By Nate Bernstein, Esq., Managing Counsel, LA Real Estate Law Group

INTRODUCTION TO THE SUBJECT OF REAL ESTATE TITLE FRAUD AND HOW YOU CAN UNWIND IT AND PROTECT YOUR CHAIN OF TITLE

Crooks can perpetrate a real estate fraud scheme to manipulate the title of your property in an attempt to rob you of your equity, and profit at your expense.    Real estate title fraud schemes can take on several creative forms- a forged grant deed, a forged quitclaim deed, fraudulent sale, recording deeds of trust for loans which you did not receive, elder abuse, undue influence, and or starting an unlawful foreclosure. Sometimes there can be several people involved with the scheme, especially if partial interests are transferred without your consent. A corrupt notary public may be a co-conspirator in the scheme. A family member also may be a ring leader in the scheme.   Another common scenario, is a “voluntary” transfer of title during a duress situation of a mortgage lender’s foreclosure before the trustee’s sale to delay the sale.    A borrower who is seriously behind on his mortgage is vulnerable and susceptible to abuse by title crooks who want to steal title for much less than fair market value on the eve of foreclosure.  Even if the foreclosure is stalled, the crooked transferee refuses to transfer the title back to you, and then tries to sell the property or lease the property without your consent.  

If you are the victim of real estate title fraud or loan fraud, you can and should file a criminal complaint with the city attorney or district attorney, but these government agencies cannot directly fix your damaged title chain through a criminal prosecution.   Even if the title crook is in jail, your title, unless restored, is still is defective and not marketable. 

You need to take prompt action to protect your title and restore clear title by filing a civil action.    In considering whether to file a civil action to clear your title, the first step is to review, what my law school real property professor called, “the current state of the title.” Get a real estate title checkup.  What is in a preliminary title report for your property ?  Has a fraudulent instrument been recorded in the county where the property is located ?   Has a fraudulent deed of trust been recorded ?  Who is involved in the title fraud, and who will be named as a defendant ?    Is there a wild deed in the chain of title that you did not sign and looks peculiar ?   Was your signature forged ?   Call a reputable title company and obtain a title report is a very important first step to obtain the county recording numbers for the fraudulent instruments.  

PULL OUT YOUR TITLE INSURANCE POLICY FROM STORAGE

When you purchased the property you probably received a policy of title insurance as a property owner.  If you have a title insurance policy, and you have been a victim of title fraud, it is highly recommended to file a claim with your title insurance carrier to seek relief and protection under your title insurance policy.  If the title insurance company accepts your claim, the title insurance company can review your title report, investigate the situation, and may appoint a real estate attorney who can file a lawsuit to clear the title. An owner’s title insurance policy is a very important asset protection device that should be obtained each time you purchase a property.  

SEEK INJUNCTIVE RELIEF IN APPROPRIATE SITUATIONS

In contemplating legal action, an important issue is whether you should file a lawsuit for injunctive relief to block future fraudulent action.   Injunctive relief is a court order to restrain a third party from doing something injurious to the title of your property.   Perhaps the title crook is trying to sell the property to a third party.    The claim and remedy of injunctive relief can ask a judge with local jurisdiction to block a sale or future transfer.    Filing for an injunction can be in three forms-  the form of a temporary restraining order or TRO- which asks for emergency relief immediately in a case,  and or preliminary injunction to stop the unlawful action well before trial, and or a permanent injunction- which prohibits the unlawful act at trial.   If you prevail in a preliminary injunction hearing, this can set the tone for a successful case, beneficial settlement, or favorable outcome at trial.  If you obtain injunctive relief you can record the court order or judgment at the County Recorder’s Office to give notice to the world that the judge has ordered the crook to stop the activity well before the trial date, and that any potential transferee could be named in a lawsuit and may be subject to the claims.    

RECORD AND SERVE A LIS PENDENS

If and when a lawsuit is filed, the plaintiff also must record a lis pendens at the County recorder’s office.  The definition, rules, and procedures about a “lis pendens” notice are found in California statutes, namely,    Cal. Code of Civil Procedure Sections 405-405.24. to  405.39. 

The lis pendens notice is then served on all party defendants and  parties with an interest in the property.  If recorded properly, the lis pendens notice will be in the chain of title with its own county recording number.  The term “lis pendens” is a latin term for “action pending.” The lis pendens provides notice to the world in the title profile that a lawsuit is pending, and that any subsequent grantee, subsequent purchaser, assignee, or lender, takes title subject to the lawsuit claims.  Generally, a lender will not make a loan secured by a title that is subject to a lis pendens.  Generally, a title insurance company will not write a title insurance policy if the company is aware of the lis pendens.  Recording and serving a lis pendens is a key step in protecting the property owner’s interest against future title transfers while a lawsuit is pending.    For more information about recording a lis pendens contact LA Real Estate Law Group. 

MAIN LAWSUIT CLAIMS TO ATTACK TITLE FRAUD

Along with injunctive relief, your counsel can file a lawsuit for such claims as quiet title, fraud, declaratory relief, and cancellation of instruments. These claims are the “bullets” for your attack on title fraud activity.   One legal resource for learning more about the nuances of quiet title actions is the website “LAquiettitleattorney.com.”    Also, please review California Civil Code 3412-3415.  California Civil Code 3412 empowers a judge to cancel a fraudulently recorded instrument-  This code section provides,    

“3412.  A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.”

As noted above, if you file a quiet title action, you are also required by law to record a lis pendens on the title, to provide notice that an action is pending with regard to the title of specific property.  In egregious cases, if you have applicable facts, you can also allege a cause of action for “slander of title”- this claim has the threat of punitive damages attached to it.  

CONCLUDING THOUGHTS ON ATTACKING REAL ESTATE TITLE FRAUD

If you have been the victim of real estate title fraud as to any property that you own, California civil law provides victims with claims and remedies that can be asserted to protect your property or to get the title to your property back in your name.  To file a civil action in proper form with knowledgeable real estate counsel, you will need to have some reasonable financial resources to sue the responsible defendants, and to move the case expeditiously in front of a judge in your local jurisdiction. If the claim is covered by title insurance, that is highly beneficial to reduce the expense of title litigation.     Experienced civil judges see these types of cases fairly often, and are interested in protecting the public.     Making a criminal complaint is also an important step, but a civil action needs to be filed to fix the cloud on your title, and to prevent block future transfers. 

