Articles in This Edition:

• Winter's coming - turn up the heat on your tenants.

• The devil's in the details.

• In case of emergency: always be prepared!

• Working effectively with rental assistance organizations.

Winter's coming - turn up the heat on your tenants.

As you read this, winter is knocking on our doors.  Hopefully the snow has not yet arrived, but it is sure to follow soon.  Either way, our jackets and blankets are now permanently handy, the A/C on our cars is dormant, and it is time to get ready for the cold.  As property owners and managers, the cold weather carries with it some unique challenges and requirements.  Snow shovels, salt, and sand replace the lawnmowers, rakes, and mulch in your maintenance staff’s hands.  Getting prepared for cold weather emergency response is now on their minds.  And for you, heating and utility costs are probably regulars on your management meeting agendas.  Question is are you prepared to turn up the heat on your residents?

You are in one of three situations. 

• First, your residents are directly responsible for their utility consumption and pay the utility companies directly. 

• Second, you pay for the utilities heating the unit and incorporate that into the rent payment you receive each month. 

• Lastly, you are some combination of the two. 

Well, you could be in a fourth category where you pay for the utilities and somehow pass that cost through to your residents separate from their rent.  If you are in the fourth category, consider consulting with your landlord attorney about how Connecticut currently views Ratio Utility Billing Systems.  So, for the rest of you, since it’s getting cold outside, what better time to consider your property’s energy policy and how you can ensure you are the best position to enforce it with your residents. 

Why, you may ask, do you care?  One of your responsibilities is to protect the asset that produces revenues.  We all think of fire as a catastrophic event on the property.  Sometimes, though, we forget about the truly destructive force that water can have on the physical building.  And, the problem with water is that the problem can persist for a long period of time before you become aware of it, all the while destroying the building that you are hired to protect.  So, as winter approaches, frozen pipes are your enemy. 

If you are in category one – your residents pay directly to the utility company – one of your biggest concerns is a resident who fails to pay their utility bills and has their utilities shut off [read more about handling utility bills in our May 2009 edition].  For you, the focus is on how your lease allows you to address this situation with the resident.  If your lease says nothing more than the resident is responsible for initiating and maintaining utilities at the property are you providing yourself with the most effective means to address a resident’s shortcoming?  The resident is putting your property at significant risk.  You may want the significance of that situation more completely described in your lease along with the consequences to the resident if they fail to adhere to those requirements.  At least then, if you must take some formal action to address the resident’s conduct, you have your lease in place to support your efforts. 

As for category two – utilities are included – your primary concern is not the resident who freezes a pipe, but the resident who takes advantage of the fact that you are paying the utilities and uses them irresponsibly.  I am talking about the resident, and you’ve all met one, who has the heat turned up to 76 degrees and has three windows open creating a frigid crosswind through their unit.  While they may find their units comfortable and your pipes are likely safe, it is probably costing you a small fortune in heating costs.  And, despite your continued requests, these residents refuse to change their habits.  Consider lease language that encourages or even demands energy conservation and offers you a remedy for the resident who commits energy waste through their lifestyle choices.  You are not required to allow your resident to heat the neighborhood at your expense. 

If you are in category three – some mix of the first two – make sure you provide for both situations so that you are not faced with a problem to which you can’t respond.  Your lease will need to be specific to the situation you are in or you will need to make operational adjustments so that your property reflects your desired policies and procedures.  For example, if you don’t want to keep heating the neighborhood, consider a plan where your next capital improvement project involves separately metered utilities for which the resident is responsible.  As part of such a plan, make sure your lease is reviewed and revised to reflect this change in how your property operates and that you have the management tools in place to address residents who don’t comply. 

Bottom line is that your lease must reflect your operational policies and procedures.  If your residents must pay their utilities directly but your lease makes no reference to that, you are going to be in trouble when you must take action against the resident who let their pipes freeze and destroyed your whole building.  

Just like you plan for the possibility of snow, plan for the possibility of turning up the heat on your residents and demanding performance under their lease this winter.  Your lease doesn’t freeze just because the ground does.   [TOP]

The devil's in the details.

Connecticut law demands that a landlord (or its attorney) focus on the details in a summary process case, because it can result in the tenant’s loss of his/her home through eviction.  The law is not interested in the landlord’s actual goal – thus, the landlord must perfectly comply with the statutorily-required notices and complaint, even when the landlord wants nothing more from the case than a reinstatement stipulated judgment to put the tenant on probation.

The consequences of missing one detail – or relying on the good faith of a third party – can be very time consuming and expensive for the landlord.  For example, on the residential side, landlords with a tenant participating in a Section 8 voucher program have usually signed a contract with the Section 8 administrator to serve a copy of the “owner eviction notice” to the administrator at the same time as the tenant.  Failure to do so may be a violation of the lease and federal or state regulations, in addition to a violation of the contract, and will likely lead to a loss of the summary process case. 

