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Landlords routinely ask us whether they can
take over a unit and change the locks from tenants who have abandoned the unit.
They usually report one or more of these facts: that tenants said they were
leaving by the end of the previous month, have failed to pay this month’s rent,
staff and/or neighbors reported seeing tenants with a moving truck or loading
boxes into their car, or tenants have not been seen on the property lately.
From their perspective, common sense says tenants have abandoned the unit and
landlord is free to re-take possession of the unit and re-let it.
However, the law requires more certainty.
The “key” question is whether tenants have surrendered the unit by removing
their possessions and personal effects
and returned the keys
to landlord. Absent a key return,
the law states that tenants have merely set the stage for landlord to confirm
that the unit has been abandoned, and landlord must do that via the statutory
abandonment notice process or a summary process (eviction) case.
The statutory abandonment notice
process is a much more streamlined and less expensive method to regain
possession of the premises than a summary process case. However, it
requires that tenants have:
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Removed substantially all of their
possessions and personal effects from the premises; and
-
Either (a) not paid rent for more than two
(2) months; or (b) expressly stated
that they do not intend to occupy the premises after a specified date.
If both requirements are
met, landlord’s attorney can:
-
Draft and send an
abandonment letter to
tenants;
-
Timely follow-up with
landlord regarding the deadline for tenants’ response to the abandonment
letter, and instructions to landlord (as applicable) regarding the process
to reenter and retake possession of the unit and inventory, remove, and
store tenants’ possessions and personal effects; and
-
Timely follow-up with
landlord regarding the deadline for tenants to claim their possessions and
personal effects, and instructions to the landlord (as applicable) regarding
the process to dispose of those items.
In short, here is the Golden Rule for addressing an abandoned unit:
A landlord should
not
change the locks, touch any of the tenant’s
property (regardless of how much it appears to be garbage), or basically do
anything at the unit unless and until:
-
Tenants have both: (a) abandoned the
premises; and (b) returned the keys to the landlord;
or
landlord and its attorney successfully take the matter through the statutory
abandonment notice process;
OR
-
A marshal satisfies a court-issued
Execution by conducting an eviction after landlord obtains a summary process
judgment for possession.
In a perfect world,
common
sense would reign supreme. However, in Connecticut, the law wins and
requires that landlord go through one of these processes or face potential
exposure to civil and criminal charges from the tenants.
In our experience, the time and
expense for landlord to defend and/or settle such civil and criminal charges
dwarfs the time and expense of one of these processes. Therefore, absent
tenants surrendering the unit (vacating and returning the keys), the law
requires landlords utilize the statutory abandonment process or summary process
(eviction) case to regain possession of the premises.
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The Critical Components of an Iron-Clad Application Process
How do landlords measure
risk when choosing a new tenant? A critical tool is a complete and
effective application process.
Most of us have been exposed to the process lenders put borrowers through when
seeking financing. Form after form after form. The rationale is
simple – the more information collected regarding the applicant, the easier the
decision for the lender when weighing the risk. Not unlike the bank, a
landlord becomes a creditor the moment the lease is signed and the keys are
relinquished. Why then shouldn’t the same stringent approach to data
gathering be followed?
In today’s economic climate more than ever, a solid application process helps
reduce the risk and downplay the chance of the landlord getting burned.
While the specifics of the process vary depending upon the landlord’s particular
needs and desires, some basics fundamentals are worth considering:
· A
written application form should be designed that allows the landlord to collect
all of the critical data in a single document – speeding the review process.
The form should include all of the information a landlord will need during the
entire tenancy. A sampling of the types of information that are
recommended include: identifying information, employment and income history,
rental history, banking information, criminal history, landlord references,
personal references, and citizenship status.
· Applications
should be completed in full. Incomplete applications should be immediately
rejected. An applicant’s refusal to provide information is a red flag and
can be viewed as an early indicator of their future attitude toward rent payment
and living by the rules.
· Consider
financial, criminal, and eviction histories. Such information not only
helps to identify the likelihood of the rent being paid on time, but also will
aid in determining overall eligibility for your vacant unit.
· Regardless
of the source, once collected, all of the various pieces of data must be
evaluated for consistency, scrutinized for accuracy, and confirmed for
integrity.
There are a number of vendors available to help landlords in the application
process and many will take over the entire process. Regardless of who
performs the tasks, advanced applicant screening and a careful review of the
completed application is critical.