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy/creditor’s rights matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.   Nate Bernstein is a 25 year veteran Los Angeles real estate and business attorney and trial lawyer.   Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options.    He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation.     Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law.    Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases.  

By Christopher Miller, MBA, Specialized Wealth Management

In addition to income, we landlords also enjoy the appreciation of our investments.  This appreciation, with the use of leverage, accounts for how many of us have made our fortunes.  My client list includes a former gas company technician, several engineers and many former teachers who have become multi-millionaires as a result of their appreciating real estate investments.

This week, I am going to talk about where this appreciation comes from.  This article was inspired by a conversation I had with a client last week.  He asked me “Will I get better appreciation if I invest in California?”  We will get an answer for him later in the article.

Investment Properties are Different than Residences

It is important to point out that your house is valued differently than investment property is.  Although we real estate investors sometimes buy single family houses to rent for income and growth potential, most home buyers do not – they are simply buying a place for their family to live.  Most homebuyers buy houses the same way they buy cars or a refrigerator:  by look for one with the features they desire.  Wealthier buyers can afford more, and often buy more expensive models.

An investment property, like an 8-unit apartment building, is valued based on the income that it can produce.  If you own an apartment property that is empty and want to sell, every real estate broker you meet with will suggest that you lease it up before listing the property.  This is good advice:  real estate investors buy property for the income it generates, and they will pay a multiple of that income for the property.  When you use a Gross Rent Multiplier (GRM) or a Net Operating Income (NOI) measurement to value a property – you are placing a dollar value on every dollar of income that the property generates.  No matter which measurement you use, more income = a higher value.

How Appreciation Happens

Now that we have established that higher income = higher value, we see that rising income in the future can lead to rising values in the future.  A property with rents that doubled over 25 years will have appreciated faster than one with rents that only rose by 70%.

Where Can We See More Appreciation

There’s a reason that all stockbrokers’ literature contains the disclaimer “past performance is no indication of future returns” – because it certainly is not.  (Although he’ll tell you it is.)  Sears stock cost $6.07 / share in January of 1981 and hit $51.95 in November of 2004.  Not counting dividends or proceeds from the spin-offs on Dean Witter and Allstate in the 1990’s that is a 9.78% annual return from appreciation alone.  Pretty good, but what happened over the next 23 years?  (It looks like Sears died 15 years in.)

In the same way, we shouldn’t expect the hot real estate markets of the past to continue as they have.  Orange County exploded between 1985 and today.  Can we expect the same level of growth over the next 35 years?  That wouldn’t be reasonable – there isn’t enough room left to build.  When we read about sky-high rents in San Francisco; can we assume they will continue to grow at the same rates into the future? 

Will We See Higher Appreciation In California?

Let’s move back to my investor’s original question.  My answer is that nobody has a crystal ball that tells these things, but let’s take a look at where we are:

California has seen explosive growth, but we are running out of land to develop and places to put everyone – particularly on our freeways.  At the same time, our residents are fleeing to states with lower costs of living that look like California did many years ago (wide open and ready to grow.)  Prices simply can’t rise until nobody can afford to live here – they will need to naturally correct by slowing their rate of growth.

Certain areas in Texas and Florida, and the Atlanta suburbs, on the other hand; look like Orange County did back in 1985.  Businesses and people are moving in, and there is plenty of space to develop.  I think a good case can be made that rents will grow faster in these areas than in California – and therefore we can see more appreciation.

Both of my sets of grandparents were from Ohio – from Cleveland and Toledo.  John D. Rockefeller – once the richest man in the world, chose to live (and be buried in) Cleveland.  Both of these cities saw fantastic growth in the early 20^th century.  Things changed by the middle of the century, and now my grandparents’ former homes aren’t worth much more than they sold for in the 1980’s.  I certainly don’t think that California is going the way of the rust belt cities.  My point is that things change and we, as investors, want to be where the positive change and growth is happening.  If you have any questions, my office number is (877) 313-1868.

Christopher Miller is a Managing Director with Specialized Wealth Management and specializes in tax-advantaged investments including 1031 replacement properties.  Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator and as an advisor helping clients through over three hundred 1031 Exchanges.  Chris has been featured as an expert in several industry publications and on television and earned an undergraduate business degree and an MBA emphasizing Real Estate Finance from the University of Southern California.  Chris began his real estate career in 1998, began working in the partial interest industry in 2001 and has been a broker advising clients since 2003.  Call him toll-free at (877) 313 – 1868.

This does not constitute an offer to buy or sell any security.  Investments in securities are not suitable for all investors. Investment in any security may involve a high degree of risk and investors should review all “Risk Factors” before investing. Investors should perform their own due diligence before considering any investment. Past performance and/or forward-looking statements are never an assurance of future results. Examples given in this article are for illustrative purposes only.  Individual results may vary based on IRS tax changes, market conditions or tenant occupancy.  Securities offered through Emerson Equity LLC, member FINRA/SIPC.  Emerson Equity LLC is not affiliated with Specialized Wealth Management. California Insurance License # 0I80282.  Copyright 2019 Specialized Wealth Management. All rights reserved.

by Kari Negri

I am not an attorney.

Dear SKY, how can I Collect Past Due Balances in Rent Controlled Buildings?

Many tenants in Los Angeles, California enjoy the advantages of rent stabilization and rent control. It keeps the amount of a rent increase ridiculously low while they live in a rental property. 

 In Los Angeles California, rent control laws allow Housing Providers to increase the rent by a maximum of about 3% for several years now.  This year, THE CALCULATED ANNUAL INCREASE PERCENTAGE EFFECTIVE JULY 1, 2019 THROUGH JUNE 30, 2020 IS FOUR PERCENT (4%) while expenses increase by about 7%.