Moreover, landlords cannot rely on the good faith of third parties, such as the Section 8 administrator.  In one recent case, the Section 8 administrator’s staff member told the landlord that all he/she had to do was call the administrator upon service of a notice to quit (not provide a copy of it).  Unfortunately, the law does not acknowledge this arrangement, and any summary process case based on it is subject to dismissal.  In another case, the Section 8 administrator advised the landlord that faxing the notice to quit would be acceptable (it is).  However, when a summary process case went to trial, the Section 8 administrator suddenly said that it had no record of such faxes, the landlord could not prove the faxes occurred (the fax machine’s history only lasted about two (2) weeks, not the month between the notice to quit and trial), and the Court dismissed the case. 

On the commercial side, landlords often try to draft their own default notices to tenants without the advice of a landlord attorney.  Unfortunately, in most commercial leases, the default notice is the foundation to any future summary process case or other civil litigation.  A simple mistake can kill any future case.  Indeed, the default notice may be comprehensive but, if it is not sent in full compliance with the lease’s notice provision, it may be worthless.  Lease notice provisions often say the weirdest things, such as requiring overnight mail via a certain company, or requiring certified mail with nothing else referenced (thereby making hand-delivery to the tenant ineffective).   

Landlords have a core business, usually either real estate ownership, property management, or both.  At the end of the day, it often makes sense for the landlord to focus on those business lines and leave other fields to the experts.  Remember, short-term savings do not always translate into long-term gain. 

Before taking on the responsibilities of a snow removal company, accountant, or lawyer, the landlord must make sure that it has the staff and expertise needed to handle the normal challenges of business.  For example, the landlord will need: 

·         Calendar reminders of what needs to be done and when;

·         A manual for the back-up, if the staff member tasked with those items is out sick and/or leaves the company, which recognizes that the back-up may have no knowledge about the field at all); and 

·         Access to resources necessary to keep fully abreast in the field and make process changes, as necessary. 

In case of emergency: always be prepared!

In Turn up the Heat , we talked about how to address a tenant who fails to keep their utilities turned on and thus puts your property in danger of a catastrophic loss.  Besides addressing the tenant’s conduct, you must also be prepared for the possibility that you learn of the utility lapse only as a result of the broken water pipe that is now flooding at least three apartments.  Are you prepared to respond to that situation and handle it most effectively and efficiently?

There are a number of things you will want to do if you are faced with this situation.  First and foremost, make sure you have a response team in place to handle the disaster recovery.  Prepare your management and maintenance staff so that they are trained and ready to handle their assignments promptly.  You might even consider disaster recovery drills to make sure they are as trained as you believe them to be.  You may want to do these unannounced so they take the response to the situation seriously.  Also, make sure you have as part of your team a damage restoration company at the ready.  Companies like JP Maguire  in Waterbury, CT, will arrange with you in advance to respond on a moment’s notice to handle the clean up and restoration work should you get that dreaded call late on a Saturday night.  As you know, timely response can be the key to containing the damage.  And, containing the damage is the first way to make short work of this difficult situation.

Once the emergency is under control and the spread of damage has been stopped, you will want to make sure you thoroughly catalog and photograph the situation.  Keeping accurate records and documenting the cause of the problem will be essential when making your claim against the tenant’s insurance policy.  Your disaster recovery company can play a vital role in documenting the damage for such a claim.  For those of you who do not require your tenants to maintain insurance coverage for such damage, this detailed information will be critical when you demand payment from your tenant for the damage they caused.

Once the restoration work is complete and assuming your tenant takes responsibility for causing the damage, your planning and training will pay great dividends and your emergency response will have you back to normal in no time.  If, however, your tenant’s destruction does not stop with just the initial damage but continues with their lack of cooperation getting repairs done or refusal to pay for the damage they caused, you will need to turn to your legal preparedness plan to finish the job.  As we have written before and teach at seminars, a tenant’s refusal to allow you to complete the necessary restoration work can be aggressively resolved through an immediate court proceeding, the cost of which the tenant must pay [click here to view the full article].  Their further refusal to cooperate will result in their immediate eviction, still with the responsibility to pay for the damages they caused and legal costs you have incurred.

Working effectively with rental assistance organizations.

As economic hardship continues to hit many Connecticut tenants, landlords are seeing an increase in third party’s offers to assist the tenant.  Usually, the third party offers to pay some (or all) of the tenant’s back rent, attorney’s fees, and/or costs due to the landlord.  For the landlord, is this too good to be true? 

Maybe, because the offer usually comes with a catch – the third party offers the money in exchange for the tenant’s ability to remain in the apartment.  Moreover, the rules beyond that basic understanding are often not clear.  For example, the third party may be (purposely) unclear about whether it is actually entering a contract with the landlord obligating the third party to make the payment(s), when it will make the payment(s) to the landlord, and what conditions it will impose on the landlord for the payment(s).   