There is an added responsibility that comes with collecting an applicant’s
personal information. Once the data is gathered, it must be properly
protected from misuse. Landlords must ensure that their application
process includes a policy for dealing with this sensitive information.
States are continually imposing obligations on landlords to safeguard any
personal information you collect as reflected in the recent passing of
Connecticut Public Act No.
08-167, which outlines some new
requirements for handling such information. Consult your landlord attorney
if you have any questions.
Despite the ever growing
number of laws and challenges involved when collecting personal information, an
effective and thorough application process is especially necessary today for
landlords to conduct a thorough risk analysis on who will reside in an empty
unit. To avoid potential problem-tenant relationships, landlords should
take the time to complete the necessary steps. Being diligent and “knowing
the risk” may be the best form of preventative maintenance available.
[TOP]
Negotiating Letters
of Intent
The Letter of Intent (“LOI”)
is one of the most important aspects of a commercial real estate transaction.
Oddly, it is often significantly mishandled. Many landlords and purchasers
of commercial real estate fail to give the LOI the attention it deserves -
feeling negotiations will occur upon contract or lease drafting. This
cannot be further from the truth.
A poorly constructed LOI can both drag out contract or lease negotiations, and
actually result in a final document that reflects a deal that neither party
intended. On the flipside, a well prepared and negotiated LOI (while
usually deemed not-binding) can serve as a source document to help clearly map
out the contract or lease drafting phase of the transaction.
Case in Point: Our firm recently handled a lease dispute between a commercial
landlord and his tenant where a considerable gap existed between what the
landlord and tenant each believed the lease stated – an all too common
occurrence.
The controversy that ensued became a growing source of friction, and the two
parties seemed headed for the courts.
Enter the power of the LOI! Prior to the initial drafting of the lease, a
LOI was negotiated between the two parties that quickly clarified the point in
question. Dispute resolved with no need for expensive litigation.
So what makes up an effective LOI? This is hard to pinpoint as there are
no two LOIs alike, just as there are no two commercial lease deals alike.
They need not be complicated; however they must encompass all aspects of the
deal important to the landlord, while clearly defining the limits or parameters
related to the landlord-tenant relationship and the agreed-upon use of the
leased space.
Critical aspects that should be negotiated as part of every LOI include, among
other things:
Each item has its idiosyncrasies. Outside professionals should be
consulted whenever negotiating and preparing a LOI. The insight provided
may help avoid commitment to a lease contract that looks great on the surface,
but ultimately turns out to be less appealing as the deal materializes.
LOIs help landlords define their
own limits, make these limits known, and identify when and where concessions can
be made in order to get a deal done. They are the core of the deal between
landlord and tenant, and their importance should not be overlooked in the
leasing process.
[TOP]
Are your Insurance Processes Protecting you Adequately?
An “Appropriately Meddling
Landlord” focuses attention on risk-management principles despite the
substantial daily demands of property ownership and management. Landlords
are exposed daily to risk of injury to people (e.g., tenants, guests, visitors,
and vendors) and damage to property by those people. Although hopefully
rare, personal injury and
property damage
claims can be significant and far exceed
the rent received for the premises. For this reason, landlords should
implement strict insurance requirements for tenants and vendors as a powerful
means of managing their overall financial risk.
On the tenant side, landlords can require their
tenants to purchase liability insurance (which usually carries a personal
property coverage component) for the duration of their tenancy. On the
vendor side, landlords should never allow a company’s workers or representatives
on their property to do any work without first receiving and evaluating their
proof of insurance - - at a minimum, commercial general liability, automobile
liability, and workers’ compensation coverage.
Proof of coverage is essential. Fortunately, the insurance industry
utilizes a simple and highly effective tool to provide insurance-related
information for their policyholders to others – the certificate of insurance.
Typically produced by the insurance agent or company on an ACORD Certificate of
Liability Insurance form, the insurance certificate should list the:
-
Producer name and contact information (the
agent or company generating the certificate);
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Insured name and address - landlords should
make sure that this name matches the tenant's name on the lease or the
vendor's name on the contract;
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Insurer(s) affording coverage;
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Type(s) of insurance - landlords should
make sure that all the required policies are in place;
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Policy number(s);
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Police effective and expiration dates;
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Coverage limits - landlords should make
sure that the minimum limits are in force; and
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Certificate holder - landlords should make
sure that the legal property owner's name is listed here
Certificates of insurance - a simple way to implement an effective
risk-management strategy.
[TOP]
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