As rent is due on the dates specified in the lease agreement, a tenant is bound to pay the rent on time.  If your tenant doesn’t pay rent on the due date, you can charge a late fee but it is not really enforceable and any late fees that they have paid even willingly should be deducted from any 3 Day Notice to Pay or Quit (per our attorney) that you serve and intend to begin an Unlawful Detainer. Under LA rent control laws, a Housing Provider can charge a 6% late fee, in some areas like Santa Monica and West Hollywood the amount is less – about 1%; but how do you collect it when technically you can’t.

Despite the law, tenants refuse to pay post fees including  late fees, administrative fees or repair reimbursement fees for damages they caused or created. For most of them they think it is unfair and the rent control laws protect the tenant and not the Housing Providers which makes collecting past due balances in rent controlled buildings a daunting task.  Add to that, most judges will always side with the tenant and there are some laws on the books that make them liquidated damages and therefore uncollectable.

This situation doesn’t only disrupt the finances, but also causes inconvenience to the accounting department or a record keeper. Fortunately, you can diminish the issue of late fees collection in rent controlled buildings if you use the following tips.

Don’t Forget to Include Late Fee Policy in the Lease Agreement

If your tenant is in California, make sure you check the state laws and the specific laws in the city your building is located. This will help you determine the percentage of late fee you can charge.  Make sure you have the correct amount in your lease. 

Plus, check to see if there is a waiting period (“grace period”) before sending your tenants a late fee notice. Once you understand the law, include a late fee policy in the lease agreement – it must be reasonable. If you miss this point, you cannot charge or collect due balances.

There are some general guidelines most states follow but in a rent controlled building you need to know what the law is in your city specifically. 

Add Clause “Allocation of Payment” in the Lease Agreement

Having this clause in the rental agreement suggests that any fee you collect for next month’s rent will be counted as unpaid fees of the prior month – this could be helpful in getting them from your tenant but the court will not look at it this way here in Los Angeles. In other words, the clause could make it easier to collect these fees, but to enforce them is another story.  Filing a lawsuit against tenants for his/her unpaid dues even for repair reimbursements or pest control issues is nearly impossible except possibly in small claims court.

Remind Tenants Constantly They Owe

It is clearly one of the simplest ways to collect past due balances from the tenants. Talk to them and/or send them notices each and every month that they have past due balances, whether it is unpaid rent or late fees for repair reimbursements – refer to your lease as well as to the applicable rent control laws in your city.  At least for rent – you can file an Unlawful Detainer or UD or Eviction but never include a late fee your resident has paid when you fill out your notice to evict.

Withholding Security Deposit

Withholding money from the security deposit has become much harder to do where the courts are concerned as well.  We used to be able to recover money out of the security deposit for damages, any cleaning or repairs above normal wear and tear, late fees, pest control issue (caused by tenant), past due rent, etc. when your tenant refused to pay past due balances. However, now SKY has had a judge tell us that only damages, cleaning and rent can be deducted from the security deposit.  It is important that you explain (in writing) the reason of withholding ANY AMOUNT FROM the deposit.  All of this is will not keep us from trying to get the correct amount paid by a tenant but all of these things make it harder every day for a Housing Provider to collect the money due to them and before proceeding you should check with an attorney so you do not waste your time.

Overall, hopefully the above tips are somewhat effective for collecting past due balances and managing your property collections smoothly even if you have problem tenants and the laws in California are getting more and more impossible.

If you have a question, please email me at Kari@SKYprop.LA

Although I am not an attorney, I am a very qualified property management company with 26 years of experience so if you have questions, you can always email me and “ask SKY” at Kari@SKYprop.LA.

By Stephen C. Duringer, Esq., The Duringer Law Group, PLC

Question         

Street parking spaces are few and far between near my building. My apartment complex has just enough parking spaces for my residents to each have one space.  If a resident has more than one car, they must try to park it on the street.  It has been working out fine for years but now I have this one tenant who refuses to follow the rules.  He is constantly parking his second car in someone else’s assigned spot.  I’ve told him several times but he just ignores me.  What do I do?

Answer                       

Your community rules and regulations should specify your parking rules, specifically stating that only one vehicle may be parked on the premises, and that all parking is assigned.  Ensure that you have the proper signage at the entrances to the parking area.  Most cities require the sign to contain certain restrictive parking language, plus the local police department telephone number, and the California Vehicle Code section that provides for towing of unauthorized vehicles.   Contact your local police department for their specific requirements, as they vary from city to city.  Next if you know the offender, then provide a written warning of the violation.  Attempt to serve it at his residence, post it on his door if he’s not in, and also put the warning on the windshield of his car. If practical, take and save a photograph of the warning on the vehicle windshield, because the offender will always claim that you did not give prior notice before towing.  If he fails to remove the offending vehicle, the car may be towed.

Question         

I rented an apartment to four roommates quite a while ago.  One of the four is now moving out, but the other three want to stay.  The one moving out is demanding that I return his portion of the security deposit, he says that he paid it so he should get it back.  Do I have to?

Answer

No, the security deposit remains with you as long as any of the roommates remains in possession of the rental unit.  Often, owners and residents will enter into an agreement replacing one resident with another, thereby removing the one original resident from the lease. The agreement will further provide that the ‘new’ roommate pay the ‘old’ roommate his portion of the security deposit.  Absent a written agreement to the contrary, the owner should retain the entire security deposit, then when all the remaining roommates vacate, the refund check should be made payable to all four of the original roommates named in the rental agreement.    

Question         

I’ve been doing my own prospective resident screening for quite a while now.  I think I’m pretty thorough, but I’m just not sure any more.  I’ve been noticing more and more inconsistencies in the applications I review, and I even came across one who out and out lied about who she was!   I’m concerned about all of the stories I’ve heard about identity theft.  I just can’t afford to make a mistake.  What can I do to weed out these undesirables and minimize my chances of being fooled?

