Articles in This Edition:

• Dysfunction junction - What to do when you inherit a bad lease.

• How one document can help you avoid he said / you said.

• Landlord's a-knockin' but he can't come in.

• Attorneys as Business Advisors - It's not just about the eviction.

Dysfunction junction -
What do do when you inherit a bad lease.

Your company has just purchased a new property or was awarded the fee-management contract it has been pursuing for some time and you have been assigned the incredible responsibility of raising the bar at this new property to meet your company’s standards.  Piece of cake, you think.  That’s why they hired you in the first place.  You have an impeccable record of turning failing properties into jewels among their portfolio peers.  This one should be no different.

But, it is.  Why?  Simply…the lease.  You and your company have made your reputation out of improving the occupancy rates and reducing the receivables on challenging properties.   You have aggressively removed the residents who were undermining your efforts to improve the community environment and attracted long-term, stable residents.  But, you’ve never had to do it with a dysfunctional lease.  At least not one that is this bad.  This lease is not just missing some important elements - you could handle that challenge.  In fact, you’ve done it before.  No, this is a lease with provisions and language that are counterproductive, and flies in the face of the long-standing effective policies and practices that have proven so successful for you in the past.  This time, you really have your work cut out for you.

First things first.  Use your past successes as your model for addressing this challenge.  Many of the things you’ve already experienced will prove just as important, and sometimes more, in this new environment.  Establish your goals and expectations for the property and develop your plan to achieve those goals.  Ensure that your plan includes an effective transition for your residents onto your preferred lease.  You will likely be out from under that bad lease in no more than a year - an end that you can count on.  Next question - what happens between now and then?  Can you get residents on your new lease, and out of the dysfunctional one, sooner? 

Part of your plan is nothing more than applying much of your existing operational experience to a different problem.  You deal with lease renewals everyday, right?  Transitioning many of your new residents to your lease is nothing more than a lease renewal.  In fact, three years ago when your company overhauled its old lease to create the one you use today, you were doing then exactly what you must do now - getting renewals from tenants in instances where the rules are changing.  The unique difference now is that three years ago, you had some history with the renewing residents that you don’t enjoy in your present situation.  Well, its time to create some history with your residents - fast. 

When they start asking questions about the new lease from the new property manager, don’t let them walk away with an uneasy sense that too much is changing too fast.  If they do, they might walk away for good.  Describe the things in the community that are not changing so the residents have something to comfort them and then explain how the changes you are making will benefit them, their enjoyment at your property, and the community as a whole.  And, consider explaining those things long before they have to sit with you to sign the new lease.

The next part of your plan is how to handle the inherited leases that won’t go away for some time.  Knowing exactly what they require of you as the property manager is an absolute must.  While you know your own lease like the back of your hand, you must know the carry-over lease even better.  Once known, develop the procedures necessary to handle resident issues for those who remain under the old lease.  Make sure you are prepared to handle lease defaults, notices to the residents, and rent payment policies that are likely different than your normal customs and practices.  The last thing you want is to follow your own procedures to the letter, only to find that your attempts to rid yourself of your biggest inherited problem were doomed from the start because there are additional notice requirements in the bad lease that you simply overlooked.

Lastly, determine whether your company can endure the dysfunctional lease for the next year.  If so, just put the first parts of your plan in place and start counting the days.  If not, get creative, think outside the box and figure out how to encourage your new residents to sign your lease and get off the original lease.  You may have to make business concessions to get it, but only you can evaluate whether the long term impact is positive or negative.  After all, as we discussed last month, if your residents can approach you to negotiate their rents mid-lease, you can approach them mid-lease to offer them a new one.  Worst they can do is say “no”.  [TOP]
 

How one document can help you avoid
he said / you said.

In CT, landlords can file criminal charges against a tenant who significantly damages the apartment or commercial space (in certain situations), or at least withhold security deposit funds to compensate for necessary repair or replacement.  However, this requires a baseline agreement between the parties on the status of the unit or space when the tenant first occupied it.  Unfortunately, landlords often report that there is not a copy of the move-in inspection form in the file, or they learn (upon further review) that the tenant completed it “inaccurately,” and the landlord has no pictures or video documentation to support its position.  This is not good news for the landlord.

