Posted by & filed under Insurance.

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Investing in a rental property is a great way to earn passive income, grow your real estate portfolio, and enjoy tax benefits. However, it’s always important to make sure that your investment is protected.

Rental property insurance (also referred to as a “landlord policy”) covers the unique risks associated with renting out a residence for long periods of time, like property damage, liability costs, and loss of income. Whether you own a multifamily complex, a condo, or a vacation home, rental insurance offers an essential safeguard against financial risk.

How is Rental Property Insurance Different From Homeowners Insurance?

Like homeowners insurance, rental property insurance usually helps to cover the building (and other structures on the property, like shed or fences) if there’s damage from a covered loss.

To purchase homeowners insurance, however, you must live in the home. You may be able to rely on homeowners insurance if you live in a single-family home and rent a room out to tenants, depending on how many people are renting from you and how long they intend to stay at the property.

However, rental property insurance includes special protections for landlords; coverage can vary based on the policy and insurance provider, but in general, you can expect:

  • Physical damage to the dwelling and any additional buildings on the property. Physical damage refers to the actual structure of the home, such as the walls and roof. Coverage will only extend to certain types of damage covered in the policy, such as fires or lightening damage, so it’s important to understand which types of damage your policy covers.
  • The landlord’s personal property. Rental property insurance doesn’t cover tenants’ personal property, but it often includes coverage for a landlord’s personal onsite property. This includes items like fixtures, lawnmowers, or appliances. However, keep in mind that if an appliance was damaged in a fire, for example, you would need to have fire damage included in your policy to file a claim for it.

When shopping for rental property insurance, you should ask whether personal property coverage is included in the insurer’s standard policy. If it is included, be sure to ask about the extent that it will cover your property. Personal property coverage is sometimes only offered as an add-on by some insurers. In other cases, it may only be offered as appliance insurance, which would cover appliances like refrigerators or washing machines only.

  • Liability. Liability coverage offers protection in case someone (a tenant or guest) gets injured on your property. If you are found at fault for the incident in some way, liability insurance can help cover the medical and legal costs up to your policy limits.
  • Loss of rental income. Loss of income coverage protects you against the loss of rent payments if your property becomes inhabitable due to an issue that your policy covers. For example, if you have fire coverage, and your property was severely damaged by a house or wildfire, you would be covered for the rental payments that your tenant is no longer obligated to pay.

This type of coverage is typically for a defined amount of time, such as up to 12 months after the damage occurred. Loss of rental income isn’t automatically included in all rental insurance policies, so make sure you ask questions before purchasing a policy if you’d like this type of coverage.

Optional Rental Property Coverage

In addition to the above coverage items, you may also have the option of adding on additional types of coverage, including:

  • Vandalism coverage. This usually covers deliberate damage to your property, such as graffiti.
  • Ordinance or law coverage. This type of coverage covers the costs to rebuild or repair a home that has been damaged, as well as the cost to upgrade it so that it meets the most up-to-date building codes after a covered loss.

What if You Have Homeowners Insurance?

Although it depends on how long you intend to lease your property, homeowners insurance generally isn’t a substitute for rental property insurance. The type of insurance you’ll need will be based on how long the tenant will be living there, which can be broken into three categories:

  • Long-term renting. Generally speaking, if you have an investment property that you’d like to rent out for 6 months or more, you’ll need to have rental property insurance.
  • Infrequent short-term renting. If you only plan to rent out your property for a week or a few weekends, you may be covered by your homeowner’s insurance. Depending on your insurance provider and policy, this may either come standard or be an add-on option. If you’re not sure whether you have this coverage, it’s best to contact your insurer before committing to short-term renting.
  • Frequent short-term renting. If you plan to rent your property to a variety of people for short periods (think AirBnb or VRBO), your property may be considered a business. In this case, you wouldn’t be covered by homeowner’s insurance or rental property insurance—you would need to purchase commercial property insurance in order to cover the associated risks. These types of policies generally include features that you might associate more with a hotel, such as bed bug coverage or identity theft protection. Keep in mind that although service providers like AirBnb may offer limited coverage, it won’t be as comprehensive as home share insurance offered by an insurance provider.

What Are the Costs for Rental Property Insurance?

Costs will vary based on the provider and policy, but rental property insurance is typically 25% more expensive than an equivalent homeowners policy. So if you were spending $1500 on homeowners insurance, you could expect to spend approximately $1875 for rental property insurance. The higher rates reflect the additional risks a landlord faces versus a live-in homeowner, like liability coverage or loss of rental income.

Rental Property Insurance Isn’t the Same as Renter’s Insurance

Despite the similarity in the names, rental property insurance is not the same as renter’s insurance. Homeowners or rental property insurance won’t protect your tenants’ belongings or provide them with liability protection, so if that’s a concern for you, you may want to make renter’s insurance a condition of your lease.

Before purchasing any insurance policy, it’s best to think about what you would like to have included in your policy and make a list of questions to ask the agent to make sure you have the information you need to make the most informed decision.

Posted by & filed under Leases.

Business legal document concept : Pen and glasses on a lease agreement form. Lease agreement is a contract between a lessor and a lessee that allow lessee rights to use of a property owned by lessor

Most tenancies go as planned; when the lease period ends, the majority of tenants either choose to move out or sign on for another year. In some cases, though, you may have a tenant who chooses to remain in the rental beyond the official tenancy period—also known as a “holdover tenant.”

Understandably, having a holdover tenant can be a stressful and complicated situation. Read on to learn more about this unique situation and what your options are.

