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Effective July 1, 2021, California Governor Gavin Newsom will require large property landlords of subsidized multifamily housing units to offer renters the chance to report their on-time rent payments to major credit bureaus at a low cost.
Senate Bill 1157 is the first bill in the nation that works to help low-income families build their credit without having to open a new credit card or take on a loan. Here’s what the California rental law means for the state’s renters and landlords, as well as how renters can get credit for renting in California.
What Is California Rental Law SB 1157?
SB 1157 was created with the objective of providing renters with limited income the opportunity to improve and build their credit history by reporting their rent payments. By reporting on-time rent payments to the major credit bureaus, renters can improve their credit score without opening a new line of credit or taking out a loan.
According to the “Power of Rent Reporting Pilot” by the Credit Builders Alliance, 80% of renters that participated in the rent-reporting pilot program boosted their credit score by an average of 23 points through reported rent payments, which is the objective of SB 1157.
The law will last until July 1, 2025, and allow landlords to report FICO 9, FICO 10, and VantageScore 3.0 and 4.0 credit scores.
What Does California Rental Law SB 1157 Mean for Landlords?
SB 1157 will require landlords of assisted housing developments — defined as those that have low- to medium-income tenants that use a financial assistance program to reduce the cost of housing — with more than 15 units to give every new and existing renter the option to report their rent payments to a consumer reporting agency.
However, landlords with less than 15 units are exempt from this bill unless they:
- Own more than one assisted housing development, regardless of the number of units in each property.
- Are one of the following: a real estate investment trust as defined by Section 856 of U.S. Code, a corporation, or an LLC with at least one corporate member.
If a renter opts into rent reporting, they will be required to pay the landlord the lesser of either $10 per month for the report or the actual cost to report the rent payment. In order to opt into the credit rent reporting service, the renter will need to provide and sign a written statement of consent.
Customize and update your online lease agreements to include your rent reporting clause.
The landlord will also be required to disclose which consumer reporting agency the rent payments will be logged with. Landlords will receive instructions as to how to submit rent payments to credit bureaus in the mail in order to minimize confusion.
What Does California Rental Law SB 1157 Mean for Renters?
The California housing law will provide renters with the chance to improve their credit health through their rent payments. Renters participating in this program will need to provide a written request to their landlord in order to start the credit reporting process and be responsible for the credit reporting cost as outlined above.
That being said, the bill won’t infringe on any of the renter’s state and federal rights, such as a renter’s right to make withholding or deductions to their rent as outlined in Sections 1941 and 1942, which cannot be reported as a late payment to a credit bureau.
It’s important for renters to know that late or missed rent payments that get reported to a credit bureau can negatively impact a credit score, and in some cases, new tradelines on a person’s credit history can cause a temporary decrease in credit score.
Can Renters Stop Reporting Their Rent?
If a renter wants to stop reporting their rent, they will need to provide their landlord with a written request to stop reporting their rent payments. Once the renter stops participating in the service, they will not be able to restart the reporting process for at least six months, as outlined in the SB 1157 bill.
If the renter fails to pay the rent reporting fee to their landlord, the landlord cannot:
- Use it as a reason to end the tenancy
- Have the unpaid fee deducted from the renter’s security deposit
If the fee is still not paid after 30 days, the landlord can stop reporting the renter’s payments. The renter will then be able to sign up for the service again after at least six months.
Report Rent Payments With Avail
If you’re a landlord or renter looking for a simple way to report rent payments under SB 1157, CreditBoost by Avail allows renters the opportunity to report past and ongoing rent payments to contribute to their FICO 9, FICO XD, or VantageScore credit scores. There is no cost to landlords for a renter to report their payments through CreditBoost, and a renter can opt to turn off CreditBoost at any time.
Learn more about how paying rent can help build credit.
Landlords can also easily collect rent from more than one rental property all online, hassle-free. Create an account today or log in to get started.
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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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]]>The post Do Landlords Need a Rental Registry to Rent Their Properties? appeared first on Avail.
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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.
The post Do Landlords Need a Rental Registry to Rent Their Properties? appeared first on Avail.
]]>The post What’s on the 2020 Ballot: A Voting Guide for Landlords and Renters appeared first on Avail.
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When researching the officials, propositions, and new measures on your local 2020 ballot, all voters can understand how tricky and confusing ballots can be. But knowing what a local, state, or national official supports and opposes or what a timely proposition will entail can impact the landlords and renters who are voting.
To best understand what is on the ballot, and what to vote for or against, look out for the following rental terms that could impact you.
- Affordable Housing: A measure to increase affordable housing could mean an increase in property taxes in order to set aside more funds to build more affordable housing units locally. In Ann Arbor, Michigan, Proposition C is an example of a measure on the ballot that will slightly increase property taxes in order to sustain an increase in affordable housing over the next 20 years.
