many people underemployed in the middle- and lower-middle-income brackets, some of my tenants are struggling with staying current on their rent.”
Zaremba says there’s no point in raising rents when the tenants are already having difficulties paying their existing obligations. “In some cases, I have raised rents and in those situations the increases were marginal — but these increases were to bring certain units up to market rates where I had long-term tenants as a way to create more income.”
However, Zaremba believes that landlords are definitely on the short end of the stick, especially since many municipalities are creating stricter eviction procedures. “This has meant landlords like myself are now in the housing subsidies business, since it is a longer and harder process to get non-paying tenants out of a unit.”
He points out that this isn’t to say that he’s indifferent to the plight of tenants — he’s just acknowledging how it affects landlords. “Since social service agencies are bereft of funding to handle the larger loads of struggling Americans, it is easier for municipalities to keep people in their apartments and let private landlords handle the brunt of these costs.” But while that may be a good solution for everyone else, it’s creating a nightmare scenario for landlords. “The snowball effect is that we will not be able to pay our real estate taxes or make our mortgage payments, which will result in increased foreclosures,” Zaremba explains.
Can Landlords Offset Increasing Property Taxes?
If landlords can’t raise their rent and they live in a city that’s increasing property taxes, what, if anything, can they do to maintain a profit?
“Maintain a profit? Light a candle, rub a rabbit’s foot, and say a prayer that lower rents and tenant-friendly courts don’t break the bank,” said Shapot.
However, depending on the type of property you have, McGill has a few strategies. “One is to convert short-term rentals into medium-term furnished rentals,” he recommends. “There isn’t much inventory in this niche in most markets and so there is still a good market for them. And, if you have short-term rentals, McGill recommends switching to long-term rentals. “But you will probably need to lower rents to attract tenants with the increased vacancies.”
And if you’re thinking of letting some of your planned maintenance lapse, he warns against it. “Typically, I can cut costs through preventative maintenance of building systems, which helps me to avoid bigger ticket issues later.” Still, he admits that it’s tempting not to fix anything and just wait until there is a crisis.
Zaremba agrees that maintenance always has to be a priority. “Roofs still have to be fixed and leaking plumbing repaired regardless of whether the tenant is paying or not,” he said. “Still, housing stock will fall into greater disrepair since there is less income from the building to handle expenses, let alone throw off a profit.”
Will the Rental Market Ever Return to Normal?
If landlords just hold on, will the rental market ever return to pre-covid levels? McGill thinks it will, since COVID-19 is a temporary shock. “There has been a significant trend for people moving towards urban areas for decades now, and it’s also where the vast majority of immigrants end up settling.” He predicts that most companies will not move to permanent work-from-home status. “Once the pandemic passes, those people will be required back in the office, so they will likely want to return to the cities.”
Also, he points to the cost of building new housing, and notes that since it’s so high, there will continue to be housing shortages. “And this will help rents return to their pre-Covid levels,” McGill said.
However, Zaremba is not as optimistic. “I do not see any reason they will rise soon since there is a glut of units and not enough solidly employed people to fill them.” He does believe that downtown urban areas will come back — but maybe not at pre-pandemic levels. “The pandemic is creating paradigm shifts that are still evolving and density is now the enemy.”
For his part, Shapot is cautiously optimistic that there may be a return, but it may be an altered return. “Eventually there will be an equilibrium where supply matches demand, but we may see less luxury rental housing and more affordable housing, which our area desperately needs,” he said.
“There is and will continue to be uncertainty, and we expect there might be bank workouts and forbearance, real estate tax concessions, as well as some foreclosures, shorts sales and a shakeup of the investment market, so hold onto your hats,” Shapot added.
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]]>The post Renter’s Choice Legislation: Here’s What You Should Know appeared first on Avail.
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The City of Atlanta recently passed an ordinance requiring that landlords allow renters to choose between paying a security deposit or purchasing a cheaper security deposit insurance plan. Earlier this year, the City of Cincinnati passed a similar type of security deposit insurance ordinance.
This renter’s choice legislation passed in both cities allows tenants to choose the best security deposit option to meet their financial needs. But how does it work and how will it affect landlords?
Here’s what you need to know about renter’s choice legislation.
Why Are Cities Passing Renter’s Choice Legislation?
In the past, renters only had one option: paying a security deposit before move-in. However, for some renters, paying the equivalent of one or two months of rent at one time can be difficult or impossible.