What is a Holdover Tenant?

A holdover tenant is defined as a tenant who stays at a rental property after their lease has expired and without the landlord’s explicit permission. Typically, a holdover tenant can remain on the property legally as long as the landlord doesn’t take steps to remove them. However, like most landlord-tenant laws, how the tenancy is defined can vary from state to state.

Holdover tenants are often confused with “tenancy at will” and “periodic tenancies;” although these terms are often used interchangeably, there is legal differentiation between them.

With a tenancy at will, the landlord agrees to allow the tenant to remain on the property after the end of the lease. The tenant or landlord can dissolve the agreement at any time and need only to follow their state laws on the process. Similarly, a periodic tenancy is a type of ongoing tenancy with no set end date. The lease continues to be in effect until both parties agree to end it. This type of lease agreement is usually decided on once the initial lease period ends.

Holdover situations generally occur when a lease expires and the landlord doesn’t have the tenant sign a new one. The important thing to understand is that although the expired lease terms may roll over month-to-month (depending on your state and local laws), you may not have the same protections for your property as when you had an official lease agreement.

Although the holdover period can be welcome to some tenants because of the flexibility, you should have a signed lease for every rental you own. Without an active lease outlining the rules of the tenancy, the tenant could become a liability or start causing problems, like adopting unapproved pets or failing to pay rent. These issues could be difficult to resolve without an official lease.

How Long Can a Holdover Tenant Stay at the Property?

If you end up with a holdover tenant, how long can they stay after the lease expires? This depends on whether you are continuing to collect rent from them. Most states recognize the tenancy as being equal to the rent payment period. So, if you collect rent from the tenant on the first of the month, even after the lease has expired, most states would see this as a month-to-month tenancy.

The notice to terminate a holdover tenancy generally must be the length of the rent payment period. In the above example, either you or the tenant could agree to terminate the tenancy with one month’s notice. If the rent was paid in one yearly lump sum, most states would require you to give the tenant notice at least one year in advance.

Your Options for Handling Holdover Tenants

Fortunately, you do have several options when it comes to holdover tenants:

  1. Let the Tenant Stay

One option you have with a holdover tenant is to let them stay on the property. All you need to do agree to this is continue to accept their monthly rent payments. Depending on the original terms of the lease (and your local laws), the tenancy may actually be considered a periodic or month-to-month tenancy. Check your original lease; if there’s no set end date for such an agreement, it may be best to have the tenant sign a new lease.

Keep in mind that once you’ve accepted rent from the tenant, the tenancy is seen as an official agreement, and you won’t be able to evict them for staying past the lease period. If you’re not sure you want a tenant to continue staying at your property, don’t accept any rent from them until you’ve had time to make a decision.

  1. Eviction

If you don’t want the tenant to stay at your property, eviction is another option. In a holdover tenant eviction, the tenant is essentially treated as a trespasser. If you choose to evict the tenant, though, make sure you don’t accept any rent payments from them, as this could make the eviction process more complicated.

If the tenant tries to pay rent, refuse to accept it. Then, send a notice to vacate for either nonpayment of rent or for violating the terms of the lease. After you’ve done that, you’ll need to follow the process laid out by your local court system.

  1. Terminate the Lease Agreement

If your tenant stays at the property past the end date of the lease but the lease agreement or local laws allow for a holdover period, you can officially terminate the lease. Although the process for this can vary based on where your property is located, generally all you’ll need to do is provide the tenant with notice that’s equal to the rent payment period. Once they receive the notice, they’ll have until the designated date to vacate the property. If they continue to live at the property past this date, you’ll need to file for eviction to get them to leave.

Before deciding how to approach a holdover tenant situation, take some time to consider which option is best for your business and rental property. In most jurisdictions, you’ll be bound to your decision. This means that if you accept rent and allow a holdover tenancy, you won’t be able to change your mind and immediately file for an eviction.

Keeping Your Property Protected

As you’ve seen, holdover tenancies can be complicated. However, one of the best ways to avoid stress or confusion is to make sure your lease includes clear terms on what will happen when the lease period ends. For example, you could include a clause stating that the tenancy will automatically convert into a month-to-month agreement at the end of the official lease period. Just be sure that your terms are in line with all applicable state and local laws; if you’re unsure, it’s always a good idea to consult with a local lawyer well-versed in landlord-tenant law.

Whatever you decide, make sure the language in your lease is clear and follows what you would want to happen if you end up with a holdover tenant.

Posted by & filed under Credit Score.

credit score concept on the screen of computer

Could what you do online have an effect on your credit score in the future? It’s a distinct possibility, according to the International Monetary Fund (IMF). Recent research from the organization claims lenders may soon start using data from browsing, search, and purchase history to make loan decisions. Read on to learn more about how this would work and the potential pros and cons.

What the Researchers Say About Using Online Data

So, how would using online data work? In theory, a lender would be able to see a credit report that uses an algorithm to show a variety of a consumer’s online shopping and browsing behavior, as well as traditional financial data like income, credit scores, and payment history. The information would likely be collected using a combination of artificial intelligence and machine learning.

The IMF isn’t the only organization that thinks lenders will use our digital footprints; a 2018 study by the Frankfurt School of Finance & Management also researched lenders looking at online data along with traditional data from credit bureaus. What they found was that even very simple information from online behaviors matched the information found in traditional credit reports and that in many cases, the information was complementary.

In addition, Frankfurt researchers found that combining credit scores along with digital footprints “further improves loan default predictions.” Their findings also showed that the use of digital footprint scoring would allow some “un-scoreable” consumers to gain access to credit, while consumers who have a low-medium credit score could either lose or gain credit access.