The most recognizable third-party assistance in Connecticut is collectively known as the “Rent Bank” programs (although they often operate under different names), which are able to assist with up to $1,200.00 in payments to the landlord on the tenant’s behalf for back rent due.  Recent federal and state government funding has created at least one similar program to assist tenants in preventing homelessness, which may include paying the landlord’s attorney’s fees and costs when the lease contains the necessary legal fees clause obligating the tenant to pay those amounts incurred by the landlord.  State agencies are also becoming more involved, particularly the Department of Children and Families (“DCF”) when a mother and/or father are threatened with the loss of housing for themselves and their children.  Finally, many non-profit agencies and religious organizations are providing assistance for a range of tenant obligations, from paying back rent due to providing energy assistance payments as winter’s cold weather approaches. 

Rent Bank programs’ rules for assistance and their method of operation are fairly consistent and clear across the state.  For example, if there is a summary process case in place, the tenant must come to an agreement with the landlord in court (called a “stipulated judgment”) to retain the apartment on payment terms that the tenant can make without assistance for future use and occupancy and back rent, attorney’s fees, and costs.  Upon entering the stipulated judgment, Rent Bank brings the tenant and landlord together to sign a contract called a “Mediation Agreement” that operates underneath the stipulated judgment.  Usually, the Mediation Agreement requires the tenant successfully to make at least 1-2 months of payments as required by the stipulated judgment, after which Rent Bank will send the landlord up to $1,200.00 in compensation for the tenant’s unpaid back rent.  Alternatively, if the landlord has not yet pursued its legal options, the Mediation Agreement will obligate the landlord to forgo serving a notice to quit and bringing a summary process action for a given period of time in exchange for the money. 

The rules for the newer federal/state program to prevent homelessness and other third parties are not as clear.  Indeed, the new federal/state program to prevent homelessness seems still to be developing its rules and business practices as of this newsletter’s publication.  DCF carries the burden with some landlords and attorneys of a reputation (whether earned or not) of promising, but not making, payments. 

The key becomes what contract the landlord enters with the third party and, by extension, the tenant.  In Connecticut, such contracts can be verbal, written, or some combination of the two.  The standard contact is the bargained-for exchange – the tenant (or third party) makes an offer to pay with certain terms, which the landlord accepts.  However, Connecticut law also enforces a contract theory where one party relies and acts on the promise of another.  Obviously, this is harder to prove, which usually works against the landlord, who can face substantial legal fees attempting to prove a contract based on a promise, or defend against an alleged contract based on a promise. 

Landlords need to be careful about their conversations and the language of the documents that they receive from and/or send to the third parties.  For example, a verbal exchange with a third party about the “lease” and/or “rent” could be construed as destroying any notice to quit that the landlord had already served on the tenant, despite the landlord’s wanting to keep the summary process action alive.  Moreover, landlords need to be careful about what information about the tenant they share with third parties.  For example, sharing confidential tenant information (as defined under federal and/or state law) without the required release(s) from the tenant could expose the landlord to fines and/or a lawsuit by the tenant or the government for the mere release of the information (which is usually a violation of those laws). 

Landlords have two competing interests when faced with a third party’s financial offer to assist the tenant – getting paid versus maintaining a summary process action (or the right to bring one) against the tenant and staying in compliance with applicable federal and state law.  Here are the key points for landlords: 

1. Focus on the conversations and documents exchanged between the landlord and the third-party to: (a) understand whether there is an actual (versus a possible) promise to pay, when the payments will occur, and the conditions imposed by those payments; and (b) make sure that the landlord does not undermine its ability to maintain (or bring) a summary process action to regain possession of the premises pursuant to the landlord’s rights under the lease and governing statutes; 

2. Keep in mind that landlords are not automatically authorized to release confidential tenant information to a third party on either that third-party’s statement that they want to help the tenant or a tenant’s verbal request that the landlord deal with the third party; and 

3. Have consistent policies and practices in place for dealing with such third parties to avoid a fair housing complaint for their treatment of the third party and, by extension, the tenant.

Landlords unfamiliar with the third party seeking to help a tenant should contact their landlord attorney to ensure that they find the appropriate balance between obtaining the money and retaining the landlord’s legal right to obtain possession from a tenant who is violating the lease, rules and regulations, or landlord-tenant statutes and staying compliant with applicable federal and state law.   [TOP]

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The reading of this newsletter does not form an attorney-client relationship. The contents of this newsletter are for informational purposes only and do not constitute legal advice. Nothing in this newsletter is intended to imply or predict the outcome of any legal matter that you may be considering or be involved in. The Landlord Law Firm makes no warranties of any kind regarding the information contained in this newsletter.