“Rental security insurance provides coverage to the landlord for potential damage to the property by the renter,” says Jonas Bordo, CEO and co-founder at Dwellsy. “Typically, the renter pays a fee to the security insurance company — generally a lower fee than the traditional security deposit — and the landlord can make a claim against that insurance to cover any damage beyond normal wear and tear on the rental.”
Not only is the amount of a rental security deposit typically much lower, but it can also be spread out, which makes it easier for a renter to pay.
How Does Security Deposit Insurance Work?
“Instead of tenants paying a large, upfront security deposit, they would instead pay a much smaller monthly premium — roughly $5/month for a $1000/ month property — very similar to renters insurance,” explains Rob Carrillo, property manager at Century 21 Haggerty in El Paso, Texas. However, he stresses that it is not renters insurance. “Rental security insurance will not protect their belongings, but rather would protect the landlord against any possible damages after move-out.”
But unlike a security deposit, renters will not get their money back if they select the rental security insurance option.
Renter’s choice ordinances may also vary by city, so the legislation can affect landlords differently.
For example, Atlanta’s ordinance applies to landlords with more than 10 rental units who require a security deposit that is more than 60% of the monthly rent amount. Renters who still prefer to pay the full security deposit will be given the option to pay at least three equal monthly installment payments as opposed to the one upfront security deposit payment that is usually required.
On the other hand, Cincinnati, which exempts landlords with 25 units or less, allows renters to choose from three different options:
- rental security insurance – paying $5 a month for the duration of the rental
- a security deposit installment plan spread out over at least six months, or
- a reduced security deposit, which can’t be more than 50% of the first month’s rent.
“I appreciate that the proposed laws only cover landlords with several properties (10 or 25),” says Domenick Tiziano, landlord and blogger at Accidental Rental. “This will allow the mom and pop landlords to continue to supply rentals to tenants with less-than-perfect credit by allowing them to collect the full security deposit allowed under the state law.”
In fact, he’s not sure if renter’s choice is a good idea. “I think this is one of those rental reforms that we will continue to see across the country as legislatures try to fix what they believe to be wrong with the system,” Tiziano says.
Where Else Has Renter’s Choice Legislation Been Adopted?
Aside from Atlanta and Cincinnati, no other cities have currently passed a similar ordinance, although several cities are pondering such a move. However, landlords in other cities are voluntarily offering rental deposit insurance.
“These security deposit programs are not as new as they may seem and are not something that started becoming available due to legislation,” explains Carrillo. “The programs are already used by property management companies across the country as an affordable alternative and have been picking up steam in property management discussion groups.”
Rhino, SureDeposit, and TheGuarantors are some of the companies that provide security deposit insurance. Besides Atlanta and Cincinnati, these companies operate in New York City, San Francisco, and Dallas — although they can be used by landlords in smaller cities as well.
Will Security Deposit Insurance Expand Housing Options for Renters?
Renter’s choice legislation will help renters afford more expensive housing options. “It is expected to assist renters who typically would not be able to afford the upfront costs of renting a property, while at the same time satisfying their obligation to be responsible for any damage they cause to the property,” Carrillo said.
Bordo agrees that it will certainly expand housing options. “Typically, a renter must come up with not just the first month’s rent, but also a security deposit, last month’s rent, and moving expenses all simultaneously.” And he says it could take years for some people to come up with that type of money. “So, any reduction in the amount of money that needs to be paid up front will make a new rental more accessible for more people — and this is particularly valuable at this time when many renters have run down their savings as a result of pandemic-related job loss or health care costs.”
How Does Renter’s Choice Legislation Affect Landlords?
Not all ordinances are a win-win, but Carrillo is cautiously optimistic. “It is expected to increase NOI (net operating income) for investors as vacancy losses should be minimized, since this will expand the market to more renters.”
However, he says landlords and property managers may have questions. “Since this is essentially an insurance, will landlords be at the will of an insurance adjuster to determine wear and tear as opposed to negligent damage?” Carrillo also wants to know how quickly damage would be addressed, so the turnaround time wouldn’t delay a new tenant from moving in.
In fact, none of the new options look particularly appealing to Tiziano. “I don’t think many landlords will go for the reduced or deferred security deposit payment options,” he says. “That’s because the deposit is really the only thing protecting a landlord from the cost of damage, non-payment of rent, eviction, etc.” Tiziano sees these changes as putting a significant burden on landlords and predicts that it will encourage them to adopt more rigorous screening standards.
