More of Widget’s Tips and Tricks in No Particular Order

Written by Landlord Property Management Magazine on . Posted in Blog

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 2nd 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 10th or 15th 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 2nd of the month if the rent is due on the 1st.
  • 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.

Rental Housing Legislation Update

Written by Landlord Property Management Magazine on . Posted in Blog

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 

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 

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 

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-14th 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 

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 

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 

On April 3rd, 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 11th

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 

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 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 

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. 

 This image has an empty alt attribute; its file name is Becky-Bower-Headshot.jpgBecky 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.
 

Industry News: Statewide Rent Control Bill, AB 1482, Narrowly Passes Off Assembly floor

Written by Landlord Property Management Magazine on . Posted in Blog

As seen on caanet.org

Despite strong opposition, statewide rent control bill, AB 1482 by Assemblyman David Chiu, D-San Francisco, passed off the state Assembly floor.  The legislation now awaits committee hearings in the Senate.

In the final hours of deliberation, AB 1482 appeared to be defeated for the year, being 7-8 votes short of the 41 votes needed for passage. Chiu, however, agreed to several amendments to his proposal, which led the California Association of Realtors to lift its opposition and take a neutral position to the legislation.

Chiu was then able to secure the needed votes to advance his proposal, which passed with 43 yes votes, 31 no votes and six abstentions.

Some highlights of the  amendments that Chiu has agreed to take relative to AB 1482:

  • Increasing the annual cap on rent increases from CPI plus 5% to CPI plus 7%, the same cap adopted by Oregon earlier this year.
  • Exempting owners with 10 or fewer single-family homes.
  • Sunsetting the bill in three years, but with the option to renew – a foregone conclusion.

​These changes do not remove objections to the legislation.  Despite requests, Chiu has refused to provide any assurances that future Legislatures won’t lower the annual cap on rent increases. The Legislature could conceivably lower the law from CPI plus 7 to CPI plus 1 next year. This creates instability in the marketplace. 

Additionally, including all buildings that are 10 years of age or older in the rent cap would result in a significant reduction, if not elimination, of new rental housing development projects. It is anticipated that with only a 10-year horizon, investors and lenders will opt to place capital in other ventures.

Moreover, the bill still does not address the crux of California’s housing crisis, which is a housing shortfall. California needs to build more housing as quickly as possible, and a statewide rent cap creates a disincentive for investors to build new housing or to renovate existing housing.

AB 1482 does not include means testing, so the state’s wealthiest residents will be eligible for a price ceiling on rentals, while renters most in need will get no assurances of assistance.

“It defies logic that the state Legislature continues to advance rent cap legislation, which will worsen California’s housing shortage, while rejecting legislation that would actually promote new homes, like SB 50, which would prohibit bans on apartment construction near jobs centers and public transportation,” said Tom Bannon, CAA’s chief executive officer. “This push for statewide rent control also comes just months after voters resoundingly rejected Proposition 10, the statewide rent control measure on November’s ballot.

“It’s time we work together to advance policies that will add housing that working families can afford instead of blanket policies that don’t address the real problem — a lack of supply.”

Getting Ready To Hire a Soft Story Vendor?