Answer                       

Identity theft has been a growing problem for several years.  Landlords have increasingly been victimized by prospects posing as someone else, using false or fraudulent information.  Often times, these thieves take advantage of a desperate landlord, eager to fill a vacancy, or a newbie landlord, who hasn’t gone through the school of hard knocks yet.  Completed and signed applications by all adults are a must.  Verify the information provided.  Personally inspect some form of U.S. government issued photo identification.  Make a photo copy of the ID and keep it secured with your file.  Verify that the social security or the tax ID number provided by the prospect is actually his number, and is valid.  Run and thoroughly review, an eviction and credit check through your apartment association.  If practical, go outside to the prospect’s vehicle, and verify that the license number on the car he just drove, matches the license number he just wrote down on the rental application.  Many ‘hands on’ owners will actually visit the prospect’s current residence unannounced, prior to approval to ensure the prospect actually lives there, and doesn’t just sleep on the couch.  You’d be amazed at what you will learn by a simple visit.  Inform all prospective applicants that you have a policy of taking a picture of all residents for the tenancy file.  Follow through with this policy and actually take a picture of all proposed occupants and keep the picture in your tenancy records. When verifying employment, and residency, ask for a description of the person, and compare the description with the person who filled out the application.  Ask for original utility bills, electric, telephone, cell phone, cable, anything with his name on it.  All of these are tools that may be used in proper screening to avoid renting to an identity thief.  Use these tools consistently, and apply them equally to all applicants, and your risk will be dramatically reduced.

Question         

What types of repairs can I require the tenant to take responsibility for?

Answer                       

A landlord and tenant can agree, in writing by the rental agreement, to allocate responsibility for minor repairs between them.  Often landlords and tenants may agree that certain items, amenities, will be the tenant’s responsibility to maintain. These may include refrigerators, washing machines, pools or spas, air conditioning, and minor plumbing issues.

This article is presented in a general nature to address typical landlord tenant legal issues.  Specific inquiries regarding a specific situation should be addressed to your attorney.  Stephen C. Duringer is the founder of The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms in the country. The firm has successfully handled over 285,000 landlord tenant matters throughout California and has collected over $200,000,000 in debt since 1988. The firm may be reached at 714.279.1100 or 800.829.6994.  Please visit www.DuringerLaw.com for more information.  

By Edward Ring

Solutions to California’s housing shortage invariably focus on increasing the density of preexisting cities and suburbs. Legislative solutions include SB 375, passed in 2008, which “incentivizes” cities and counties to approve high density land developments, and the failed (this time) SB 50, which would have forced cities and counties to approve high density development proposals. 

By Megan Eales Monroe

Today, anyone can stream a TV show on-demand, click a computer mouse to order a week’s worth of groceries, or open an app on their smartphone to catch up instantly on local and world news. Yes, we live in an on-demand economy, where consumers expect reliable, instantaneous information.

You already know that it pays — literally — to have all of your properties leased out to renters. But, have you considered how this on-demand economy will revolutionize the real estate industry as well, especially residential leasing?

Would-be residents want information and responses to property listings the same way they want everything else in their lives — fast. From fast replies to following up with interested prospects, here’s a look at five ways you can use AI to improve your lead-to-lease conversion process, filling vacancies fast and bringing your operations into the on-demand economy:

1. Respond to Inquiries as Fast as Possible

The faster you’re able to respond to an inquiry, the less likely it is that you’ll lose out on a qualified renter to the property down the street. And we’re not just talking about within a few hours, we’re talking about within minutes. In fact, research suggests that landlords who respond to inquiries within one or two minutes are up to 40 percent more likely to directly engage with a prospective renter. And while you may not think that waiting even 10 minutes to respond to an inquiry is a big deal, research shows that as many as 20 percent of prospective renters will have already moved on to a new property by that time.

Although a fast response time makes a big difference to your lead conversion rate, it’s not always easy for leasing staff to stay on top of a high volume of inquiries. With leads flowing in from your website and third-party listing sites 24/7, including weekends and holidays, an instant reply to every prospective renter isn’t always humanly possible — though it is possible when teams can collaborate with Artificial Intelligence.

By leveraging recent advancements in AI technology, you can actually reply instantly to each inquiry around the clock, and not just with a stale canned reply or one-dimensional chatbot. New innovations have made it possible for Conversational AI to actually respond intelligently to a variety of questions about open listings and help leads actually schedule showings, creating a personalized, on-demand experience for prospective renters.

2. Qualify Leads Efficiently

Once you have an interested renter, you need to determine whether or not the property is the right fit for them. You don’t want to find out that they’re planning to move in with their dog after showing them a unit that isn’t pet-friendly.

To avoid spending valuable time and resources on a lead who isn’t the right fit, you need a system in place to pre-qualify them before investing any further time in them

Set consistent criteria for prospective renters, and make sure you communicate this information with them upon first contact. You should also include as much information in the listing as possible so they have accurate expectations before they reach out.

However, as every leasing agent knows, prospective residents don’t always read the listing thoroughly before they call or email. Conversational AI can also alleviate this challenge, by asking important qualification questions and answering other questions to help potential residents determine if the unit is the right fit.

If all checks out for both parties, then you can proceed to the showing. Otherwise, you can save time and go your separate ways, or — see if they are a good fit for a different unit.

3. Remember to Cross-Sell

Don’t write off a potential renter if they aren’t a good fit for the property they initially inquired about. Instead, see if they might be a good fit for another property that you own or manage. By cross-selling, you can turn more leads into leases by offering other options.

This is another opportunity to leverage Conversational AI by automatically cross-selling other vacant units that are available. AI can remember the resident’s answers to questions and recommend another unit or property that would better meet their needs, then answer questions and schedule a showing there instead.

4. Follow Up

Following up is an important part of trying to fill vacancies, but research shows that many property managers aren’t doing enough of it. According to Zillow, about 30 percent of property managers follow up with would-be residents just once after the initial point of contact. However, their research indicated that the most effective way to convert leads to leases is to follow up five times within four days of initial contact.

If you follow up only once, consider adding additional touchpoints to keep leads engaged beyond the initial interaction. This doesn’t all have to be done over the phone, either. You can send follow-up e-mails, text messages (if given permission) or even by mail.

Following up with would-be renters is another way AI can pay big dividends. Conversational AI can automatically follow up with leads on a set schedule, using the communication channel they most prefer.