The Pros and Cons of Using Online Data for Lending

The idea of using online data for lending purposes is somewhat Orwellian and has some interesting pros and cons.

On the one hand, researchers from IMF suggest that using online data will help more borrowers who have been denied by traditional financial institutions, particularly those who have fallen on tough times. For example, even with mortgage rates hitting historic lows during COVID-19, many lenders became more choosey about who qualified for those lower rates.

If lenders were to take a consumer’s browsing and purchase history into account, it could give them more confidence to approve the person for a loan, even if their credit score had suffered a few dings. Ultimately, using online data could be good news for those who have had trouble getting approved in the past, up to two billion adults worldwide, according to the Frankfurt study.

Another benefit to online data usage in credit scoring, according to IMF, is that it circumvents two significant issues with “hard” credit scores. The first issue is that banks tend to reduce credit availability in times of financial downturn. Unfortunately, this is often the time when people need credit most. The second issue is that it can be difficult for companies and individuals with no credit history to establish one. According to the study, the use of online data could be supplementary in providing people with more access to credit in either of these cases.

Now, onto the cons. What about privacy or security concerns? IMF acknowledges that these are valid, but effectively an “efficiency-privacy trade-off” that would require the government to set official standards for data collection and use. For example, fair lending laws in the U.S. prohibit the use of information about gender or race in lending decisions. Would those rules still apply when it comes to using information from a digital footprint?

What about other factors that might cause discriminatory decisions, such as religious beliefs or political views? This proposed credit scoring system is very similar to the new one implemented in China, where saying the wrong thing online or visiting the wrong website can mean being denied access to loans or even some social events.

Another issue is that there’s no evidence that AI is currently capable of this task or will be in the near future. According to Microsoft AI researcher Kate Crawford, “AI is neither artificial nor intelligent. It is made from natural resources and it is people who are performing the tasks to make the systems appear autonomous.”

In addition, the fact that people are actually performing these tasks brings up the growing problem of bias and discrimination in AI. One example of this is women being offered less credit than men based on credit-worthiness algorithms. Unfortunately, it’s not just how the systems are applied, but also how people build and train AI to see the world. Gartner, a marketing research and consulting firm, predicts that 85% of AI projects through 2022 “will deliver erroneous outcomes due to bias in data, algorithms, or the teams responsible for managing them.”

And another important question: how will your information be protected from data breaches?

Traditional Financial Data Still Rules

Fortunately, the idea of using online data to determine lending decisions is still fairly speculative at this point. However, it brings up many questions about how this could affect the rental housing industry as a whole, including Fair Housing laws and tenant screening. It also brings into question the growing use of AI for tenant screening and making rental decisions.

AI is still a young technology, and as we’ve discussed, one that can be subject to bias and discrimination. In contrast, traditional screening methods remain the most objective way to evaluate a prospective tenant and avoid potential discrimination issues. Another thing to consider: would you want to reject potentially good tenants who were blocked from creditworthiness because of online data—or, conversely, accept tenants that have would have otherwise been denied?

While there’s no way to know for sure if online data will be used to determine creditworthiness in the future, it does give some food for thought.

Posted by & filed under Rentals.

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Most landlords are aware of the disclosures they have to make about lead paint or mold, but what about a death at a rental property? Depending on your state or municipal laws, you may be required to disclose whether there’s been a death on the premises. Failure to follow your state or local guidelines could incur expensive fines, so it’s important to understand what you’re required to legally disclose before a tenant signs the lease.

Should You Disclose a Death at the Property?

Before we explore the legal issues surrounding death disclosure, should you disclose that one occurred, even if you’re not legally required to?

If there are no laws on tenant death disclosure in your area, it’s ultimately up to you to decide. In general, it’s best to give your tenants as much information about the property as you can and to be as upfront as possible. If a tenant asks a direct question about whether there has been a death at the property, you should answer honestly.

Although your answer may be off-putting to some tenants, there’s a chance that they could learn about the death another way in the future. If they find out after they’ve already signed the lease, they may feel you were being dishonest, which could add strain to your relationship with them, even if you were acting within your legal rights.

If the death happened within the last five years and you owned the property at the time, it’s generally a good idea to at least offer a vague disclosure to potential tenants. Being upfront and honest can prevent future issues and gives you the chance to address any questions or concerns the prospective tenant may have.

The Psychologically Impacted Property

A tenant’s death typically doesn’t affect the physical condition of a property beyond potential cleaning and repairs, but many states recognize such dwellings as having an emotional and psychological impact on the residents.

If a homicide, suicide, or other violent death occurred on a property, that information alone could be enough for a prospective tenant to decide they have no interest in living there—even if there’s nothing physically wrong with the home. This can understandably make it more difficult to find tenants for the rental, which can make some landlords consider not disclosing the death at all. As previously mentioned, though, keeping the death a secret could cause potential problems if the tenant somehow finds out.

Instead of hiding information about the death, it’s better to focus on finding tenants who understand that it occurred and the property has moved past the unfortunate event. To help interested renters feel more comfortable, you can let them know about any remodeling you’ve done since the former tenant passed. This can give the property a bit of a refresh in the eyes of many tenants.

Are You Required to Disclose a Death at Your Property?

Whether you’re required to disclose a death at your property comes down to your state laws; there’s no federal law requiring this type of disclosure as there is with lead-based paint. In some states, a landlord isn’t required to disclose a death, while others require landlords to disclose that a tenant died and in some cases, how the death occurred.