- Property taxes: Any measure that will increase property taxes is important for both landlords and renters. For landlords, the properties that they own in the area would then be taxed at an increased rate, thus causing the cost of owning those properties to escalate as well. More importantly, renters might also see an increase in their monthly rent in order to cover the cost of this change in property taxes. Maryland voters will face multiple questions regarding property taxes, all of which will indirectly affect landlords and their renters.
- Rent control regulations, rent increases, rent stabilization: All of these measures will directly affect the rental market, landlords, and their renters. Rent control and rent stabilization are commonly used interchangeably, and though their explicit definitions differ, their legal definitions refer to how much a landlord can increase rent for existing and new tenants. California voters will be voting on Proposition 21, which could expand rent-controlled properties across the state.
- Fair housing policies: These initiatives refer to any local measures that want to address the ways that renters can still be discriminated against despite the national Fair Housing Act of 1968. Criminal records and lack of accommodations for those with disabilities are both common forms of discrimination that renters face despite federal protections.
Research Local and State Officials and Measures
One of the best and easiest ways to research everything that will be on your local ballot is to find a voter guide for your area. These guides go into detail about the backgrounds of local, state, and national candidates running in 2020, while providing information about the various measures on the ballot as well.
When researching candidates on your ballot, looking into their past voting history, their platforms, and organizations or other elected officials who support them is vital to understanding who you will be supporting with your vote. For landlords and renters in particular, understanding where a candidate stands on a variety of issues such as rent control, property taxes, or landlord and renter rights can help determine your vote.
When faced with different measures, propositions, or questions on a ballot, the best way to determine how to vote is by researching said measure’s backgrounds, who supports and opposes them, and what a yes or no vote means in explicit terms. Some ballot measures can be worded in confusing or misleading ways in order to sway a person’s vote, which is why familiarizing yourself with these measures can help you decide how you want to vote.
You can easily find, research, and put together your ballot guide through BallotReady.org, a non-partisan organization that compiles all voting information for individual states. Voters can even input their exact address to see what they will be voting for, whether that be by absentee or in-person ballot.
State-by-State 2020 Ballots
Find information on polling locations, how to request an absentee ballot, and links to voter guides through HowToVote.org’s individual state pages, all linked below and organized by region.
- Connecticut
- Delaware
- District of Columbia
- Maine
- Massachusetts
- Maryland
- New Hampshire
- New Jersey
- New York
- Vermont
- Pennsylvania
- Rhode Island
- Illinois
- Indiana
- Iowa
- Kansas
- Michigan
- Minnesota
- Ohio
- Wisconsin
- Missouri
- Nebraska
- North Dakota
- South Dakota
- Tennessee
- Alabama
- Arkansas
- Oklahoma
- Kentucky
- Louisiana
- Mississippi
- Texas
- Virginia
- West Virginia
- Florida
- Georgia
- North Carolina
- South Carolina
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]]>The post Illinois Marijuana Laws: What Clauses to Include in Your Lease appeared first on Avail.
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UPDATED: As of Wednesday January 1st, 2020, recreational marijuana use is now legal in the state of Illinois. As the 11th state where residents can legally purchase marijuana for recreational use — meaning no need for a medical card to buy, instead, you’d only need a valid form of state ID — many zoning laws still apply to where it can be used.
Still, state residents can legally possess just over an ounce of legal cannabis, and 500 mg of THC infused products. While enforcement efforts may vary by city and/or township, residential landlords in Illinois may want to revisit the advice below to keep ahead of the curve. Pay close attention to both state and local municipal laws, and keep in mind that as a landlord, you can still limit marijuana usage on your property with custom lease clauses.
With the introduction of a new bill by Governor J.B. Pritzker, Illinois is poised to become the latest state to legalize recreational marijuana use and cultivation by adults age 21 and over. If the bill passes, residents of the state could legally possess 30 grams of marijuana, or just over an ounce (picture the smallest spice containers at the grocery store). They could also grow a limited number of plants at the home, with permission of the landowner.
For residential landlords in Illinois and other states considering similar legislation, a change in the law signals it’s time to revisit the terms of your tenant leases — and the terms of any loans you have on your rental property.
Joshua Bauchner, a partner and chair of the New Jersey law firm Ansell Grimm & Aaron’s Cannabis Law practice, says that second part is a key step that often gets overlooked. “Most loan documents contain a clause from the lender that prohibits any unlawful activity on the property,” he says. “And often it says any activity that is unlawful according to state OR federal law; it doesn’t give an out if the state legalizes something that isn’t legal at the federal level.”
If that’s the case with your loan terms, should marijuana be legalized in your state, the decision to allow it on the property or not is made for you. To remain compliant with your loan, you’ll need to prohibit it.