5. Bring Leasing Online

Still relying on printers, scanners, and fax machines for would-be renters to go through screening, submit applications, and sign leases?

It’s time to catch up to modern times. If you don’t yet have an online leasing platform that makes it possible for renters to submit an application, consent for screening, pay application fees, and even sign their lease online — then it’s time to invest in digital leasing.

By letting renters progress through each step of the leasing journey when and where they please, you’ll be sure to wind up with more signed leases, and decrease the amount of time your units sit vacant.

When your leasing flow is digital rather than offline, Conversational AI can even keep residents moving through these steps after the showing is booked — allowing your team to focus on the big-picture rather than managing each step of the leasing flow manually.

Make the most of these five strategies, and stop letting your properties sit vacant because of inefficient follow-up and repetitive manual processes. Do it right, and it can even save time for your team and increase your cash flow.

AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money.  Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.

by Nick Schoch

Reviewing your portfolio of investment properties should provide a sense of satisfaction. Thanks to your decades of hard work, your portfolio generates cash and operates like a well-oiled machine. But would this continue without you? Is your spouse or successor up to speed on how your portfolio operates? Do they know the addresses for each property you own? Will they be surprised when something you consider routine occurs at one of your properties?

You know it is inevitable, so don’t miss an opportunity to create a seamless transition. One that allows the people you care about to avoid the stress that comes with sorting out your portfolio and figuring out how it works. Even if you have a property manager, their focus is often limited to the on-the-ground property operation and not high-level concerns like strategy, finance, or long term capital expenditures. All this tacit knowledge that helped you build your portfolio is a treasure. Help your successors by creating a map to that knowledge.

The usual estate plan with a will and trust is missing key information during a critical transition. A roadmap to understand how your portfolio operates would help fill so many of those often-overlooked gaps. Below are five essential elements to consider adding to your estate plan:

1. Schedule of Real Estate Owned.

Create and maintain a schedule of real estate that provides detail for each property you own. The schedule should show each property’s address, property type, property manager contact, number of units, number of occupied units, gross and net expected income, lender, outstanding loan balance, and whether you have impounds/escrow payments for taxes and insurance. Knowing your portfolio is half the battle for your successors to handle ongoing management. You can find templates online or use the simple template on my website.

2. List of Trusted Advisors.

Maintain a list all the contacts that support your portfolio. Your list should include your property manager, attorney, insurance agent, loan advisor, maintenance team, and tax advisor. Include each contact’s name, phone number, and email address. Even if you handle some of these areas yourself, you should not expect your heirs to have similar expertise unless they’re already assisting with managing your portfolio. Help your successors get their arms around managing your portfolio by listing experts that you would trust in helping them manage your portfolio if you were not available.

3. Instructions with List of Key Documents.

Maintain a letter of instruction to your successors that (i) explains how you manage your portfolio and (ii) provides access to key documents. Your letter of instruction should explain your routines so that your successor can maintain the portfolio cash flow. Include the schedule of real estate (see #1) and consider providing additional key documents for each property such as deeds, loan documents, insurance coverage, bank statements, rent rolls, and accounting records. Your successor will need this information to manage the property and settle your estate. After you organize your information, consider storing it with your attorney or trusted estate advisor so they can quickly share it with your successor when needed.

4. Staggered Loan Maturities.

Try to avoid having your property loans mature within 6-months of each other and maintain at least 3-years of remaining loan term on each property. Better yet, consider financing your properties with full term loans instead of ones that require a bullet or balloon payment at any point. This way your properties will naturally amortize the loan balance until it is paid-off. Even if the fixed rate period is only 5- to 10-years, the additional term provides you flexibility when there’s another downturn and lenders step out of the market. Furthermore, your successors won’t have to deal with a maturing loan that requires a significant payment in the midst of the transition.

5. Pre-Negotiated Succession Language.

By default, most loans provide the lender the right to demand full repayment upon the death of the borrower or a guarantor. This can cause your whole portfolio to come due and put quite a burden on even strong balance sheets. You can avoid this by asking your lender to alter the due-on-death clause to allow for your successors to take over the loan. Consider that Federal law allows relatives inheriting 1-4 unit mortgaged homes to take over their loan. Your goal with your commercial loan is to get to a similar place so that your heirs won’t have to come up with cash to payoff a lender in the midst of settling your estate. Remind the lender that their primary repayment source comes from the property’s stream of recurring rental cash flow, which remains unaffected by the transition. If the loan is recourse, the lender may ask you to commit to providing a replacement guarantor with acceptable wherewithal. This is still better than your successors having to pay off the loan before they’re ready. Lastly, approaching the lender with this request demonstrates a level of planning beyond the average borrower. It should give them increased comfort that you have a succession plan that considers how you intend to repay your loans.

These five simple elements will help minimize the stress of taking over your portfolio. You probably already know you need to do these things. I hope this article spurs a conversation with your trusted estate advisor about integrating these elements in your estate plan. The ones you love will be grateful you did.

Nick Schoch is an independent loan advisor for 5+ unit apartments and a landlord located in San Diego, CA. You can download Nick’s Apartment Loan Handbook free at his website: nickschoch.com. If you have questions about this article or financing an existing property or purchase, you can contact Nick at nick@nickschoch.com or call/text (760) 201-6758.

By Daniel Bornstein

In several past articles on fair housing and Section 8 tenancies, we said that no group should be painted with a broad brush and that discrimination lawsuits are the product of preconceived notions about classes of people.

We might be seen as hypocritical, then, when we outline five profiles of tenants. Not so fast -these personalities span every class, religion, color, source of income, and other characteristics. Indeed, tenants are individuals, and after managing thousands of landlord-tenant relationships, we can provide a contextual framework on where individuals fall into this spectrum.

The political tenant

This tenant inherently sees the landlord-tenant relationship fraught with tension because it begins with the presumption that the landlord is powerful, and the tenant is weak. When the landlord communicates with the political tenant, the tenant is always wary that the landlord is attempting to exploit him or her.

The silent tenant

The silent tenant is just too busy to engage with the landlord and as a result, the landlord may be obstructed in the relationship. For example, the landlord may send letters that go unanswered. When the time comes to make repairs and proper notice is served on the silent tenant, perhaps the landlord still cannot gain access to the unit – the tenant just doesn’t want to be bothered.