“Also, one big risk that these laws don’t address is what happens if the tenant cancels the security deposit insurance?” Tiziano says landlords need to ensure that they’re notified if this happens. “They should also have the right to buy the insurance and charge the tenant if this happens — I didn’t see anything in the new laws that protect a landlord from this risk.”
While Tiziano thinks it’s great that the laws could help renters get into an apartment they might not have otherwise been able to afford, he is mainly concerned that landlords don’t have a recourse if renters cancel insurance, and they could end up being exposed financially.
That’s why Barry Saywitz, president of The Saywitz Company — a national commercial real estate brokerage, investment and management company that owns and manages over 1,000 units throughout Southern California — thinks voluntary adoption will be based on other factors.
“In markets where the vacancies are much lower, landlords do not need to take the risk and will just wait for a better-quality tenant, and therefore, tenants who need payment plans or this type of insurance will be left renting lesser-quality properties or needing to save up to be able to afford to actually move,” Sawwitz warns.
“As for the real estate markets in California as a whole and Southern California in particular, we do not see this rental security insurance playing an active role at the moment, nor do we foresee landlords taking full advantage of it.”
One dilemma Saywitz sees is that insurers might require all tenants in a particular property to sign up for the program. “This would make sense so that the insurer can average the risk with good paying tenants against those who might default.”
If only the high-risk tenants are insured, he questions how this program could be feasible. “While it is a worthwhile service, we do not see landlords jumping at the option and that may be a function of the tightness of the market, but it certainly makes good common sense in many instances.”
As other cities assess renter’s choice legislation as a possibility for renters and landlords, stay up to date with changing security deposit laws and other rental market legislation by signing up for our newsletter.
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On September 14, 2020, city councilors in Syracuse, New York, passed legislation designed to stop landlords from evicting tenants that live in a one- or two-family rental home that is not listed on the city’s rental registry. The ordinance goes as far as prohibiting landlords from collecting rent from properties not on the rental registry.
However, landlords who join the registry can go back and collect rent from previous months — but they can’t evict based on back rent that was owed when these properties were not listed on the registry.
If this sounds confusing, we’ll break down what a rental registry is, how it works, and what landlords need to know about it.
What Is a Rental Registry and How Does It Work?
“Rental registry is essentially just registering your property with your city and getting approval to house renters on your property,” explains Luke Smith, founder of We Buy Property In Kentucky. “Typically, this requires you to submit information to your city government, such as address, name of ownership, contact information, and operating manager.”
In other words, you’re letting your local government know that you charge rent and that you have a taxable asset. “The government should receive taxes each month from your rental property,” Smith says. Some cities also charge a rental registration fee.
However, this isn’t the sole purpose of a rental registry. “In most cities in the United States that have a rent registry, it is used by the local government to be able to effectively enforce property standards and city code ordinances,” says Erik Wright, owner of New Horizon Home Buyers in Hixson, Tennessee.
Cities collect the landlord’s information to have a verifiable point of contact for property standard or code violations. Cities also collect this information in case they need to fine the landlord for these violations. “Cities are doing this in an effort to ensure quality housing for tenants that at least meet the minimum standards of living,” said Wright.
Rental Registries May Vary by City
If you’ve never heard of a rental registry, that’s because not every city has one. According to Smith, they tend to be more common in major cities. He believes that every city should have one, but acknowledges that smaller towns may be slower in setting up the process.
“Major metro areas require landlords to get a license from the city stating that they are allowed to rent out their property, and over the past decade, Airbnb has greatly increased the number of landlords in major cities,” said Smith. The proliferation of short-term rentals has also led to another reason why Smith believes major cities have rental registries. “They’re trying to ensure there are available houses for residents that want to purchase a home in the city.”
Wright agrees that rental registries can help larger cities collect important rental housing information. “It is used to collect data about the number of rental units, the current rent rates, and what housing services are offered,” he said. “This information is used to enforce the current rent control or rent stabilization regulations.”
Andy Kolodgie, owner of The House Guys in Washington, D.C., gave us some examples of how the rental registry is used in the DMV (District of Columbia, Maryland, and Virginia). “Alexandria, Virginia recently rolled out a mandatory rent registry to enforce the collection of short-term lodging taxes,” said Kolodgie, adding that the goal was to make sure that hotels and short-term rental properties pay the same amount of taxes on the rentals.
“Another example is Fredericksburg, Virginia, where the city government enforced a rent registry to pursue code violations and overcrowding issues,” Kolodgie said. Aside from the DMV, he says rental registries are common in cities with a large number of rentals, like college towns.