If you’re not sure if you’re required to disclose a death, it’s a good idea to find out. Even if you have never experienced death at one of your properties, knowing what’s expected of you to disclose can be helpful in the future.

The laws surrounding death disclosures can vary quite a bit, so here’s a look at how three states handle the issue:

  • California
    The California Civil Code requires landlords to voluntarily disclose any deaths that occurred at their properties within the past three years. You cannot provide personal information, like the previous tenant’s identity, occupation, family, or lifestyle—only that the death occurred and basic information about the cause. If a tenant asks whether there have been any deaths at the property prior to the past three years, you must provide that information, but it’s not required for you to voluntarily disclose it.
  • Georgia
    In Georgia, landlords are required to answer direct questions about death on the property truthfully, but they aren’t required to voluntarily disclose it. They must also disclose the nature of the death, such as whether it was natural, accidental, homicide, or suicide.
  • Oregon
    Oregon law doesn’t require landlords to disclose the death of a former tenant at the property. It also states that no cause of action will be taken against a property owner who fails to disclose a death.

What if your state doesn’t have specific regulations on the matter? It’s essentially up to you to decide whether you’d like to share the information with prospective tenants. However, most landlords generally choose to disclose minimal information about tenant deaths that occurred within the last few years.

Unless required by state laws, you’re not required to disclose the death in writing. Most of the time, a verbal disclosure is enough.

How to Discuss a Previous Tenant’s Death

Death is an uncomfortable subject for many people, so how should you go about having a discussion about a previous tenant’s death with potential tenants? Here are a few tips:

  • Be honest
    If a tenant asks you whether there’s been a death on the property or they want to know what happened, answer their questions honestly. It’s not necessary to give them a lot of information, but avoid lying or evading their questions.
  • Avoid going into detail
    While you should answer questions honestly, avoid going into too much detail. There’s some information that should definitely not be disclosed, such as the former tenant’s personal information or other inappropriate details. This doesn’t mean that you need to lie; you can simply inform the prospective tenant that the information they’re asking for is private and that you’re unable to share it. Let them know you can give them basic information, such as whether the death was natural, accidental, or violent, and anything else that’s essential for them to know.
  • Focus on improvements and changes made to the property
    Sometimes it can be difficult for landlords to find new tenants after a violent death at their property. One way to attract potential tenants is to make renovations or improvements. Prospective tenants who are asking questions about the former tenant’s death are much more likely to be interested in your property if they can understand what you’ve done to change things up. This can help them see your rental as a refreshed home and may reduce the psychological impact of what happened there.
  • Be Prepared
    If you’re concerned about prospective tenants asking questions about death at your property, it’s helpful to be prepared. Figure out what you’re going to say, what information you should share, and how you’re going to talk about the incident.
  • Refer them to the officials
    If a prospective tenant is asking too many questions or seems overly curious about the history of your rental, your best course of action may be to direct them to the local officials to submit a public request for more information. Keep in mind that although you should be honest when answering questions, you’re likely only required to give the bare minimum of information.

What Should You Do if a Tenant Dies at a Rental Property?

If you’re currently dealing with a situation where a tenant has died on your property, you may be wondering what steps you need to take.

Keep in mind that just because a tenant dies doesn’t mean the tenancy is automatically terminated. This means that once you’re cleared to re-enter the property, you’re not allowed to start clearing out the former tenant’s belongings. Some state laws require that the tenancy be passed on to the next of kin in some circumstances.

Typically, a written notice of a tenant’s death serves as a 30-day notice but in some situations, the lease may continue until it’s officially terminated. During this time, the tenant’s estate will be responsible for rent payments. The executor of the estate is typically the one who will contact you in order to secure the property, remove belongings, and end the tenancy.

It’s common for family members to want to enter the rental and start removing items right away, but you should make an inventory of what’s there and what’s been removed. This is because some family members may not have the legal right to take belongings, and you have an obligation to prevent potential theft.

After the property has been cleared of all belongings and the tenancy has been terminated, you should determine how much of the security deposit to return to the estate. Once this is done, you can start making changes to the property and begin searching for new tenants.

Posted by & filed under Leases.

All landlords want tenant stability. Tenant turnover can be a cash-flow killer, not to mention time-consuming. That’s why finding the right tenant is so important! However, despite your best efforts, you may have tenants who want to break their lease or move out right before the term expires.

Close up of business woman hands breaking contract document sitting on a desk at the office

Here’s a look at how to handle early lease termination, legitimate reasons for breaking a lease, and some other options you can offer to minimize issues like vacancies and loss of rental income. Please note that this is for informational purposes only and is not intended as financial or legal advice.

Things to Consider Before Making a Decision

When a tenant wants to break their lease, you generally have two options (depending on where your property is located):

  • Say no, and risk the tenant becoming frustrated or difficult to manage.
  • Say yes, and allow the tenant to break the lease on the condition that they pay an early termination fee or upfront rent payments for the rest of the term (which is hopefully mentioned in your original lease).

Neither of these situations is ideal; you either have a disgruntled tenant on your hands, or you’re left with a vacant property.

Before you make a decision about whether to allow the tenant to break their lease, make sure to review your state and local laws. Many areas require landlords to mitigate damages if a tenant moves out before the lease is up. For example, in California, Civil Code 1951.2 states landlords cannot require tenants to cover unpaid rent that could have been reasonably mitigated by re-renting the property.