Written by Landlord Property Management Magazine on . Posted in Blog

By Carlos Escudero
So, you received your Order to Comply, and now you’re looking to hire a Soft Story Vendor.   Well, I’ve found it’s best to take the time to do a little research before hiring a retrofit contractor.  Finding the right vendor makes all the difference in your retrofit experience; from the quality of the work, design methodology, to your emotional stress, and the timeliness of your project.  By fulfilling this simple step, you will save a lot of time and money later when it counts.  To help you with the daunting task of qualifying potential soft-story vendors, start by making a list of the qualified soft-story retrofit contractors in your area. It’s imperative to research and ask for recommendations from your friends and colleagues who’ve had a seismic retrofit done on their building.   As you narrow your search for potential contractors to work with, ask these 5 important questions to ensure you’ve found the right vendor for your project.  Q1.  Is your company a Full-Service soft-story provider or an agency hiring subs? There are two different types of vendors to be aware of, Regular General Contractors  who will sub out the work to other contractors, and Full Service (design/build) Contractors that are responsible for your project from start to finish.  Traditionally, general contractors hire a variety of subcontractors to help complete different phases of the project creating scheduling difficulties and project delays. I’ve found it’s more efficient working with Full Service Contractors like CalRetrofit, that do the actual work and not simply act as an agency managing subs.  Q2. What separates you from your competition? A true belief and mission in Design Minimization and value engineering is one of CalRetrofit’s innovative services.   There are ways to significantly reduce the scope of work & reinforcement methods by re-engineering the original remediation plan provided by our clients, thus mandating substantial savings in construction costs and possible change orders.  Approximately 50% of the engineering plans our clients submit for our review are revised, resubmitted to LADBS and substantially minimized.  If your project has been engineered or is still in the pre-engineering phase, I urge you to utilize our expertise to provide the most optimized and cost efficient structural engineering design.  This will save you thousands.  Q3. Do you carry Commercial Retrofit Insurance? A specific commercial retrofit insurance policy is required to perform seismic structural construction. You will want to make sure your vendor doesn’t provide a policy that has no coverage for commercial reinforcement work. You’re covered with CalRetrofit. Q4. How many soft-story projects have your completed? Can i get list of client references?    Longevity in this business often coincides with experience, and it’s very important to find out how long the company you’re considering has been doing seismic retrofitting.  There are no formal credentials, or certifications, in this field.  You will want to make sure that the company you hire, has both training and experience in these areas, as well as a thorough knowledge of the steps involved, and are up to date on all building codes, regulations, and each cities specific ordinances and deadlines. A track record of happy clients speaks volumes.  Ask for a list of client references and contact them.  Make the most of this opportunity, by asking questions that will give you an understanding of what you can expect working with this vendor.  I also recommend visiting a few of the vendor’s constructions sites and completed jobs. Q5. Will the tenants have parking at night? Most retrofit vendors completely block off the tuck under construction areas, forcing tenants to have to park their vehicles elsewhere during months of construction.  This is a massive headache to say the least.    At CalRetrofit we’ve got our clients covered.  We cover trenches with steel plates, enabling tenants to drive over covered trenches upon their arrival back home at 5pm.  We go through leaps and bounds to protect and secure every job site environment while minimizing the negative effects on property managers and their tenants. By asking these 5 questions and doing your due diligence you will quick separate the men from the boys and be able to make a decision based on research not on heresy. At the end of the day, it’s in the vendors best interest to be honest and trustworthy because he wants your recommendation to other potential clients.
Carlos Escudero,  CalRetrofit Seismic Retrofit Consultant.  After over 10 years of Property Management experience working with a large firm in Los Angeles, Carlos was excited to join the retrofit industry and worked with a competitor, however, after a year in, he realized there was a lack of integrity in their business and and was inspired to look elsewhere, until he joined the CalRetrofit team, first as a project manager, and then, after being with the company for a short time and truly understanding their vision and their mindful integrity, he decided to focus his talents on helping building owners and property mangers find their way to this awesome company.

Watch Out! For Possible Wealth Tax Changes

Written by Landlord Property Management Magazine on . Posted in Blog

by Michael Trainotti
Senator Scott Wiener (D-San Francisco), in late March 2019 introduce his proposed legislation is modeled on the federal estate tax but would lower the exemption rate to $3.5 million, which is lower than the federal estate tax exemption. Senator Wiener introduced Senate Bill 378 at the end of March. If the bill is passed, it would result in a special fund designed to improve socioeconomic equality in the state. With the lowered exemption rate of $3.5 million, or $7 million for a married couple, the proposed estate tax would phase out at $11.4 million for an individual or $22.8 million for a married couple, which is the current federal estate tax exemption rate. By phasing out at the federal estate tax exemption, the bill would prevent California residents from being double-taxed. In other words, estates would be taxed by California if they range from $3.5 million to $11.4 million. In addition, similar to the federal estate tax, SB 378 has exemptions, including for transfers to a surviving spouse, and for family farms. If the California legislature passes SB 378, it will appear on the ballot in November 2020. This would not be the first time that an estate tax measure appeared on the California ballot. California residents approved a ballot measure in 1982 that prohibited an estate tax. Accordingly, in order to put an estate tax in place in California, voters in the state need to approve it in a ballot measure. On the federal level this is the same area where some of the presidential candidates want to change the current $11.4 million for an individual or $22.8 million for a married couple, if they are elected president in 2020. What this all means is the current estate planning does not worry about estate tax (popularly called the “death tax”) but instead is now more focused on obtaining a step up in basis for income tax purposes.  This could possibly change after the 2020 national and state election.  What should you do now, if anything?  Some nationally known commentators are recommending making gifts to family members today.  The idea is to freeze values today and shift your wealth appreciation over to your family.  The commentators point out that there will be no “claw back” under new treasury regulations, Reg 106706-18 when using the enhanced gift tax exemption of $11,4 million today.  For example, if you used $100,000 today of the $11,4 million and the exemption amounts change later to a lesser amount of $3,5 million below the current $11,4 million, the $100,000 gift is not reduced from the $3,5 million.   Today you can discount value of assets which may not be available after 2020.
Michael Trainotti, Inc., A Law Corp 400 Oceangate, Suite 520 Long Beach, CA 90802 Work: (562) 590-8621 Fax: (562) 590-8181 email: mike@trainottilaw.com website: www.trainottilaw.com