Passive aggressive tenant

The passive aggressive tenant can be disappointing because these type of tenants are nice as pie and you think you have a great relationship with such pleasant people but in the end, the tenant takes a surprising turn for the worse.

Passive aggressive tenants are very polite and engaging when you interact with them and they seem to be ideal residents until asked for some sort of responsibility in return as part of a give-and-take relationship. Once they are reminded of their responsibilities, the passive-aggressive tenant takes a hostile stance.

Although they appear to be very nice when there are no underlying issues, these type of tenants will suggest that the landlord has done something wrong to them when concerns are raised or instructions made by the landlord.

The dysfunctional tenant

The dysfunctional tenant’s personal life is constantly embroiled in crisis, making it difficult for them to properly engage in a landlord-tenant relationship. Oftentimes, the dysfunctional tenant will articulate the source of dysfunction to the landlord, in an attempt to gain empathy or sympathy. When the personal crisis leads to nonpayment of rent or other problems in the rental unit, the dysfunctional tenant has no shortage of excuses.

The fifth profile is the perfect tenant who religiously pays rent on time, responds to requests, they are personable and honorable, and that’s the type of relationship landlords would most likely expect.

Let’s move on to how rental property owners can respond to each persona.

As for the political tenant, communication should not be about the relationship itself, but about best practices in the relationship. If, for example, the tenant who has politicized the relationship has not paid the rent on time, you can address the failure to pay rent by saying, “you promised to pay the rent on time, we have a contract – why have you failed to do so?” Both the landlord and tenant have mutual responsibilities, and it is important to set expectations based on this contractual obligation without getting bogged down in the acrimony the political tenant tends to lean towards.

Documentation is always prudent, but even more so with the silent tenant. When tenants do not have the inclination to interact with the owner, the landlord should document their attempts to reach the tenant and amplify their written correspondence with these muted residents. What we’d like to see at Bornstein Law is a paper trail that shows a good-faith effort on behalf of the landlord to have fluid dialog with a tenant who does not reciprocate, so that when there is a conflict later on – for example, when the silent tenant does not grant access to make repairs because he or she has been uncommunicative – you have documentation that shows you as a landlord did your part to have open transmission of information.

When the passive aggressive tenant becomes animated and the landlord believes the tenant is incorrect, landlords should not get involved with drama but instead, pacify the situation. These tenants have a propensity for long-winded dialogue and emails, which can consume a lot of time and energy. The best practice is to not enlarge the discussion but to pacify the tenant by agreeing to disagree, use limited language, and deflate the aggression by moving on.

What landlords should know about dysfunctional tenants is that it is important to compartmentalize their empathy towards a tenant, which can diminish the control of the situation, and the fundamental objective of effectively running a rental business. The key to dealing with dysfunctional tenants is to see beyond the underlying crisis in their life and be firm with expectations.

More than a practitioner in landlord-tenant law, Daniel Bornstein is the Broker of Record for Bay Property Group, a property management company that protects and optimizes the investments of landlords. He is also renowned for his educational seminars and is called upon as an expert witness in complex real estate litigation matters. To avoid or resolve friction within rental units and cauterize risk, Daniel is happy to dispense informed advice to owners, property managers, and other real estate professionals looking to survive and thrive in today’s challenging and litigious rental housing market. Call 415-409-7611 or email daniel@bornstein.law. ​

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Widget’s Way featuring Patti “Widget”

• If you are unfortunate enough to receive a letter from your tenants attorney, do not respond, do not pass go, do not collect $200.00. Send the letter to your own legal counsel for review and direction. Sometimes what you say can and will be used against you in a court of law. Sometimes they may try to lead or manipulate you to do the wrong thing, just so they can use it against you. Simply said it is over your pay grade.

• Remember the tenant’s rent is due on one specific day as per your rental agreement example rent is due on the first of the month. It would then be delinquent on the 2^nd of the month. Your grace period is when the late fee is applied to the account, not when the rent is due.   

• Be very careful whom you speak to. Example if someone other than the tenant on the written agreement starts asking for keys, requesting maintenance, try’s to negotiate terms , etc. remember you should not speak to anyone other than the tenants on the agreement. And you should not disclose any information to anyone other than the named tenants.  Good choice of words might be, unfortunately you are not listed on the rental agreement therefore you cannot act on the residents behalf.  I also cannot discuss any of the tenancy with you because you are not on the contract. This trick also works well with overbearing real estate agents trying to assist their client by telling you how it’s going to be handled.

• Don’t tell the neighboring residents anything about a tenant you are evicting or what’s going on with them. That is personal private information, so please keep your lips closed.  Good choice of words might be Thank you for bringing that to my attention, I will let our legal counsel know.

• Stop using email, text messages and your mouth to get you into trouble. Do your job and serve a notice about the issue. Kill a tree. Sending a text message as a 24 hour notice to enter is not valid in a court of law.  Using an email or text or your mouth to terminate tenancy or notify of a lease violation is not valid it can and may be used against you.  Again kill a tree.  The less electronic communication and verbal vomit the less likely the tenants will cry harassment or pull out of context, alter the words in photo shop.  Your job is to serve a notice for violations, so please do that instead of emails, texts etc. If what you are trying to say to your tenant is not possible with a notice then maybe you shouldn’t be saying it.

• There is 2 parts to a breach of covenant notice that is non-monetary.  That’s right I said two parts.  Example, you serve a 3 day covenant notice for unauthorized pets in a unit. Make sure that you are also serving the 24 hour notice to come in and inspect after the notice expires.  If you get into a court room the tenant’s attorney may ask you “When did you re- inspect and where is your supporting documentation?)  This is not the time to have a bad case of the deer in the headlights look.
• Remedy upon notification, means correct it yesterday, not tomorrow. So when dealing with a habitability issue remember this the tenant does not owe any rent until it is corrected so don’t dilly dally on the repair, because it is expensive to you!