In this case, if a tenant has six months left on their lease and the rent is $2,000 per month, you could only charge the tenant for the time that the unit stayed vacant. However, you would also need to do everything you normally do when you’re searching for a new tenant, like advertising, showing the property, and screening applicants.

If you can’t find a new tenant despite your best efforts, then the tenant will be responsible for the rent due for the remainder of the lease. You would deduct this amount from the security deposit first, and then if needed, take the tenant to small claims court for the rest of the unpaid rent. Keep in mind that you can’t collect double rent. So if the tenant’s lease ran through May, but they left in February, you can’t collect rent for April and May if another tenant is now occupying the property.

So, if your tenant wants to break the lease, you should:

  1. Stick to the terms of your lease. A thorough, well-drafted lease agreement should include an early termination clause that outlines the potential fees you can collect if the tenant decides to move. This could include paying the remaining rent for the remaining lease term or a flat fee.
  1. Find a new tenant. If your property is located in an area that requires you to mitigate damages, you should start searching for a new tenant as soon as possible. This will ensure you meet the mitigation requirements and reduces the chances of your property staying vacant once the current tenant is gone. If you have difficulty finding a replacement tenant to pay the full amount of the original rent, you can charge the tenant who’s breaking the lease for the difference.

Legitimate Reasons for Breaking a Lease

In some cases, you may be legally required to allow your tenant to break the lease without any penalties. Check your state and local laws to learn more about your rights and legal obligations before making a decision. That said, here are some examples of situations where you may want to consider being lenient with your policies:

  • Active Military Status
    Active duty and reserve military personnel can be deployed at a moment’s notice. If they’re transferred a minimum of 50 miles away, military personnel are allowed to break their lease without penalty under the Service Members Civil Relief Act. Depending on your state and local laws, you may also be required to hold the property for them until they return.
  • Job Transfers
    With job transfers, tenants often have no control over where the new job is located. There’s not much reason to try to enforce your lease terms, and if it were to go to court, a judge probably wouldn’t rule in your favor. However, it’s a good idea to add a clause to your lease stating that the contract can be broken for job transfers as long as the transfer is more than 50 miles away. This will avoid issues like a tenant breaking the lease because they’re transferring to a branch across town and want to a rental that’s closer.
  • Job Losses
    If a tenant loses their job and wants to break the lease, it may be best for everyone to just let them move on. If they have no income, it will be difficult to get what you’re owed; it’s better to let them break the lease so you can find someone who’s able to pay rent as soon as possible.
  • Victims of Domestic Violence, Sexual Assault, or Stalking
    Tenants have the legal right to a safe, habitable home—and as the landlord, you’re required to provide that. If the tenant is a victim of domestic abuse or sexual assault perpetrated by a co-tenant, or a victim of stalking, they aren’t in a safe environment and you may be legally required to allow them to break the lease. In some states, like Colorado, you may even be required to provide the tenant with a comparable dwelling or hotel at no cost. Consult with legal counsel to determine the rights of yourself and your tenant, as well as how best to move forward.
  • Personal Reasons
    Sometimes bad things happen to good tenants, like divorce, a death in the family, or illness. Major life changes aren’t always negative, either—maybe your tenant has decided to expand their family and your property isn’t large enough for their new addition. In these circumstances, it’s best to be understanding and allow them to break the lease.
  • Problematic Tenants
    Let’s face it: some tenants are more trouble than they’re worth. They might constantly complain, always be late with the rent, or cause issues with other tenants. If a problematic tenant wants to break their lease, it may be best to let them out of the lease so you can focus on finding a better fit for the property.

Other Options

Lease Assignments

Another option you may want to consider is a lease assignment. This allows tenants to reassign their lease in exchange for terminating the lease early. They essentially transfer their lease and rent obligations to another tenant, then are no longer responsible for paying rent or other tenant obligations. This can be very beneficial because you won’t have to deal with a vacancy, turnover time, or standard move-out procedures. If your lease doesn’t include a clause regarding lease assignment, you may want to consider adding one.

With a lease assignment, the current tenant is responsible for marketing your property and interviewing tenants. You then complete the rental application and tenant screening process with the best candidates. Most state laws require landlords to put in reasonable effort to work with the tenant to find a replacement, so if you choose to offer lease assignments, you must be prepared to complete your tenant screening and rental processes in a timely fashion. Make sure you’re still screening applicants exactly as you would if you would with any other tenant.

When it comes to the security deposit, it’s often easiest to let the two tenants work it out. Often, the new tenant will pay the old tenant the security deposit directly. Check to see if security deposit transfers for lease assignments are legal in your state, however, before adding this process to your rental documents.

Offer a Month to Month Lease

A year-long lease may feel too long for some tenants, particularly if they foresee life changes in their future. One way to work around this and make sure you still receive rental income is to offer to switch them to a month-to-month lease. This offers more flexibility for both parties, as either of you can decide to end the lease with only 30-days’ notice. You do lose some of the stability of a longer lease, but you won’t need to worry about a vacancy—yet. In some cases, your tenant may decide after a time that they don’t want to move after all.

When a Tenant Leaves

Whether a tenant moves because the lease ended or they wanted an early termination, it’s always a good idea to know why. Although you don’t necessarily need full details, you should have an understanding if it’s because of something going on in the tenant’s life or if it has something to do with the way the property was managed or kept up. If the tenant is leaving because of a management or property issue, this is an excellent opportunity to make adjustments to your processes or property. You may even find that these adjustments help with better tenant retention in the future.

Posted by & filed under Rentals.