Evaluating Real Estate Opportunities: How to Make the Right Choices when Acquiring New Assets

Written by Landlord Property Management Magazine on . Posted in Blog

By Elizabeth Reynolds
  • Looking to expand your real estate portfolio? 
  • Are you a new investor and interested in building wealth through real   estate?
  • Partnering with KW Commercial will help you to achieve your goals fast!
  • We are here for you, every step of the way, locating properties that will meet your real estate portfolio needs!
There are three main methods for evaluating real estate properties and their ultimate value:
  1. Market Models:  Leverages local comparable data
  2. Cost Model:  Utilized in the event that local comparable data is not available
  3. Income Model:  Leverages the income generated from the property
Commercial property is generally valued based upon the Income Model
  • Office, retail and industrial/warehouse buildings, square footage is most important because, it is valued based upon the square footage
  • Apartment complexes, the number of units is key
  • Knowing the year a property was built is important because you need to know its actual age versus it effective age.
    • Effective Age is important in negotiating a longer amortization period on your loans
    • Preventative maintenance has a positive effect on the effective age of the property Below is a list of a few key areas to consider, that can impact the effective age of the property
      • Upgrades bringing the property to most current and/or state of the art conditions
      • HVAC
      • Roof
      • Electrical
      • Amenities
      • Elevator
      • Parking upgrades
Valuation Methods:
  • Cash-on-Cash return:  Cash flow before taxes/Initial investment
  • Gross rent multiplier (GRM):  Value of Property/Gross Potential Rental Income
  • Price, Income and Expense per unit (PPU):  Price of the Property/Number of Units
  • Price, Income and Expenses per Square Foot:  Price/Total Rental Square Foot
  • Operating Expense Ratio:  Operating Expense/Gross Income
  • Break Even Ratio:  Effective Gross Income/Operating Expense +Debt Service
  • Maximum Loan Amount: Takes into account the maximum Loan to Value (LTV) of the individual bank based upon the debt coverage ratio and the current net operating income of the property
Capitalization Rate:  As refinance rates increase, the value of the property decreases
  • Value is determined by: NOI/Cap Rate
    • Cap Rate:  The lower the cap rate, the higher the value of the property
Cap Rates : 5 : 10 : 20
Years to return value of Property : 20 yrs : 10 yrs : 5 yrs
  • Cap Rate Modifiers:  Investors need to adjust the cap rate based upon the following modifiers
    • Potential Appreciation
      • Management intensity
      • Tax benefits
      • Ability to get money out of the deal
      • Ease of financing
      • Risk involved
Conservative Guidelines:
  • Vacancy factor of 5% is generally used by lenders
    • Total operating expenses should be approximately 45% to 55% of Gross Operating Income (GOI), before debt service
    • This is not true for retail or office buildings, where pass through costs are common
    • Replacement reserves should be 3% of GOI
    • Repair and Maintenance costs should be 18% of GOI, depending on the type of neighborhood, age of the property and the amount of deferred maintenance
    • Management costs should be about 5% of GOI
    • Total Operating Expenses:
      • Office  Building:  30% to 40% of GOI
      • Industrial/Warehouse:  10-15% of GOI
      • Note:  be sure to carefully evaluate the property’s marketing package in order to ensure that all the expenses are included, especially if the expenses seem to be low
Three Powerful formulas to learn:
  • NOI:  Value * Cap Rate
    • Value:  NOI/Cap Rate
    • Cap Rate:  NOI/Value
    • Debt Coverage Ratio (DCR):  NOI (annual)/Debt Service (Annual)
Evaluation Systems/Team Members: Partner with KW Commercial to complete the property financial modeling evaluation, physical property assessment and determine the properties upside based upon all the factors as outlined within this article.  Further, KW Commercial will support you through the due diligence and overall property evaluation.  We are here for you every step of the way in order to ensure you realize the upside of your new real estate investment. Call us today to get started!  1-888-503-4443
Elizabeth Reynolds
Elizabeth Reynolds, Commercial Broker Over 25 years of experience in commercial and multi-family acquisition, management and construction. Ms. Reynolds began her career as a property manager for a large multifamily complex while completing her Bachelor’s degree in Operations Management at Cal State Polytechnic University. Elizabeth has successfully overseen various real estate departments, including Property Management, Operations Management, Sales/Business Development, Acquisitions/Market Analysis, Financing, Advertising/Public Relations, as well as Supply Chain, Information Technology and Program/Project Management.