Baltimore, Seattle, Denver, Miami, Los Angeles, San Francisco, Louisville, and Narragansett, Rhode Island are just a handful of other cities with rental registries.
Benefits and Drawbacks of a Rental Registry
Remember that the city of Syracuse voted to bar landlords from evicting tenants in one-and two-family rental properties that were not on the city’s rental registry. But why did the city take such drastic steps? Well, that city’s registry was established in 2007, but it turns out that 60% of the properties in the one-and two-family rental property category are not on the rental registry. According to some experts, there are actually benefits and drawbacks to being on one.
“One of the ways a registry could benefit landlords is to more quickly notify them of any property standard issues they may not be aware of,” said Wright. “For example, if a tenant is responsible for the upkeep of the yard or exterior and it is being neglected, when the city issues a property standards violation, you will be notified because they have your contact information.”
Landlords could also gain a competitive advantage by registering, assuming everyone else does, as well. “If there are laws in your city preventing other rentals within a certain amount of distance, by registering your rental with the city, you eliminate your competition from moving into your area/neighborhood,” Smith explains. “And as the Syracuse ruling has shown us, if you aren’t playing by the rules in your city, you shouldn’t expect help from your local government if you need it when it comes to evictions or tenant problems.”
And that may be the most important reason for — and greatest benefit of — being on the rental registry. “Whatever fee you pay yearly (Syracuse landlords pay $150 every three years for each property) is well worth any legal support you will receive,” said Kolodgie. He explains that it’s absolutely necessary to be able to convict in the case of serious damage or financial harm. “If you lose this ability, you are running a high-risk operation and should focus more on being risk-averse.”
However, Kolodgie also points to at least two drawbacks. “The mandate increased the amount of bureaucracy and expenses as there are yearly fees to be registered.” Smith agrees with the expense drawback, stating “The only drawback from a rent registry as a landlord is that you have now informed your government that you have a cash producing asset rather than just a home, and now you will be expected to pay taxes on revenue.”
What Landlords Need to Know About Rental Registries
We’ve discussed the pros and cons of being on a rental registry, but there’s additional information that landlords should know. “Landlords need to know if their properties are covered by the law, as jurisdictions sometimes exclude certain owner-occupied rentals,” explains Domenick Tiziano, landlord and blogger at Accidental Rental.
Smith and Kolodgie also touched on the legal ramifications of not being on the rental registry if it’s a requirement in your city, but Tiziano drove that point home. “Landlords need to know that their rights might be severely limited if they do not comply with local registration requirements, and they can even be subject to stiff fines.”
While the Syracuse story recently made headlines, Tiziano says this practice is already in full swing in New Jersey. “The first question a judge will ask in an eviction proceeding is ‘is the property registered?’ and anything but a ‘yes’ response will result in an immediate dismissal of your eviction case.” He says the judge can’t even hear the case if the property isn’t compliant with the registration law.
And here’s something else to consider: “Many government organizations will not allow subsidized housing to a tenant if the landlord does not have their rental registered,” warns Smith. “For example, Section 8 will not allow renters to stay at a property that is not registered.”
Will Other Cities Follow With Their Own Rental Registries?
Is it likely that other cities (sympathetic to the plight of renters) will follow Syracuse and New Jersey, especially as a way to address evictions related to the pandemic? The economy isn’t close to recovering, and while homeowners have the option to backend their missed mortgage payments, renters are solely dependent on a temporary eviction ban issued by the Department of Health and Human Services and the Centers for Disease Control and Prevention, which is expected to end on December 31.
Smith believes that other cities will follow Syracuse in this ruling because it benefits them. “The more rentals that get registered means more revenue for the city — and don’t forget that cities are businesses that require revenue to stay profitable.” And by increasing the number of registered landlords, he says they have the opportunity to capture previously lost revenue dollars.
“Syracuse has made the tough controversial decision and now other cities can and will follow suit without appearing like the ‘bad guy’ as Syracuse has already set precedent.” However, Smith believes that landlords do not have anything to fear as long as they are following the requirements.
Wright agrees, and adds, “As a landlord myself, I don’t see any issue with this ruling as it mainly affects those landlords who do not take care of their properties to ensure that they meet the minimum property standards of a city.” He points out that these slumlords give the good landlords a bad name. “Most of us are trying to run a profitable business while also providing a quality place for our tenants to live and raise their families,” Wright said.
As cities draft and pass new legislation, stay up to date with rental property news and important landlord-tenant laws in your city by signing up for our newsletter.