Tenants are well-equipped with powerful phrases to undermine the landlord’s claim (and sway a judge) in this situation, such as: “It was like that when we moved-in” or “We left it better than when we moved-in.”  Absent a signed, written agreement between the parties, pictures, or a video about the unit’s move-in condition, the landlord will face the classic “he said, she said” situation in court, which the court will usually resolve in the tenant’s favor.  Why?  In Connecticut, the law treats the landlord as being in the business of renting property and treats the tenant as the consumer, and the judge will therefore hold the landlord to a higher standard.

Take the common situation where the landlord has decided to allow the tenant to complete the move-in inspection form at the tenant’s convenience and without the landlord’s presence after the lease-up and key transfer.  While handing the blank form to the tenant, the landlord often adds (without anything in writing) that the tenant’s failure to return the form means the parties agree that there is no pre-existing damage to the unit.  Unfortunately, that is not the law in Connecticut.  This situation also begs the question how the landlord intends to resolve differences of opinion on the unit’s move-in status with the tenant if the tenant completes the form “inaccurately.”  For example, given the likelihood of dinged walls and related damage during move-ins, there is nothing (in this situation) to prevent the tenant from documenting such damage as pre-existing on the form.  If the landlord has already given the tenant the keys, the landlord is probably stuck relying on the tenant’s “goodwill,” which can be a risky proposition. 

Alternatively, the tenant may view the landlord’s approach as an invitation to make a “wish list” of changes that the landlord will fulfill, even if they are unnecessary for the unit to be habitable.  The tenant may note damage or problems with (commonly) the carpet or countertops, and return the form to the landlord with the expectation that the landlord will soon replace or otherwise repair those items.  The disconnect caused when the landlord does not respond (because, from its perspective, the form was not a “wish list”) can be devastating to the budding landlord-tenant relationship.  Even worse, the tenant may forward the self-completed form to local code officials with a letter stating that the landlord has failed to fulfill its end of the bargain, which may (depending on the code official’s response) put the landlord into an unnecessarily defensive position. 

Landlords can eliminate these issues by treating the move-in inspection (whether by form, pictures, and/or video) like the lease-up and collection of first month’s rent and security deposit – everything happens before the landlord gives the tenant the keys.  Some client-landlords handle all of these tasks in the unit itself, which gives the landlord the opportunity to review with the tenant the key lease terms, the unit’s status, and operation of the unit’s systems (and when to call-in an emergency vs. a work order).  These clients report that such face-to-face conversations help eliminate future conflict with the tenant – even the most shameless of tenants often have trouble contradicting things in writing and discussed personally with the landlord at the lease inception.

Finally, related to our discussion about due diligence in property acquisitions (see our Quick Tip in this issue), the acquiring landlord should ensure that it receives all move-in inspections forms, pictures, and/or video documentation from the selling landlord.  If the selling landlord says that they do not exist or that “you can rely on me to testify for you,” the acquiring landlord would be well advised to get that in writing (unlikely) or understand, account for, and otherwise plan for the unit’s current condition to be the new baseline for any future action against the tenant.   [TOP]

Landlord's a-knockin' but he can't come in.

Ever knocked on the door of an apartment for a scheduled inspection and had a tenant refuse to let you into their apartment?  Ever had it happen more than once with the same tenant?  Did those experiences leave you storming back to your office, incensed by the gall the tenant had at telling you go away and don’t come back?  No?  Then grab some coffee and move onto the next article.  Yes?  Then grab some coffee and keep reading to find out how you can gain access despite the tenant’s refusal to allow you in. 

Before we get too far, this article assumes a couple of things.  If these assumption don’t apply to you, correct them, and then reread this article so you too, can live happily ever after. 

• Assumption #1 – You have a proper “right to access” clause in your lease. 

• Assumption #2 – You have complied with your “right to access” clause by giving the required notice in the required fashion in the required timeframe. 

Now – back to the tenant. Having both criterions in place, you arrive at the door and are told by the tenant through the small crack they opened, that they will not allow you in.  Maybe under normal circumstances, you would simply reschedule at a convenient time for you and the resident.  However, today, you are not the only one standing outside the door.  You have with you your maintenance supervisor who is there to watch over the outside contractor hired to complete the smoke detector system upgrade in your entire building.  And, to make matters worse, this is the third apartment where you’ve knocked and been told to go away. 