DST 1031 PROPERTIES: THE BASICS

Written by Landlord Property Management Magazine on . Posted in Blog

By Dwight Kay

 

A Delaware Statutory Trust (DST) is an entity that is used to hold title to investment real estate. In some ways, this is similar to how a Limited Liability Company (LLC) can hold title to real estate; however, unlike an LLC, a DST 1031 property will qualify as “like kind” exchange replacement property for a 1031 exchange. This qualification as “like kind” property is pursuant to Revenue Ruling 2004-86.

 

The DST entity can be used to hold title to most types of real estate; however, a typical DST 1031 property is a triple net (NNN) leased retail or office property or a multifamily apartment community. A NNN leased property is a property whereby the tenant (and not the landlord) is typically responsible for property maintenance costs, insurance premiums and property taxes.

 

Other types of DST 1031 properties that have been available to investors have included shopping centers, government leased buildings, self-storage facilities, senior living communities, warehouses, distribution facilities, medical office buildings, fast food buildings, pharmacies and grocery stores.

 

Typically, at any given time, Kay Properties has 10 to 15 DST 1031 properties available to our qualified accredited clients, with a typical minimum investment of $100,000.

 

The following are examples of past DST 1031 properties, and actual properties, tenants, lease terms and financing structures may vary greatly. Please note that the names listed below are independent of Kay Properties and Investments and belong to their respective copyright and trademarked companies. Please also note that there are material risks associated with investing in real estate and DST properties, including but not limited to loss of entire principal amount invested. Please review the risk section of the private placement memorandum for any potential DST offering that you are considering, and speak with your CPA and attorney prior to investing.

 

  • A 300 unit multifamily apartment community in Jacksonville, FL.
  • A portfolio of two medical office buildings on long term net leases in Richmond, VA.
  • A 100% occupied single tenant, technology and data center in Atlanta, GA. This was an all-cash/debt-free DST offering.
  • A 100% occupied Absolute Triple Net leased building to a global public company in Charlotte, NC.
  • A 300 unit multifamily apartment community in Nashville, TN.
  • A 100% occupied medical pediatric office property in Raleigh, NC.
  • A 100% occupied medical office surgery center in Dallas, TX.
  • A 300 unit multifamily apartment community in Austin, TX.
  • A 100% occupied industrial building on a long term NNN lease in Chesapeake, VA. This was an all-cash/debt-free DST offering.

 

DST 1031 properties also have various financing ratios to satisfy an investor’s exchange requirements of taking on “equal or greater debt,” as defined by the Internal Revenue Code Section 1031. However, some DST 1031 properties are offered allcash, debt-free in order to mitigate the risk of using financing when purchasing real estate.

 

The financing used on DST 1031 properties is typically non-recourse to the investor. Non-recourse financing is typically defined as financing whereby the lender’s only remedy in the case of a default is the subject property itself. The lender is not able to pursue the investor’s other assets beyond the subject property. So, investors could lose their entire principal amount invested in the property in the case of a major tenant bankruptcy, market- wide recession or depression, but their other assets would be protected from a lender.

 

The non-recourse financing used on DST 1031 properties is typically long- term (usually seven

to 20 years) and already locked and in place with the lender. This can greatly help to reduce 1031 exchange closing risk for investors that must be able to identify a property within their 45-day identification period that they know that are going to be able to close on.

 

From our observations at Kay Properties, the typical loan to cost of a DST 1031 property ranges between 40-65 percent as of 2017. A DST 1031 property with a 50 percent loan to cost is a property wherein the investors are putting down half of the required equity or

cash amount to purchase the DST property and the lender is providing the other half, in the form of a mortgage.

 

As an owner of the DST 1031 property, you are typically entitled to receive 100 percent of your pro-rata portion of any potential principal pay-down from the loan on the property, thereby potentially building equity in the property. It is important to note that some DST 1031 properties are structured with principal pay-down beginning the first year, others with principal

pay-down beginning in year two to five and others that are interest-only financing for the life of the loan.

 

DST 1031 properties are structured whereby the investors in the DST receive 100 percent of their pro-rata portion of the potential rental income generated by the property’s tenants. DST investors receive 100 percent of their prorate portion of any potential net appreciation of the property over the hold period. This is an area that truly differentiates DST 1031 properties from partnerships. With a partnership, the offering’s sponsor is typically entitled to a portion of the potential rental income and potential appreciation.

 

Investors are keenly interested in the fact that when a DST 1031 property is sold, they are free to do another future 1031 exchange into any type of “like kind” replacement property. Typically, our clients at Kay Properties and Investments do further 1031 exchanges into more

DST 1031 properties; however, you are free to invest in any other typeof “like kind” property that you choose to upon the sale of your DST property.