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Every day there’s a new update on the spread of Coronavirus Disease 2019 (COVID-19). Because COVID-19 is a respiratory disease spread between people who are in close contact (6 feet or less) with one another, apartment buildings and other shared living spaces pose the potential risk of an infected tenant spreading the virus to other residents — also known as community spread.
Whether you’re a landlord for a handful of units or a building owner, here’s what you need to know about preparedness, communication and tenant safety during the COVID-19 outbreak.
How Can Building Owners and Landlords Prepare for COVID-19?
Building owners and landlords should start preparing for the virus now, according to Patrick Hardy, CEO of disaster management company Hytropy. Hardy constructed FEMA’s first model small business disaster planning framework.
“Don’t wait until there is an outbreak or a tenant who is showing symptoms,” Hardy warns. “Even if you feel the risk is very low, all it takes is for one tenant to show symptoms of what they think is COVID-19 and post that on social media to cause a serious disruption to basic operations.” Hardy says that building owners can make custom disaster plans quickly and for free on the Disaster Hawk App that his company created.
However, some experts advise against going overboard with preparation efforts. According to Amesh A. Adalja, MD, senior scholar at the Johns Hopkins Center for Health Security, this novel coronavirus comes from the same family of a group of common cold-causing viruses. “Everyone has had those viruses, and this one has more severity,” he said. “But in most cases, it doesn’t require hospitalization.”
While landlords and building owners should be informed and prepared, avoid panicking and creating anxiety among tenants.
Download a sample letter template to send your tenants. You can edit the letter to add any additional steps or actions you’re taking once you download.
CLICK TO DOWNLOAD A PRINTABLE COVID-19 LETTER TEMPLATE
Ways to Help Keep Tenants Safe
Education is the best defense against COVID-19, and building owners can play a major role in helping tenants understand best practices — like good hand hygiene.
“We will let our tenants know that they should wash their hands often, wear a mask if they’re feeling sick, and notify a healthcare provider if they think they might have the virus,” said Rebecca Blacker, broker at Warburg Realty and owner of multiple buildings in New York City.
While owners can’t control what happens in a tenant’s personal unit, the common areas are certainly places where they can take a more proactive role. “Building owners can provide antibacterial soap and hand sanitizers in any common areas such as gyms, game rooms, and the lobby,” Hardy explains.
Building owners like Blacker are also trying to ensure that common areas don’t become hotbeds for transferring the virus. “We are ordering extra gloves and routine cleaning supplies and instructing our supers to wipe down common areas like hallways, elevators, stairwells, and mailboxes more often.” She admits that there hasn’t been any specific guidance from government agencies about recommended procedures for apartment buildings, but believes these are steps that all building managers should take.
What to Do If a Tenant Is Diagnosed With COVID-19
What happens if you discover that a tenant has been diagnosed with the coronavirus? Are tenants required to disclose this information?
Hardy says that in general, a tenant is not required to inform the building owner or landlord. “However, building owners should have a written pandemic disaster plan that includes how to deal with a building outbreak, and prepared crisis communication messages to media and to the tenants.”
Hardy also warns that this plan needs to be prepared in advance instead of waiting until the last minute. However, it may be rather difficult to create a communication strategy without specific information or guidelines from federal agencies.
“It’s a complex issue because while we do not want others in the building to be affected by a sick tenant, we also might not have a right to tell someone with the virus that they cannot be in their apartment,” said Blacker.
Medical experts like Adalja think that it would likely be a more manageable situation than some fear. “Because most cases are mild, at-home tenants can be expected to stay in their apartments while they are symptomatic and minimize social contacts.” He doesn’t believe the building owner needs to be informed, but says this may vary.
Keep in mind that some infected with the virus or at risk of infection have been instructed by medical professionals to quarantine themselves in their home. “If a case is diagnosed in the building, the owner should work to avoid stigmatization of that tenant and overreaction by other tenants,” Adalja added.