Astrology has become increasingly popular over the last few years, especially among young people. This might not seem relevant to the rental housing industry, but zodiac discrimination has become more common than one might think. The question is, is it legal?

Close up happy young woman hugging man, holding keys

Zodiac discrimination first became publicized a couple of years ago, when a New York applicant was denied to be another resident’s roommate because their zodiac sign was Capricorn. The message the applicant received stated, “Our main goal is to keep things egalitarian, without anyone being ‘in charge’ or domming the household. I love Capricorns but I don’t think I could live with one.” Another example: A Los Angeles YouTube influencer complained about her apartment search after a property required her to include her zodiac sign on an application to get pre-approved.

Since rental applications include birth date information, finding out someone’s zodiac sign is easy. And unfortunately for the applicant, they may have no idea whether the information is being used to discover their sign—or if their sign will somehow disqualify them.

Is It Legal? Experts Weigh In

Many have claimed that zodiac discrimination is unquestionably housing discrimination, but it’s unclear if it’s actually considered discrimination by law. The Fair Housing Act prevents discrimination due to race, color, national origin, religion, sex, familial status, and disability, but there’s no explicit mention of zodiac signs. The closest protected class would be religion. However, since astrology isn’t a religion, claims of religious discrimination would be very difficult to prove.

According to David Levine, a professor who teaches civil procedure law at the University of California Hastings College of Law, the argument of discrimination is a tenuous one at the federal level. “In order for this to be legally considered discrimination, you have to fall within a protected category. Otherwise, you can choose to create a housing contract for any reason you want,” he said.

However, many states have additional fair housing protections, such as prohibiting discrimination based on medical conditions, genetic information, marital status, or sexual orientation. For example, California’s Unruh Civil Rights Act prohibits “all arbitrary and intentional discrimination by a business establishment.

Under this law, denying someone a rental because of their zodiac sign would be illegal, according to Caroline Pettie, the executive director at Fair Housing Advocates of Northern California. “This is not a legitimate basis for turning someone down. It has nothing to do with their ability to pay rent or be a good tenant,” she said.

Discrimination of Any Kind is Best to Avoid

Regardless of whether it’s legal to deny an applicant based on their zodiac sign, discrimination of any kind is best to avoid. Although there may not be laws against it (yet), you don’t want to end up in a potential discrimination lawsuit—plus, if the suit became publicized or went viral on social media, it could severely hurt your reputation as a landlord. Stick to basing your rental decisions on objective data from tenant screening reports, rather than looking to the stars.

Posted by & filed under Eviction.

The Federal eviction moratorium officially ended on August 26, after a 6-3 vote by the Supreme Court ruling that the CDC’s order exceeded the agency’s authority. In response, the White House encouraged governors and mayors to issue their own state and local eviction moratoriums to help protect struggling renters.

eviction notice paper

Top Biden officials stated, “Our bottom line is this: no one should be evicted before they have the chance to apply for rental assistance, and no eviction should move forward until that application has been processed. We are encouraging all other states and local governments to use their legal authorities to appropriately put in place or extend their own eviction moratoriums.”

After the Supreme Court’s decision, the city of Boston enacted its own moratorium, joining seven states and 31 cities. Since the end of the CDC order, the state of Massachusetts has also discussed issuing a statewide eviction moratorium.

Are eviction moratoriums becoming the new normal? It’s possible, especially if the new legislation proposed by senators Elizabeth Warren and Cory Bush is passed.

The Keeping Renter’s Safe Act of 2021

The new legislation proposed on September 20 would protect renters from eviction by amending Section 361 of the Public Health Services Act. Section 361 already grants the federal government the power to respond to communicable diseases like Covid-19; however, the new act would classify evictions as a contributing factor to the spread of communicable diseases.

If passed, this act would grant agencies like the U.S. Department of Health and Human Services (HHS) and The Centers for Disease Control and Prevention (CDC) permanent power to enact policies to help curb the spread of communicable diseases, including federal eviction moratoria.

With at least 11 million renters behind on rent, it’s estimated 3.6 million households could face eviction over the coming months.

No Clear Answers

At this point, the Keeping Renters Safe Act is only a legislative proposal. For the act to pass and become law, it would need to be approved by Congress and signed by President Biden. However, whether it would pass remains unclear, especially since Congress had difficulty agreeing on the federal eviction moratorium over the summer. One thing to consider: the emergence of new variants and the state of the economy could spur legislators to pass the act.

Even if the Keeping Renters Safe Act isn’t passed, there’s still a good chance that local and state governments (heeding the Biden administration’s suggestion) enact their own eviction moratoriums in response to burgeoning infection rates, more dangerous variants, increased rates of eviction-related homelessness, or other unforeseen circumstances.

In the meantime, the White House has said it will implement new policies to ensure Emergency Rental Assistance (ERA) dispersal is accelerated for tenants who are at the highest risk of eviction. The Department of Treasury has also created new guidance on ways households can self-attest to receive ERA funds. In addition, the Departments of Agriculture, Health, and Human Services, Veteran’s Affairs, and HUD are set to roll out more actions to help renters.

As with all things during the pandemic, there continues to be a lot of uncertainty about what the future holds. Although most of the current state-wide moratoriums are set to expire at the end of September through mid-October, it seems likely at least some of them will be extended, particularly in areas that have higher COVID-19 infection rates.

In the meantime, if your property isn’t under a moratorium and you’ve been thinking about evicting a tenant, now may be the best time to file to get ahead of the potential passing of the Keeping Renters Safe Act. If your property is under a state or local moratorium, there are several strategies you can implement to help with future non-payment of rent, as well as actions you can take if you can’t file for eviction. As it may be difficult to get rid of irresponsible renters, make sure to continue running tenant screening on all new applicants to avoid future issues.