 

It is important to note that cash flow from real estate and DST 1031 properties, as well as past

performance, is not guaranteed, as it is a function of the underlying real estate and tenants and

their economic performance. Just as with all other types of real estate, projected cash flows could be lower than anticipated. It is very important for you as an investor to believe in the property, its location and its tenants before investing, as well as to review the risk factors of the offering materials in their entirety.

With DST 1031 properties investors are able to utilize depreciation and interest write-offs to partially shelter their projected cash flow from taxes. This allows for tax-advantaged potential rental income to the investor. This is another reason why many of our clients have invested non-1031 exchange discretionary funds into DST 1031 properties.

 

A typical DST 1031 property can be closed on within five business days after submitting subscription documents. DST 1031 properties can be closed on this quickly because typically all of the appraisals, environmental reports, property condition reports, financing, tenant estoppels, etc. have already been completed, as DST 1031 properties are “pre-packaged” for 1031 exchange investors. This is one of the reasons why DST 1031 properties have become very popular with investors that are in their 45-day identification period and close to running the

risk of a failed 1031 exchange and a major tax consequence. They like the fact that they can close on DST 1031 properties quickly and complete their 1031 exchange within IRS guidelines.

 

DST 1031 investors do not receive a K-1 or 1099 at the end of the year for tax purposes. At the end of the year you will receive an operating statement (sometimes referred to as a substitute 1099). This will show your pro-rata portion of the DST properties rental income and expenses.

 

You will then provide this to your CPA, who will take this information and input it into Schedule

E on your tax return, the same as all of your other commercial and rental properties.

 

DST 1031 properties are only available to accredited investors. An accredited investor (1) is generally defined as an investor with a net worth (assets minus liabilities) of greater than $1 million, exclusive of primary residence. That being said, there are a number of ways that an entity can potentially qualify as an accredited investor, and we encourage all investors to speak with their CPA and attorney before considering a DST 1031 investment to fully ascertain if you and your investment entity (trust, partnership, LLC, etc.) qualify as an accredited investor.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals and risk tolerances.

Diversification does not guarantee returns and does not protect against loss. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, WealthForge Securities, LLC and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal.

Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect. Real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. All photos are representative of the types of properties that Kay Properties has worked with in the past. Investors will not be purchasing an interest in any of the properties depicted unless otherwise noted.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of WealthForge Securities, LLC, Member FINRA / SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

Are Emotional Support Animals Protected by ADA?

Written by Landlord Property Management Magazine on . Posted in Blog

By Nicole Seidner In February 2019, there was a so-called “epidemic” of emotional support animals in the United States. The relatively new idea did not sprout in popular culture but surge, taking quick advantage of popular cultures tenuous understanding of mental health and the desire to keep Fido at one’s side. Emotional Support Animals (ESAs) are real and can be great help aiding those with mental disorders from PTSD to depression, giving companionship, comfort, stability, and structure to those who need it most. It’s also been shown that many people are using the term and putting it on their everyday pets to try and reap the benefits. Emotional support animals are in a gray area of the law, making it difficult and even scary to try and navigate around when you must. You can’t deny someone in a wheelchair a ramp so they can get home, but where does that leave you when a veteran with PTSD shows you their dog? Or just someone, anyone, says their cat is vital to helping their social anxiety? There are steps a property manager can take to understand and move forward in the residency landscape.

I. Understanding

Service Animals, as defined by the ADA under Title 2 and 3, are any animals individually trained to perform work or tasks for an individual with a disability. Disability, in this case, can include physical, sensory, psychiatric, intellectual or mental. That is the striking difference between a service animal or an emotional support animal – ESAs do not perform work tasks such as leading the blind, pulling a wheelchair, or calming someone during a flashback. ESAs give support or comfort and are therefore not considered service animals under the ADA.

II. The Fair Housing Act

HUD has provided guidance demonstrating how the Fair Housing Act (FHA) and the Americans with Disabilities Act (ADA) intersect with regards to emotional support animals. The agency has established that those with a proper ESA have the right to live in pet restricted areas with their support animal but does not include the right for an ESA to go anywhere and everywhere with that pet owner. This is just one of a few striking differences between an emotional support animal and a service and working animal. A property manager, leasing agent, rental property owner, etc., are still required to behave in a similar manner. There is a limit to what you can and cannot ask, and yes, it is safer to proceed on the side of caution. You can inquire on the type of animal, going no further than that, or how many animals, going no further than that. You can inquire on the type of service (IE service animal) and may have to accept the broader answers with little specification. Section 504 of the Rehabilitation Act of 1973 states that all persons with disability can expect reasonable accommodations. Those accommodations include the right to live with any assistance animal, including emotional support animal. Also, they can/should be given handicapped parking spots, reserved parking close to entry for those with limited motion, curb cuts, wider doorways, braille signs, etc. FHA does allow for landlords to request extra deposits to cover accommodation modifications. The amount of this deposit depends on several factors, including how much it would cost to change back after the tenant moves out and cannot exceed the total cost of restoring the unit. If the next tenant doesn’t want the reasonable accommodations reverted, the deposit should be returned to the tenant. There can be an extra deposit for the service animal.  Housing providers are required by ADA to allow service animal provisions, but that does not leave all housing providers hopeless.