CDC Recommendations to Provide Tenants Regarding COVID-19 Safety
The CDC has provided the following recommendations in attempt to contain community spread of COVID-19. The following guidelines can be provided to tenants in your unit or in your building:
- Wash your hands well and often with soap and water (for at least 20 seconds), especially after touching surfaces that are frequently touched by others. If soap and water are not readily available, use an alcohol-based hand sanitizer that contains 60%–95% alcohol
- Cover your mouth and nose with a tissue or your sleeve when coughing and/or sneezing
- Avoid close contact with sick people
- Avoid touching your face, nose, or mouth with unwashed hands
- Stay home when you are sick
- Clean and disinfect frequently touched objects and surfaces
- If you are experiencing any of these symptoms seek care right away. Before you go to the doctor’s office or emergency room, call ahead and explain your symptoms and any recent travel, and avoid contact with others
Information That Landlords Can Send Tenants About the Coronavirus
It’s important to let tenants know that owners are taking this situation seriously. Hardy recommends creating a flyer that provides the following three details:
- Informing tenants that management is aware of the virus and taking precautionary steps (make sure to outline what those steps are)
- Information and resources on how tenants can prepare themselves and their families for the virus (for example, information from the CDC)
- Let tenants know that management is monitoring the situation and will keep them informed of any developments that affect the building
Besides increasing sanitary measures and having a building-wide plan in place, it’s a good idea to temporarily suspend social gatherings, such as meet and greets, apartment complex meetings, or other activities in the building that require people to gather.
id=”coronavirusresources”
Below are helpful links to CDC information about COVID-19:
These resources track the spread of COVID-19:
COVID-19 Tracker and State-By-State Health Information
Kaiser Family Foundation Tracker
Links regarding rules on evictions given the crisis:
Cities Restrict/Refuse to Conduct Evictions During COVID-19 Outbreak
To join the conversation about landlord and tenant response to the COVID-19 pandemic, check out the Avail Community Forum posts on national eviction news and preparedness tips from other landlords.
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On Monday, December 9, Seattle City Councilmember Kshama Sawant introduced legislation that would prevent landlords from evicting tenants during the winter. The legislation, if passed, would ban evictions from November 1 through March 31, “regardless of whether just cause for eviction may exist.”
Sawant’s proposal is in response to the Seattle Renter’s Commission, which recently wrote a letter appealing to the council to suspend evictions during the colder months. According to the commission, renters would be “displaced to the streets during the months with the harshest weather and poorest living conditions.”
If passed, Seattle would be the first city in the country to have a winter eviction ban. Other seasonally-based eviction bans exist in cities like San Francisco, which passed a law banning landlords from evicting families with children during the school year if the owner wants to occupy, remodel, demolish, or convert the housing unit into a condo. San Francisco’s law was also expanded to protect school and day care center workers from eviction during the school year.
Seattle’s moratorium on winter eviction is just the latest change to just cause eviction and landlord-tenant laws in the city. In September, a new law required landlords to accept non-electronic forms of rent payment (like cash or check), and in November, Washington’s Supreme Court upheld Seattle’s First-In-Time rule, which requires landlords to process applications and offer units in chronological order of applicants.
If this latest proposal becomes law, how would the eviction ban affect Seattle tenants, landlords, and investors?
How the Seattle Winter Eviction Ban Could Affect Tenants
According to a Seattle Times report, there were approximately 3,200 evictions in King County in 2017, about half due to just one month’s late rent. Because 90% of the evicted tenants were not in a position to rent somewhere else, many stayed with friends or family, moved into transitional housing, or became homeless.
The letter from Seattle Renter’s Commission sent to the city council notes that 41% of homeless people in Seattle sleep outside and 19% sleep in vehicles — neither of which provide sufficient protection from the elements. The ban could literally be a life-saver for people who have no place to go if they’re evicted.
On the other hand, the eviction ban could negatively impact tenants in a variety of ways. Scott Isacksen is the founder and CEO of TCI Building Services in Castro Valley, California, and owns 3 rental properties — 28 units in total. He believes that this type of law will create a higher housing barrier for people on the lower-income scale.
“As a property owner, I would ask for the maximum security deposit possible to help cover this risk, and would not accept someone that is at all questionable — for example, with a credit score of 700.” Isacksen said he would also be likely to start the eviction process as soon as someone is late on rent. “Five months of rent is too costly to show any leniency,” he said.
Isacksen’s view is shared by Rick Albert, a broker associate for LAMERICA Real Estate and an investor in Los Angeles. Albert said landlords will have to be pickier when choosing tenants to reduce the risk of losing money on their investment. “For example, even if a potential tenant means well, if they have poor credit, pets, or any other issues, then the landlord is going to pass, and this is going to make it difficult to find places with such a record.”
In California, he says mom and pop investors are leaving the market by selling their rentals because of what they perceive as over-regulation. “If those rentals are purchased by owner users, there are less options for tenants in the long run.”
Landlords might also raise rent to cover the risk of lost rental income. “Tenants that were paying $2,000 a month may now end up paying $2,500 a month to bridge this gap in rental income,” said Tino Jaimes, owner of Sunrise House Buyers TX, a real estate investing company in Houston.