How to Prohibit Marijuana Use
Whether or not you can prohibit marijuana use on your property is also subject to local landlord-tenant laws. Generally speaking, if you can prohibit cigarette smoking on your property, you may be able to prohibit marijuana use.
Writing a blanket zero-tolerance policy into the terms of your lease could cause problems, however. In that case, if you had a tenant licensed for medical marijuana use, such a policy would infringe on their rights in a more meaningful way in the eyes of the law than it would on an individual without a medical need for the drug.
To avoid issues on these grounds, Bauchner recommends the language in any new lease terms makes a clear distinction between medical and recreational use. “A clause like, ‘The unlawful use of any controlled substance is strictly prohibited in and around the Premises. Tenants who are legally licensed under state law to use medical marijuana are exempt from this provision,’ could work,” Bauchner says, “but it’s a good idea to run the wording past a local lawyer to ensure it’s compatible with the laws of your state.”
What To Do If Your Tenants Don’t Agree
Any amendments to a lease that infringe on the rights of tenants come with the risk that certain tenants will not accept. If you choose to prohibit marijuana on your property and a tenant feels strongly that they should be allowed to use it as acceptable under state law, Bauchner says the prudent move for landlords is to agree to release the tenant from his or her lease early, as doing so avoids the potentially greater burden of a legal dispute.
Losing a tenant before the lease is up isn’t ideal, but if it’s going to be a dealbreaker for your tenants, you’ll want to know as soon as possible. If the Illinois legislation passes, it won’t go into effect until January 1, 2020. But Bauchner says you can make any updates to your lease clauses in advance.
“Most leases have a provision that permits the landlord to modify the lease upon notice of 30 days,” he says. If such a provision exists in your lease, you can add the new clauses immediately and send it out to all existing tenants, calling attention to any amendments and what they mean. The revised lease with the new clauses would then go into effect in 30 days, even if that’s before the law passes.
Should a tenant choose to terminate their lease as a result of a new prohibition, having a head start on re-letting the unit before the law goes into effect — and more landlords start updating their leases — could make it easier to find someone new.
On the flip side, if you decide to allow marijuana use on your property, certain tenants may also claim breach of their lease on the grounds that the presence of smoke or odors violates their implied warranty of habitability. A building allowing smoking for the first time could be perceived as less habitable for tenants with asthma or young children, not to mention that smoke of any kind can cause damage to a property as well as be difficult and expensive to remove the odor.
A lawyer can help you weigh your options to make the best decision for your investment and your tenants. “This is as new an area of the law as it gets,” Bauchner says. “We as lawyers try to give our clients the best advice we can to help them move cautiously to limit issues.”
What If You Choose to Allow Marijuana Use on Your Property?
If there aren’t any clauses within your property loans preventing you from allowing marijuana use on the premises, you might consider approving it. That doesn’t mean you don’t need to review your lease, however. All landlords have an obligation to maintain safe premises. If someone is cultivating marijuana on site, as the proposed Illinois bill allows, it can pose safety concerns.
“People break into dispensaries and steal product,” says Bauchner. “If people know cultivation is happening in your building, you have a new security risk.” The first draft of the Illinois bill stipulates that home growers are limited to “five plants per household, in a locked room out of public view.” That’s a small quantity meant for personal use, which could deter theft since the risk would likely outweigh the reward. Even so, it’s still a consideration to keep in mind.
Landlords opting to allow marijuana could consider increased security measures to try to guard against potential risk and assuage concerns of others in the building. It’s also wise to check for common provisions that may already be included in your lease, and which could prevent issues that might arise from allowing marijuana. Provisions preventing tenants from operating a business out of the premises, for example, are helpful, as that precludes anyone growing plants from selling them, and allows for legally enforceable consequences if they do.
Likewise, provisions limiting the number of people who can safely congregate on the premises are useful. If it turns out a tenant has a green thumb that attracts lots of friends to their unit, such a provision can impose limits on occupancy, cutting down on crowding or noise concerns.
Bauchner notes, however, that with regard to tenant behavior, marijuana use often proves to be less of a concern than people fear. “With respect to use, the beauty of marijuana is its effect on people,” he says. With alcohol, you can see violent or reckless behavior, including greater potential for domestic violence and other disturbance. “With marijuana use, and I don’t say this to be flippant, people are going to order a pizza and take a nap.”
In his experience, the behavioral concerns around marijuana use in residential buildings are mostly around a heightened risk for fire in accordance with an increase in smoking, although there again, he says the level of risk is no different than it is from cigarette smoking.
Don’t Fear The Reefer
Ultimately, if your loan doesn’t prevent you from allowing marijuana use on the property once your state legalizes it, the choice to allow or not is up to you. And, if you choose to prohibit it, Bauchner says you don’t need to explain why to your tenants. “You can do it for any reason or no reason, but not the wrong reason,” he says. “The wrong reason, of course, would be anything that targets a specific group.”