Posted by & filed under Landlords.

Defaulting renter with facemask receives letter giving notice of eviction from home on wooden table

In August, Florida landlord Santiago A. Alvarez enacted a policy requiring his tenants to get vaccinated for COVID-19—or face eviction. Alvarez, who owns eight apartment complexes with 1,200 units total, decided to require vaccines after 15 of his tenants died of the virus. His new policy also states that applications from prospective tenants will automatically be denied if the applicants aren’t vaccinated. In addition, if any tenants remain unvaccinated when it’s time to renew their lease, they’ll have to move.

Alvarez’s rule not only applies to tenants, but to his employees as well. All employees must show proof that they’ve received at least one dose of the vaccine. He is the first known large-scale landlord in the U.S. to impose a vaccine requirement for tenants, as well as employees.

According to Alvarez, his primary goal is to keep his tenants and employees healthy; in addition to the 15 who died, many of his tenants became ill at one point with the virus. The reaction to his new policy has been divided, with at least two tenants stating they had contacted local eviction defense attorneys to discuss challenging the rule in court.

Are Alvarez’s Actions Legal?

While it’s understandable that Alvarez wants to protect his tenants and employees, is his new policy legal? This remains unclear, especially since Florida is currently under an executive order from Governor Ron DeSantis prohibiting businesses from requiring their customers to be vaccinated. Governor DeSantis has repeatedly stated that he feels vaccine passports violate both civil liberties and Health Insurance Portability and Accountability Act (HIPAA) rights.

DeSantis’ press secretary stated they conferred with the governor’s legal counsel, who felt Alvarez’s policy is in direct violation of the vaccine passport ban. Each violation of the ban (which the Florida Department of Health will start enforcing on September 15) could result in a $5,000 fine.

In contrast, Alvarez’s attorney states that the rule doesn’t violate the governor’s ban, as the current ban applies only to businesses requiring vaccine documentation from “patrons or customers”. Tenants, he argues, are not patrons or customers, which he defines as transient and only on the premises for a temporary period of time. This could be seen as a loophole in the governor’s ban—and one that may force the courts to decide whether a tenant is equivalent to a customer.

Attorneys Weigh in On Whether Landlords Can Require Vaccines

The issue of whether landlords are legally able to require their tenants to get vaccinated has been in question since the news that a vaccine would be available. While the Florida case is certainly more complicated due to the state vaccine passport ban, the core issues of civil liberties and privacy remain a national concern. To further complicate the issue, landlords are legally required to provide a safe living environment for their tenants—which could be interpreted as taking measures to minimize COVID-19 at their properties.

Last fall, three lawyers weighed in on the issue of whether landlords could impose vaccine requirements:

  • “Fascinating question. My immediate reaction, however, is no. Doing so invades constitutional rights of privacy and arguably is a civil battery. I would think it would expose the landlord to civil liability, not to mention violating a likely host of civil rights.” – Evan Walker, Attorney at the Law Offices of Evan Walker in La Jolla, California
  • “It is certainly quite possible that landlords could make vaccination a mandatory condition of a tenancy. A requirement that landlords mandate vaccination in order to rent a property would be permissible under existing federal law. In 1905, the Supreme Court addressed a similar issue of mandatory vaccination imposed by the government in regard to smallpox in the case ‘Jacobson v. Massachusetts.’ In this case, the court ruled that the ‘police power’ of the state to protect public health and safety permitted the legislature to impose a mandatory vaccine.

The court explained that such regulations are not a violation of the 14th Amendment right to liberty because there is a limitation by which every person is necessarily subjected for the ‘greater common good.’ This decision still prevails even today despite occasional injurious results from vaccinations due to the impossibility of assessing whether a specific person can be safely vaccinated or not. Federal and state laws will likely extend the Jacobson ruling to a mandatory vaccination for COVID-19. Landlords certainly will be afforded legal protection if they discriminate based on whether a person has a vaccination against infection from COVID-19.” – David Reischer, New York City Attorney and CEO/Founder of ProBono.LegalAdvice.com

  • “There’s a lot of uncertainty here. It’s important, though, to note that one thing is clear: This is not a HIPAA situation. A landlord is not typically a tenant’s healthcare provider. HIPAA rules only apply to healthcare providers. Landlords already collect a lot of private information about their tenants… As for requiring the vaccine, it’s really uncharted territory in that we don’t have a robust regulatory scheme or a lot of cases to use to argue by analogy.

That said, my first question would be, what does the lease say? Landlords want to abate public health risks in their buildings. An example would be cooking meth. Besides being a criminal activity, it’s really dangerous to everyone around them. But this is different, obviously. Do you modify your leases to include the vaccine? Do you restrict the rules to your common areas like fitness centers? You do have some basis to require a vaccine, certainly, but you also have to consider why you want to do it.” – Jacqueline Fox, Professor of Health Care Law and Policy, Public Health Law, Bioethics and Torts at the University of South Carolina School of Law in Columbia, South Carolina

Can Landlords Ask About Vaccine Status?

While the question of required vaccinations remains murky, can landlords ask their tenants about vaccine status? “The short answer is, most likely yes,” said Wendy Parmet, a law professor and director of the Center for Health Policy and Law at Northeastern University. According to Parmet, HIPAA doesn’t apply to landlords; it’s intended to keep health care providers, human resource departments, and insurance companies from spreading private medical information.