• Providing reasonable accommodations when there is a habitability issue at the property.  Please take note when finding them a hotel or a different place to stay during the repairs means they don’t owe rent for that time period, you pay for the hotel, they should also be given a food credit of $10.00 per person per meal per day and reimbursed any laundry expenses.  Please talk to your legal counsel for proper credits to be given, considering the circumstances involved.

• Please refrain from acting on emotions; I know that it is extremely difficult especially in the heat of the moment or in a conflict. You may feel as if you have been backed into a corner or put on the spot, remember you don’t have to have all the answers in a split second so use a fogging technique such as, Thank you for bringing that to my attention I will make sure that my business partner is aware of your concerns and get back with you.

• New Law 9/1/19 With landlord tenant laws changing whenever the wind blows, we need to change with them to stay on top of things, in the past we may wait until the 10^th or 15^th of the month to serve a 3 day notice to pay or quit, on 9/1/19 when the law changes and we are  no longer allowed to count weekends or holidays in the expiration of the notice or also in the answer period of an eviction, we will see this process take longer, So we may need to change our business practice with the law and serve our 3 day notices sooner.  Like on the 2^nd of the month if the rent is due on the 1^st.

• Independent rental owners looking to hire a property management company. Please interview them, ask questions, ask to see real-estate license credentials and any other licensing, certifications, fair housing training etc. Remember you as the landlord are ultimately responsible. If the manager violates the law or discriminates that will most likely rest on your shoulders. 

• Fee management property owners when bringing on a new account and speaking with that owner, for your own benefit and knowledge there are a few very specific questions that you should be asking the owner. Such as, has your tenant reported bed bugs in the last 6 months? Have you received a letter or fine from code enforcement or from the city in the past 6 months? Have you received a call or complaint from fair housing in the past 6 months? Are you currently named in any pending law suits regarding your investment property?

• Tenant screening the only thing that you have as a tool when screening a tenant that cannot be altered or modified by the tenant is the credit report. Tenants can alter id’s they can buy fake paystubs online; even purchase bogus bank statements on the internet. The phone numbers they provide to you to call and verify the information on the application, you could be calling a friend or family member. Utilize google to get the phone number to verify employment or look on the credit report to see who the current employer is, that credit report tells you so much info, if you just listen to it.

Patti has over 23 years’ experience in the property management industry. She is an independent rental owner, a property manager by trade, and has been a regional property manager for over a decade. Patti is an advisor and considered an expert in the property management industry. Patti is actively involved with several apartment associations; she is a key note speaker at conventions, writes articles for their publications and is an educator in their training classes. She has been invited to judge several different types of industry awards. Patti also holds various certifications and licenses on both a state and on a national level, Including a CA Licensed Real Estate Broker. She is also a repeat guest speaker at UCLA.

By Becky Bower

California’s 2019 state legislative session has a projected end date of September 13, 2019. Keep in mind that this state has full-time legislators, allowing the legislature to meet throughout the year after adjourning their regularly scheduled sessions. 

*Bills with an asterisk are technically still active, but were either held under submission in committee, are still in committee, or the author withdrew the bill from committee. 

PASSED: Tenant Screening Fee for 2019 

The total allowed applicant screening fee has increased by $1.81 since last year. Application processing fees cannot exceed $50.94. This adjustment is made based on the changes to the Consumer Price Index. 

PASSED: City of Glendale’s “Right to Lease” Ordinance 

See Ordinance Info 

This ordinance was revised in February to include relocation fees. Relocation fees apply to pre-1995 buildings with tenants choosing to vacate after a rent increase of over 7%. For buildings with 3-4 units, the fee is 3x the actual rent. For 5 and more units, the fee is 3x the amount of the rent after the rent increase. With tenants who have an overall household income equal or less than the median income for Los Angeles County (plus 30% of the AMI), the relocation fee will be based on the length of occupancy. It follows: 3-4 years of occupancy equals 4x the amount of the rent increase, 4-5 years equals 5x the rent increase, and 5+ years equals 6x the rent increase. 

This ordinance also requires rental property owners to offer a 1-year lease to rental applicants (which an applicant can reject and enter into a shorter period as agreed upon). Current tenants in good standing are required a 90-day renewal notice that also includes the 1-year lease term. This too can be reduced to a shorter period at the tenant’s request. 

PASSED: Inglewood’s Temporary Rent Caps and “Just Cause” Eviction Policy 

See Interim Ordinance  

In early March, the Inglewood City Council temporarily capped rent increases at 5% for pre-1995 apartments. It also imposed a “just cause” eviction measure. These temporary ordinances should last 45 days (expiring mid-April) but could be renewed by the council for up to a year. 

PENDING: Criminal Records on Rental Applications 

AB-53* 

Similar to “Ban the Box” employment laws, this bill would prohibit the property owner from inquiring about, or requiring the tenant to disclose, any criminal records during the rental application process. After the initial rental application phase, landlords can request a criminal background check. If the owner considers denying an applicant based on their criminal record, they are required to provide the rental applicant a written statement as to the basis of their possible denial within 5 days of receiving the background report. The rental applicant will then have 2 days to provide evidence of record inaccuracy, evidence of rehabilitation, or other factors. The owner would then need to reconsider within a specified time, and if the decision to deny holds, the landlord would need to notify the rental applicant in writing. AB 53 also requires rental property owners to include, in the application, a notice of the use of criminal records as part of the screening process. 

PENDING: “Just Cause” Eviction Bills 

AB-1481 and AB-1697 

This year, there are two proposed “just cause” eviction bills. While both propose to limit evictions to specific causes (like failure to pay rent or a breach of the lease) and include some “no fault” eviction causes (like demolishing the unit or withdrawing from the rental market), there are a few differences between the two bills. AB 1697 would only apply to tenants residing for 10 months or more, while AB 1481 would apply to all tenants. AB 1481 also bans the owner’s right to terminate the tenancy to move into the unit if the tenant is 60 years or older unless the tenant grants permission or if the lease provides notice of this tenancy termination option. 

Both bills were moved to inactive file by Assembly Member Tim Greyson (D-14^th district). 