There is also a difference between having a rule and enforcing that rule. From a liability perspective, it might be prudent to prohibit marijuana use in writing, even if you’re lax on policing it. Doing so can ensure you stay in line with the terms of your loan and protect you from a potential increase in insurance that could result from your allowing an activity associated with a heightened measure of risk.
Bauchner says potential legalization in your state should not be cause for alarm for landlords. Given six in 10 Americans approve legalizing the use of marijuana, there’s a good chance some marijuana use is already happening in your units, so it’s unlikely that legalization will feel like a seismic change.
Think of it instead as a good time to tie up any loose ends with your lease and loan documents, and be attendant to the issue. Make the changes you’re going to make sooner rather than later so you can get things settled with your tenants.
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A new ruling by the Portland City Council will require landlords to register their rental properties to the city by 2020.
In Portland, the property registration will go along with city taxes and will provide the city with greater census information to make better decisions for landlords and tenants.
What This Means for Landlords in Portland
City leaders are not expecting this decision to have much of an impact on landlords. The goal is to have more accurate census data to inform policy decisions on renters.
Portland landlords need to take the step of registering their properties, otherwise they will be at risk of a fine.
Because this ruling is new, and 2018 taxes will be due April 15, 2019, Portland landlords are exempt from the requirement in 2019. It will be mandatory beginning in 2020.
Is This Ruling Good for Landlords?
From the city’s point of view, this should be a positive step for landlords. The primary driver in the decision is for better census data.
Better census data means a better handle on the overall supply of rentals, which will help city officials make better policy decisions for landlords and tenants. which gives renters a better understanding of what’s available and pricing.
Registration will include a fee, but the city has not disclosed the fee amount. The fee will support the cost of the registration program, as well as other city support for landlords and tenants. More on this below.
Why Is This Happening?
The city wants better data, but what’s most important is what they plan to do with it. Andrew Bencivengo leads a local advocacy group and has been outspoken in support of this ruling.
Bencivengo believes this data will allow for better laws to benefit tenants, primarily focused on quality of the apartments and pricing.
How the Census Data Impacts Prices
The census data will allow for a better understanding of what that supply is and if there are any economic opportunities for development and incentives for landlords to buy property.
Essentially, the idea is for Portland to add more options for tenants and thereby reduce their prices.
How the Census Data Impacts Safety and Quality of Properties
Before pursuing this ruling, city officials learned from an example they saw in nearby Gresham, Oregon. In Gresham, landlords register their property, pay a fee, and the fee is then used to inspect the property. This resulted in an increased quality of rentals for tenants, which is better for the city overall.
The Mayor of Portland, Dan Wheeler, said that a similar measure could be coming to Portland with the increased revenue and accurate data of apartment space.
Bencivengo said the health inspections would be a great improvement for tenants, who often fear asking for maintenance improvements due to backlash from landlords.
With the inspections, there would be a transparent relationship about the properties and a threshold of quality tenants should expect.
Should I Care if I’m Not in Portland?
The short answer is yes. Seattle, Denver, San Diego, Kansas City are just a few examples of other cities who are considering adopting a similar program, too.
In Portland, the decision really came down to having better data for landlords and tenants.
“Quality data in our rental system is something that tenants and landlords have been asking for, and in the absence of this system, there has been no single source of reliable quality data.” – Portland Mayor Ted Wheeler
Whether you’re a business or a government body, better data means better decisions. So it’s realistic to expect other cities to follow suit and attempt similar measures to collect data.
What You Need to Do
If you’re in Portland, you don’t have to do anything just yet. When you file your 2018 taxes by April 2019, you can register your properties at the same time. It’s not mandatory, but if you want your city to have better data, you can take that step.
The form to register will be found in the same place as your tax forms at the City’s Revenue Division web page found here.
This will apply to every landlord in Portland, even if you only own one single unit. You need to register every property you have listed.
If you don’t want to register your properties in 2019, please note that you will be required to the following year – in 2020 when you file your 2019 taxes.
If you aren’t in Portland and your city does not have these laws, you don’t have to do anything at this time. We recommend continuing to educate yourself on your local landlord-tenant laws.
Be on the lookout for registration laws coming your way, and if you believe better data could benefit you as a landlord, you could also present this program to your city.
How Avail Can Help
By using Avail for your properties, you’ll have easy access to legal information and education that will make you aware of new laws in your city.
Avail is an app designed for landlords with less than 10 units. The app allows you to advertise vacant units, request rental applications and credit reports, sign leases, and collect rent all online. We also provide guidance, education, and support for every step in the rental process.
To learn more about the Portland ruling see the following news articles:
Portland will require landlords to register properties
Portland council voting on rental housing inventory database
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