And there are even more potential drawbacks for tenants. “If there are no exceptions to the eviction ban, this may also result in tenants having to live next to other tenants who are engaged in illegal activities, as the landlord has no recourse to remove the offending tenants from the property,” said Rick Davis, a real estate attorney at the Levy Craig Law Firm in Kansas City, Missouri.
He also believes that it would be harder for tenants to retain counsel. “There are a limited number of attorneys who represent tenants, and the result of this measure would be to have the same number of evictions filed in a shorter period of time.”
How the Seattle Winter Ban Could Affect Landlords
The most obvious adverse effect to Seattle landlords is a loss of money. “In theory, a tenant won’t have to pay rent for those months because they can’t be evicted, and that could be tens of thousands of dollars lost,” said Albert.
And while some tenants may have encountered a financial setback that results in a loss of income, this may not be the case for everyone. Davis believes that the vast majority of tenants are great, but says there is a subset that will take advantage of the laws to avoid paying rent. “I have seen this both as an attorney and landlord. There are many tenants that know exactly how long they can remain in a home without paying rent until being evicted and will go from small landlord to small landlord, taking advantage of those who do not check rental history,” he said.
As a result, real estate lawyer Shann Chaudhry expects default rates to increase. “This could cause substantial financial hardship to landlords,” Chaundry said. “If the problem becomes chronic or epidemic, then landlords could potentially themselves face insolvency or bankruptcy.”
Property maintenance is another problem that landlords might face. “Many landlords own only a few properties and have mortgages and other bills that will need to continue to be paid even when the tenant is not paying,” Davis explained. “This could create a cash crunch for those landlords that results in maintenance items being neglected or performed less expensively than they would if not for the lack of rental income.”
According to Davis, these types of proposals are perhaps focused on large, institutional landlords — but that’s not representative of the entire landlord population. “If a company has 1,000 rental units, it may be possible to cover the losses from a tenant that doesn’t pay rent for 5 months.”
However, Davis says many of his clients are mom and pop landlords with only a handful of rental properties, and it would be a significant burden to pay mortgages without that rental income. “Moreover, as the margin on a rental property is usually relatively small, it could take many, many years for the landlord to make back the money lost during the delayed eviction,” said Davis.
Isacksen agrees. “The greatest impact will be on mom and pop landlords that have a small investment in the area,” he said. “One 5-month span of no rent in a smaller building would completely eliminate the chance for profit in the year and likely make it a loss.”
How the Winter Ban Could Affect Seattle Investors
Will these changes to Washington landlord-tenant law cause investors to shy away from Seattle? Most of our experts believe that it will – or it will cause them to consider converting their properties.
Isacksen believes investors will consider investments in Seattle riskier. “This will affect offers made, the decision to invest at all, and the price people are willing to offer.”
Another potential issue: the grade of certain types of real estate investment would be downgraded. Chaudhry says investors look at cap rates to determine the fitness of a property, but cap rate and the cost of improvements may no longer be the biggest factor.
“Estimating variance based on a factor for default, nonpayment, and the inability to evict is most certainly going to become part of their calculations,” Chaundry said. “Most likely this will affect the price of multifamily residential property, as opposed to single-family property.”
Chaudhry says it’s possible that residential rentals could be converted to commercial, if zoning and land use allow. “If the highest and best use becomes something other than residential, or multifamily, it is foreseeable that the owners could convert to the highest and best use.”
But that’s not the only way investors could change the use of the property. Jaimes says he would likely convert the property into an AirBnB. “With Airbnb you can even create short-term rentals — like 3 to 6 months leases, and this could probably be a possible loophole to the eviction ban because it is through the AirBnB platform and considered a short-term rental,” he said.
While some landlords and property owners might look to convert their rental properties to avoid the potential repercussions of a ban on winter evictions, landlords who continue to rent their properties to tenants may elect to take extra precautions against missed rent with safety nets like rent guarantee insurance. Rent guarantee insurance can protect landlords from missed rent payments for up to six months per year and can cover unpaid rent during the eviction process, if needed.
For more information on protection against lost rental income, learn more about rent guarantee insurance and how landlords can protect their rental income in the event a tenant stops paying.
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Under the Seattle First-In-Time renter law, landlords have to offer the first available unit to the first applicant who meets all requirements – in other words, first come, first served.
On November 14, 2019, the Supreme Court of the State of Washington rendered a verdict on the constitutionality of Seattle’s First-in-Time (FIT) rule, which is also known as the First-in-Line (FIL) rule.