The simple rule in CT is that your residents cannot deny you access to the apartment, no matter what the reason.  You have a right to enter the unit and, if assumptions 1 & 2 above are true, the tenant’s refusal to allow you in can result in some pretty drastic legal rights that you may exercise to gain access.  And, in many instances, will result in the tenant being responsible for any costs incurred to exercise those legal rights in addition to any losses incurred because the tenant wouldn’t let you in.  For example, in the scenario described above, if you were charged by the contractor (even though the work could not be completed), you may be able to recover that cost from the tenant who denied you access. 

While the right-to-enter rule is simple, its application is less so.  We have covered this topic in seminars in the past and later learned that landlords decided, without seeking legal advice, that if the laws say they can go in, they can go in on their own.  Such in not the case.  In fact, if you use force to enter an apartment after you have been denied access (i.e. – pushing through an open door with someone resisting on the other side), there will be police involved but you will be the one getting the tour of the local jail and leaving fingerprints in little boxes designated for each digit.  The law will get you through the door via order of the court, and that process requires some legal paperwork and a visit with a judge.  Any other attempts to get in could get you into serious legal trouble. 

Here’s to getting into the apartment without legal intervention and knowing that, if you need to, the law will get you through the door.  Cheers!.  [TOP]

Attorneys as Business Advisors -
It's not just about the eviction.

As attorneys, we advise our client-landlords about the law and how they can operate within (or test the limits of) its boundaries, not just initiate lawsuits or otherwise take legal action for them.  However, we have learned that many landlords do not realize that such advice is available.  Generally, under the law, we may not reveal anything a client discusses with us due to the “attorney-client privilege,” which is meant to facilitate communication and consultation (indeed, you may hear attorneys referred to as “counsel”).  To introduce you to this concept of an attorney as “counselor,” we pose these questions (and our responses) to landlords:

Question: How many times has your attorney asked you about your business goals and objectives?  Our new clients often respond, “Never.”

Remember that the law exists to facilitate business, not run it.  It is your business, not the lawyer’s.  The lawyer’s job is to help you engage in that business within the framework of applicable law and, where the law is unclear, help you understand the legal risks involved so that you can make an educated business decision.  If your attorney is not asking about your goals and objectives, it may be time to engage a different attorney.

Question: How many times have you asked your attorney what was “legal,” or simply instructed the attorney to “evict” the tenant (even though you might be willing to keep the tenant under certain circumstances)?  As landlord-attorneys, we can answer from experience, “Often.”

Even if your lawyer has not asked you about your business goals and objectives, we recommend that you share them with the attorney and ask how he/she can help you meet them in a given situation that you think requires legal assistance.  Lawyers are used to simply “receiving” work from your business operations and applying certain legal tools to those situations, but this does not mean that they are uninterested in learning about and assisting you in accomplishing your business goals and objectives.  In most situations, there is no “one way” to manage property and tenants under the law, and a good landlord-attorney will look for non-legal solutions to the situation that may reduce your costs and increase your operational effectiveness.  If you encounter resistance from your attorney in such a discussion, or the attorney simply responds by describing the same legal tools that he/she has always used for you, it may be time to engage a different attorney.

Question: How many times do you accept at face value a new law or regulation (or a government employee’s interpretation of them), even though it seems to violate common sense or increases your expenses as you struggle with new legal or regulatory burdens?  As landlord-attorneys, we are rarely asked a question about the government’s ability to mandate, require, or prohibit something that affects landlords.  Landlords seem to assume that the government automatically has the power to do so, and place all of their time and energy in seeking to prevent the proposed law or regulation from being enacted, or seek to change it once it is enacted.

In sharp contrast, the government may not do anything at any time it wants, but must have legal authorization to do it (whether by constitution, law, or regulation).  Not every law or regulation is permitted either – for example, the government may enact a law that is unconstitutional, which means that a court can strike it down.  However, the court can only engage on the issue if you challenge the law or regulation, which usually means the involvement of (at least) an attorney to advise and assist you. 

DISCLAIMER:
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.