III. Emotional Support Animal Letters

Despite all this, there is one card to play. There is no ignoring the growing number of people allegedly claiming that their common animal is an ESA, regardless of any misbehaviors. There is a number of occurrences to back this up, including an ‘ESA’ on a Southwest Flight biting a six-year-old girl, and an instance where someone attempted to bring a peacock on board as a comfort animal. Those with true disabilities, who need their service animals and ESAs to function with independence and dignity, face these fraudulent claims as a slap in the face, diminishing the true value that the real thing brings. That is why there have been a growing number of states passing laws to make it illegal to falsely claim your pet as an ESA or Service Dog. It’s always good to check your local government or statewide regulations for penalties for making false claims. There are several state laws across the U.S. regarding emotional support animals, service animals, and fraudulent representation thereof. Faking a service animal or emotional support animal can have different punishments as laws vary from state to state, but in California the law enforces fines up to and included $1,000 and even half a year in jail. Always check local legislature for more specific detail. Some states are leaning the opposite way. For example, Oregon has a bill that could ban any additional charges from landlord to tenant based on pets. Seattle – the city – has a similar mindset. Check your local city laws, and the state as well.   As a property manager or rental property owner, this means there is a careful dialogue to ensure someone requesting their ESA join them in renting. You can’t say outright, are you disabled? Or similar questions. You can’t claim someone is faking it, either. A potential tenant will have proof, and it is a landlord’s right to request this proof. They need to provide an ESA Letter from a licensed health care professional.  These letters are reliable through certified therapists.

IV. Scammed Certificates

Because so many people have been abusing the right to ESAs, there are many online ‘certifications’ people have been using to claim their cat, dog, and peacock are proper emotional support animals. There are sites set up just to create fraudulent ‘certificates’ or ESA Letters to declare every pet ever an ESA. To verify an ESA, consider the following:
  • A genuine ESA must be written by a licensed mental health professional.
  • The licensed mental health professional must be licensed in the state you are living in.
  • The ESA is awarded after a mental health screening.
  • The letter is not referencing a ‘registry’ that one signed up for, or requests the person sign up for their services.
  • The ESA is ‘certified.’
  • The service doesn’t return requests for validation, verification, or other follow up services.
There is no national-, state-, or city-level registry for Emotional Support Animals. An ID card, dog tags, framed certificate, or anything else does not make a pet immediately an ESA. These are often add-ons used to try and make a false service seem legitimate when it is, in fact, quite the opposite. Bottom line: a registry is not real and does not mean a property manager has to allow that pet in. Landlords can verify ESA letters in a way that does not violate HIPPA or the Fair Housing Act. A proper ESA letter will be on a letterhead, with contact information such as phone number and email, along with the therapist’s license number. A landlord cannot ask the doctor anything directly, but you can verify the license number through any state portal. Despite the growing popularity of so-called emotional support animals, a landlord is not powerless. There may be a limit to what you can and cannot ask, but all your questions can be answered on one sheet of paper. As a property manager, you don’t need to know what someone’s disability is, but only that the pet and the ESA letter is real. If something fishy is in the letter, that could tell you all you need to know. Call the licensed mental health professional, see if they are in state, if they are verified through state portals, and if there is still doubt, check with a lawyer on local laws.
Cole Seidner is a copywriter at the CIC Blog. She holds a degree in Writing from Savannah College of Art and Design with a focus in creative nonfiction. Her free time is spent taking pictures of her dogs or reading deep dive analysis on movies that she hasn’t seen.

Dear Maintenance Men:

Written by Landlord Property Management Magazine on . Posted in Blog

 
 
DearMaintenanceMen

Dear Maintenance Men:

My pest control company has removed a beehive from my property.  However, the bees have not left and the tenants are complaining about bees inside their units.   I have sealed every hole, crevasse and crack I can find.  Yet, the bees still find a way of getting into the units. What is missing or are these bees just too smart?