According to the FIT rule, when landlords want to fill a vacancy, they must inform applicants of the criteria that will be used for screening, the minimum requirements to apply, and any type of necessary documents for the application. The FIT rule also requires landlords to document the exact date and time the completed rental application documents are received.
Landlords must screen these documents in chronological order, and if any additional information is needed, applicants must be notified either by phone, written communication, or in person.
Lastly, landlords must offer the first available unit to the first applicant who met all of the requirements – in other words, first come, first served. The applicant has 48 hours to accept or decline the offer, and if the offer is declined, the next applicant on the list will be offered tenancy. This process continues, in chronological order, until an applicant accepts.
Seattle Councilmember Lisa Herbold sponsored the legislation and applauded the ruling. In a Seattle City Council press release, she stated that research by Seattle’s Office for Civil Rights reveals that among pairs of equally qualified applicants, landlords display differential treatment 60% of the time when assessing applicants in a protected class versus those in no protected class.
The FIT rule was first adopted by Seattle’s City Council in 2016. It went into effect on January 1, 2017, and by July 1 of that year, landlords were expected to be in compliance. In 2018, a King County judge struck down the FIT rule, agreeing with landlords that the law was unconstitutional. But now that Washington’s Supreme Court has voted to uphold the law, how will the tenant screening process affect Seattle landlords and tenants, investors, and other cities?
How Will the Seattle First-In-Time Renter Law Impact Renting?
Avail spoke with two attorneys specializing in landlord-tenant law who believe the ruling may have unintended consequences. “The law will likely lead to a greater number of eviction proceedings against tenants that are mandated to rent properties that a landlord would have otherwise screened out,” explains David Reischer, a landlord-tenant attorney and CEO of LegalAdvice.com. Although the law is intended to ensure that all renters are treated equally, he says Seattle landlords will lose their ability to exercise personal judgement.
But why is that a problem — and doesn’t “exercising personal judgment” lead to exactly the type of subjective approval process that the law is trying to prevent?
Reischer believes there has to be some level of the type of personal judgment in the tenant screening process. “For example, landlords should be able to exercise their personal judgment that a potential candidate will indeed make rental payments on time and not turn into a squatter that fails to pay rent.”
Tenant attorney Samuel Evan Goldberg of Goldberg & Lindenberg in New York City agrees that a law intended to help tenants may end up hurting at least some of them. “The danger for tenants’ of Seattle’s FIN law is that some landlords may choose to invoke stricter minimum screening requirements.”
Stricter criteria could make it almost impossible for some tenants to rent an apartment – which he says is the opposite of the intent of this law. It could also lead to legal trouble for landlords. “If landlords were to raise their screening requirements in order to violate the Office of Fair Housing and Equal Opportunity, which seeks to eliminate housing discrimination, then numerous discrimination proceedings would be brought against landlords,” Goldberg said.
How Could the Seattle First-In-Time Renter Law Affect Investing?
In addition to the possibility of stricter requirements, the ruling could also affect investments in Seattle’s real estate market. “Landlords may choose to purchase buildings in states that do not follow Seattle’s First-In-Line Renter Law,” warns Goldberg.
And it’s not hard to understand why. “This new law will certainly deter future investors from buying properties with the hopes of generating rental income, as the costs to evict a tenant that fails to pay their rent on time are extremely high,” Reischer explains. “Not only does a landlord lose out on missed rental payments, but the costs to hire a lawyer to petition the court to evict a tenant are not insubstantial.”
In addition, it can take a long time for eviction cases to move through the court system. “The courts are notoriously slow to allow for the eviction of a tenant without assuring numerous safeguards that the tenant receives proper due process,” Reischer said. “As such, the eviction process typically takes about 6-12 months from start to finish, and this delay will have a significant impact on an investor’s bottom line.”
Is the First-In-Time Renter Law an Outlier or National Trend?
So, will the change to Washington landlord-tenant law lead to a wave of other FIT rulings across the country? Opinions vary. “Cities and states facing housing crises across the country, such as New York City and California, would likely follow this law in order to add another layer of protection for tenants,” said Goldberg.
However, Goldberg believes adoption will be slow at best. “It is unlikely that other cities will quickly follow in Seattle’s footsteps and pass a similar law until the full effects of this radical experiment are fully understood by other politicians,” he says.
Participate in our community forum to share your experience with the rental market in Washington state. If you’re investing in a new rental property or trying to fill a vacant one, find out how property management software platforms like Avail can help you through the entire rental lifecycle.
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