PENDING: Rent Control Bills 

AB-1482 and AB-36* 

Surprise, surprise… rent control is back! As of writing, AB 1482 would cap annual rent increases by 5% plus the percentage change in the cost of living. Rental property owners would be prohibited from terminating a tenancy to avoid the rent increase cap. If passed, these provisions would be active until January 1, 2030. 

As AB 36 stands now, this bill would allow local governments to cap rents on single-family rental properties (exempting landlords with 10 or fewer units) and on construction that’s at least 20 years old. 

On April 10, 2019 Long Beach became the latest city to push for an ordinance that places a rent cap, plus a base relocation charge and “Just Cause” Eviction rules. 

PENDING: Extended Notices for Rent Increases 

AB-1110 

For a month-to-month tenancy, existing law requires that if you increase the rent by 10% or less, the landlord has to provide at least 30 days’ notice. For rent increases of more than 10%, the landlord has to provide an additional 30 days, to a total of 60 days’ notice. AB 1110 would require 90 days’ notice for rent increases of more than 10% but no more than 15%. For increases of more than 15%, landlords would have to provide 120 days’ notice. This bill has moved on to the Senate. 

PENDING: Keep Californians Housed Act 

SB-18 

Existing law requires a tenant within a month-to-month lease at the time the rental property is sold in foreclosure to be provided 90 days’ written notice. Tenants within a fixed-term lease (like a 12-month lease) would have right to possession until the end of the lease term, unless in specified circumstances. This existing law expires on December 31, 2019, however, if SB 18 passes, these provisions would stay in effect indefinitely. 

PENDING: Allowances for Tenants to Shelter those at Risk of Homelessness 

AB-1188 

This bill would permit a tenant to temporarily allow a person at risk of homelessness to live with them for up to 12 months, regardless of the lease (written consent by the property owner). Landlords can adjust the rent payable under the lease as compensation for the occupancy of the extra person, and which terms would need to be agreed upon in writing. AB 1188 allows owners to establish rights and obligations for the person at risk of homelessness, the tenants, and the owner. This includes making the tenant liable (to the extent of the terms of the lease) and requiring a written rental agreement. 

PENDING: Requirements for the Homeless Coordinating and Financing Council 

SB-333 

SB 333 would require the Homeless Coordinating Financing Council to develop and implement a strategic plan for addressing homelessness in California by July 1, 2021. 

PENDING: Mandatory Acceptance of Section 8 

SB-329 

The Fair Employment and Housing Act currently prohibits housing discrimination based on source of income. While Section 8 housing vouchers do not legally fall into the “source of income” category, this bill would change that. By expanding the definition of “source of income” to include section 8 housing vouchers, it would make it illegal for any property owner to deny a tenancy based on the applicant’s Section 8 enrollment. 

PENDING: CalWORKs Extension & Payments 

AB-960 

The California Work Opportunity and Responsibility to Kids (CalWORKs) program provides cash assistance and other benefits to qualified low-income families, which includes homeless assistance benefits to homeless families that have used “all available liquid resources in excess of $100”. This bill would allow the county to approve of additional days of temporary shelter assistance if necessary to prevent homelessness while the household is transitioning to receive permanent homeless assistance. The CalWORKs program currently provides permanent housing assistance to pay for the last month’s rent and security deposits, up to 2 months of rent arrearages, or utility deposits. This bill would also remove the requirement that rental property owners must have a history of renting properties in order to receive payments. 

PENDING: Long Beach’s Tenant Relocation Ordinance 

See Media Coverage 

On April 3^rd, the Long Beach City Council voted in favor of an ordinance that would place relocation fee policies on rental properties. Since then, the city council has approved of an ordinance that would effectively cap rent increases at 10%, and limit the ability to terminate tenancies. The formal, second vote of this ordinance is scheduled for June 11^th. 

As it stands, this ordinance would require landlords with 4 or more units (in pre-1995 housing) to pay a tenant’s relocation fees (based on unit size) if they raise the rent by more than 10% in a year or require the tenant to move. While these amounts will periodically be revised, the ordinance currently lists fees as $2,706 for a studio, $3,235 for a one-bedroom, $4,185 for a two-bedroom, and $4,500 for a 3-bedroom or more. 

PENDING: Use of Pesticides 

AB 1788 

This bill would expand the current prohibitions against the use of pesticide containing particular anticoagulants in wildlife habitat areas. Also known as the California Ecosystems Protection Act of 2019, if passed, this bill would prohibit the use of common types of rat poison. 

FAILED: Housing Development Near Public Transportation 

SB-50* 

This bill would have allowed eligible neighborhood multifamily projects to submit an application for a streamlined, ministerial approval process that is not subject to a conditional use permit. The approval of a project (under these provisions) would have automatically expired after 3 years (with a 1-year extension available). SB 50 would have also revised the density bonus law by imposing additional requirements for developments located within a county with a population equal or less than 600,000. This bill was held in committee. 

FAILED: Statewide Rental Registry 

AB-724* 

AB 724 would have created a rental housing registry for buildings within California. This would have included landlords or property owners with more than 15 units. If it would have passed, information like the name of ownership, the number and size of each unit, and the move-in dates would have been required. AB 724 was held under committee in May. 

FAILED: Tenants Associations Withholding to Pay Rent 

SB-529 

This bill would have given tenants the right to form, join, and participate in activities of a tenant association, subject to any restrictions as may be imposed by law, or to refuse to join/participate with a tenant association. Landlords under this bill would have been prohibited from terminating the lease or refusing to renew the lease of a unit occupied by a member of a tenant association. If SB 529 would have passed, Landlords seeking to terminate a tenancy would have been required to provide cause in writing, as well as a written notice to quit. 

FUTURE: Los Angeles Rent Controlled Housing Gets a 4% Allowable Increase 

See City Update

The City of Los Angeles’ annual allowable rent increase for rent controlled housing (properties subject to the Rent Stabilization Ordinance) has increased to 4%. This goes into effect from July 1, 2019 until June 30, 2020. 

 Becky Bower is the Content Strategist at The CIC Blog. She holds a degree in English, with a focus in creative writing, from CSU Channel Islands. Her biggest weakness is cake and favorite superhero is Batman.