Bert

Dear Bert:

We have had a similar problem at one of our properties. We also sealed everything we could think of and still the bees found a way in.   You may want to look at your roof vents that service the bathroom & kitchen exhaust fans.  The bees come down the vent and go into the voids between the ceiling and roof. Most fan boxes are not well sealed below the fan blades.   Once they are in the ceiling, it is easy for them to travel to different units, find a hole and drop down into the apartment’s living area.   Because the bees may be discovered in an area far from the original entry point, it is hard to track down where they first came in.  We now install screening at all bath and kitchen exhaust vent tubes.   The material used is 1/8 inch square metal screening and is attached to the top of the vent tube at the roof level.  Be sure to extract the hive and any honey you find or you might not only continue to have a bee problem, but an ant problem also.

Dear Maintenance Men:

I have a bathroom sink that is slow draining.  I have already snaked the drain and found no stoppage.  When I remove the pop-up assembly and have an open drain, water whooshes down with no problem. However, with the pop-up in place, water backs up into the sink and drains very slowly.  

Paul 

Dear Paul:

Most bathroom sinks have an overflow hole near the top edge of the sink.  This hole serves two purposes; 1: Acts as a safety drain to keep the sink from overflowing should the water rise above a certain level in the sink.  2: The overflow hole also serves as an air vent for the sink when the water levels are above the pop-up plug.   The overflow hole allows air to escape through the drain and the water to evacuate more efficiently.  

What has happened is hair, toothpaste, grime etc. have built-up and sealed off the overflow drain where it exits just below the pop-up assembly plug.  Most snakes are too big to go through the overflow drain.  Alternatively, a speedometer cable will work great or even a long zip tie will work.  Push the cable or zip tie down through the overflow hole at the top of the sink and push any gunk out into the drain.  Use water to help push the debris out the overflow drain, a funnel works great to direct a good flow of water.  If you cannot get the overflow to drain, disassemble the main drain assembly to gain access to the overflow drain exit.   Once the overflow drain has good airflow, the sink should drain a bit faster.  If this does not solve the problem completely, look at restricting the water flow coming out of the faucet.  Use a restrictive aerator to cut down on the GPM of the faucet.     

Dear Maintenance Men:

I am thinking of converting my thirsty lawn into a drought resistant landscape. What recommendation do you have to help me achieve my plan?

Dorothy

Dear Dorothy:

Creating a drought tolerant landscape is a great idea.  In the end, the drought tolerant landscape will cost you less money in water and will be easier to maintain.  The single greatest consumer of water in your landscape is the turf.  Reduce the grass area to ease the burden on water.  Xeriscaping is a term for a water conserving landscape.  Some of the benefits of Xeriscaping is water saving, low maintenance, pesticide free, pollution free (no lawnmowers) and use of local native plants.   You might want to consider using Ornamental grasses, as they are drought tolerant, look great and give your landscape a bit of vertical dimension.  Succulents of course are great at conserving water.  Flax and Delphiniums Iris are a few perennials to use.  Marigolds, Mexican Sunflowers, Phlox and Vinca Passion are Annuals that will work well.  As for shrubs, look at Japanese black pine, Mountain currant, Sassafras, Honeysuckles etc and good trees are Acacia, Gray Birch, Monterey Cypress, Eucalyptus, Fig, Juniper Amur Maple to name a few.

Maintenance Tip:  If you keep potted plants or flowers on your deck; always elevate the pot with plastic, or terracotta legs to let any water under the pot evaporate. This will help avoid water and rust rings from developing under the pot. 

WE NEED Maintenance Questions!!!    If you would like to see your maintenance question in the “Dear Maintenance Men:” column, please send in your questions to:  DearMaintenanceMen@gmail.com

Bio:
If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371
Frank Alvarez
is licensed contractor and the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor and Co-Chair of the Education Committee of the Apartment Association of Orange County as well as being Chairman of the Product Service Counsel.  Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to:  www.BuffaloMaintenance.com
Jerry L’Ecuyer
is a real estate broker. He is currently on the Board of Directors and Past President of the Apartment Association of Orange County .and past Chairman of the association’s Education Committee.  Jerry has been involved with apartments as a professional since 1988.

Legal Corner

Written by Landlord Property Management Magazine on . Posted in Blog

By Stephen C. Duringer, Esq., The Duringer Law Group, PLC
Question          I drove by my apartment building the other day and noticed that one of my tenants put up a satellite dish antenna, not just one, but three.  I just put a new roof on about a year ago. This tenant had the nerve to bolt them right through the new roofing shingles.  Looks terrible.   I’m concerned about water leakage, mold and possibly voiding my roof warranty.  Can they do that legally? Answer                        No.  Your standard apartment association rental agreement most likely includes a provision prohibiting the tenant from making modifications or alterations to the premises without the landlord’s prior written consent.  The tenant is in breach of the agreement and most courts would agree that the breach is a curable one.  Depending upon the extent of the damage to the roof, the tenant’s conduct may rise to the level of waste, a non-curable breach.  You have at least two options. First, you may remove the satellite dish antenna from the exterior of your building and repair the damage.  You would then deduct the reasonable out of pocket costs from the tenant’s security deposit.  You can then demand reimbursement by serving a three-day notice to perform covenant or quit by demanding that the tenant replenish the security deposit for the amount charged.  A second option would be to serve a three-day notice to perform covenant or quit, by demanding that the tenant return the premises to their original condition by removing the satellite dish and repairing any and all damage to the building.  This option is not preferable because you do not want to instruct the resident to climb on your roof and perform the roof repair himself.  Under either scenario, you would be well advised to document the breach by taking pictures of the unauthorized satellite dishes and the damage that was caused by its installation.  Keep in mind, California law allows tenants to maintain a satellite dish antenna on their patios and balconies, within areas exclusively for the use of the tenant.  These do not, however, give the tenant the right to affix an antenna to your roof or install an antenna in the common areas. Question          I just received the most curious letter.  Seems my local police department has identified one of my residents as an undesirable, they say he’s suspected of being in a gang and is dealing drugs.  They say that if I don’t evict him, the police will prosecute me for allowing a criminal to operate on my property.  I may even lose the property!  The family has been there for several years, other than a couple bounced checks they have been model tenants.  Help, I cannot afford a vacancy right now, what do I do? Answer                        In this upside-down world we live in today, this is a growing trend in law enforcement.  Rather than prosecute the criminal, many law enforcement agencies are taking the lazy way out and threatening the law-abiding landlord, forcing them to evict the resident. Rather than locking up the bad guys, just shuffle them off to another community. If the police are certain he is dealing drugs, why isn’t he in the “gray bar hotel”?  If the letter you received is inconsistent with your experience with your resident, follow up with the police department by asking for documentation supporting their claim.  Have there been arrests on the property?  Have illegal drugs been found there?  Ask other residents in the building, gather independent information.  If the information you gather supports your resident’s involvement in criminal activity, act immediately.  Consult your attorney to determine if you have enough facts to support a three-day nuisance notice, or if a thirty day or a sixty-day notice is appropriate.  Remember, a letter from the police department is not enough evidence in court to base a nuisance notice on, testimony from percipient witnesses will be required.               Question          I’ve been doing my own prospective resident screening for quite a while now.  I think I’m 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 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 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.  Take 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 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 visit the prospect’s current residence unannounced, prior to approval to ensure the prospect 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 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          I’m getting conflicting advice about whether I must rent to some one that does not have a valid social security number, nor an official picture ID.  Seems like most of the attorneys and the Fair Housing guys say I ‘cannot discriminate’ and that I must rent to all, regardless of whether or not the prospect can prove who he is, or verify his tenancy history, or his ability to pay the rent.  I have been following that advice for years, and now have a building full of undocumented people, that I could never find in a million years if I ever had to collect from them.  The rent usually gets paid, but the building, and the neighborhood, look like hell.  I want to take my building back, and only rent to persons that qualify, that have verifiable identities and credit, and are good credit risks.  What are my rights? Answer                        The dirty little secret is that our industry has passively allowed this erosion to occur over many years.  Many landlords have looked the other way, in favor of the quick rental, the cash payments, the full building, the reduced confrontation, we’ve taken the easy way out.  Landlords have been wary of lawsuits claiming discrimination and have believed the bullying taunts and threats from the tenant and immigrant rights activists, that we have just taken the easier and less confrontational course of allowing it to happen.  We blame our government for not addressing the illegal immigration issue; one side of the aisle wanting cheap labor, the other wanting cheap votes.  We blame employers for hiring, and our ‘welfare state’ for creating the magnet that keeps drawing.  Landlords are part of the problem as well. By succumbing to the short-term temptation of the quick rental to the unverified, the undocumented, we are contributing to the problem.  Many landlords are realizing that rather than just complaining, they can be a part of the solution.  Landlords have absolutely no obligation whatsoever to rent to an individual who is unable to independently verify his identity, his past tenant history, and his ability to comply with the terms of the rental agreement, including his financial ability to pay the rent.  Our system of society is built around a numeric social security or tax ID number.  Our life history, good and bad, is reported more often than not, into a data base that is organized by, and sorted by the social security number.  Names are common, but social security numbers are unique.  No two people should share the same number.  Credit as well as criminal convictions are reported similarly.  These very basic requirements should be applied uniformly to all applicants, regardless of race, national origin or ethnicity.  It is just good business sense.  With average rents over $1600 a month, landlord investment of $200,000 or more per rental unit, and a litigation climate that is out of control, landlords must know who their residents are, must reduce their risk of financial loss and must know how to recover from a breaching resident. 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.