According to Nicole Huberfeld, a professor of health law, ethics, and human rights at Boston University’s School of Public Health, landlords can legally ask about vaccine status but tenants aren’t under a legal obligation to disclose whether they’ve had the vaccine.

Navigating Vaccines at Your Properties

Like all aspects of COVID-19, this is fairly uncharted territory. While there have been suggestions from the federal government that vaccines can be required by employers, little to no official guidance has been provided to the rental housing industry. According to a July 26 memo from the Department of Justice, the law “does not prohibit public or private entities from imposing vaccine requirements.” This statement does make it appear that a private landlord would be legally within their right to require their tenants to be vaccinated.

Legal experts continue to be divided, with some saying it’s within a landlord’s legal rights and others saying it’s an over-extension of power in the landlord-tenant relationship. Beyond the question of infringing on tenant’s rights, there’s also the issue of enforcement. The more tenants you have, the harder vaccine requirements will be to enforce—and the blowback from tenants could potentially result in higher turnover.

Attorney Danielle Lesser, chair of Morrison Cohen’s Business Litigation practice says that landlords could potentially tweak lease clauses that deal with the types of identification required to include proof of vaccination, but they would need to include language that doesn’t infringe on a tenant’s right to enjoy their space. “As you see employers require vaccinations in increasing numbers, I don’t think it’s a leap to think we’ll start to see landlords regulate access to their buildings,” she said.

Until a legal consensus has been reached, this remains a sensitive and unclear issue. If you’ve been considering vaccine-related policy changes to your rental properties, the best course of action may be to consult with a local lawyer who specializes in Landlord and Tenant law.

Posted by & filed under Property Management.

Hand holding magnifying glass and looking at house model with row of coin money, house selection, real estate concept.

Have you been thinking about investing in real estate? Traditionally, real estate has been seen as an effective hedge against inflation; when the price of goods and services go up, so do property values. However, with everything from fix and flips to turnkey properties and Airbnb rentals, you may be wondering what type of real estate would be the best investment. Although the answer may differ based on who you ask, most would agree long-term rental properties (also called buy and holds) are one of the most lucrative assets.

Long-term rentals allow landlords to earn passive income or cash flow from their properties, benefits from certain tax breaks, and build equity while paying down mortgages. With inflation rising in the U.S., a long-term rental property may be an ideal way for you to invest your money. Then the next question is, “where?”

To help you narrow down your options, here’s a look at the results of a study conducted by SmartAsset examining some of the best places to currently buy and own a long-term rental. The study focused on data from 120 U.S. cities with a population of 200,000 or more to gauge factors like home investment favorability (which includes price-to-rent ratio, four-year change in median home value, and estimated annual cash flow), home affordability, and the health of the local rental market.

The Top 10 Cities to Purchase Long-Term Rental Properties

Generally, rental markets in Florida tend to be the most lucrative, with five cities earning a rank among the top 20 rental markets. All five cities (Port St. Lucie, Tampa, St. Petersburg, Jacksonville, and Orlando) also ranked within the top 25 (out of 120 total) for home investment favorability. Cities in Texas and Arizona were also found to be very favorable for real estate investors.

  1. Port St. Lucie, Florida
  • The best place overall to buy and own a rental property in the U.S.
  • Ranked 1st for home investment favorability
  • The average rental property investor has an estimated annual cash flow of $6,096 (the 4th-highest cash flow in the study)
  • Home values have increased by more than 54% between 2015 and 2019 (the 5th-largest increase in the study)
  1. Buffalo, New York
  • Has the 4th highest home investment favorability score
  • Median home values increased 55% between 2015 and 2019 (the 4th-largest increase in the study)
  • The 8th best price-to-rent ratio
  • Median housing costs (mortgages, taxes, utilities) are 13.17% of the median national income (the 3rd-lowest out of all the cities in the study)
  1. Mesa, Arizona
  • The population grew 5.46% faster than the growth of its available housing between 2015 and 2019 (the 6th-largest difference in the study)
  • Median rents increased by 26.46% from 2015 to 2019 (the 17th-largest increase out of 120 cities)
  • An estimated annual cash flow of $2,880
  1. Tampa, Florida
  • The 10th best home investment favorability score
  • The 5th best rental opportunities score
  • Median rents increased by over 23% between 2015 and 2019
  • Low unemployment as of May 2021 (4.6%)
  • Median home value of $265,700 in 2019 (59th out of 120 cities)
  1. Birmingham, Alabama
  • The highest home affordability score out of all the cities in the study
  • The 5th lowest median home value in 2019 ($98,800)
  • Median housing costs were 14.39% lower than the median national household income (5th-lowest in the study)
  1. Detroit, Michigan
  • Lowest median home values out of 120 cities ($58,900)
  • Best price-to-rent ratio (5.67)
  • Housing costs are 9.90% of the median national household income (the lowest in the study)
  • An estimated annual cash flow of $5,616 (the 7th-highest cash flow in the study)
  1. Glendale, Arizona
  • Ranks 9th place for overall home affordability
  • A low average effective property rate of 0.56% (the 15th-lowest in the study)
  • Median home values of $241,100 in 2019
  • An estimated annual cash flow of $2,712
  1. Huntsville, Alabama
  • Median home values of $185,200 in 2019 (34th-lowest in the study)
  • Average effective property tax rate of 0.54% (11th overall)
  • The population growth outpaced housing unit growth by nearly 5% between 2015 and 2019 (the 9th-highest in the study)
  1. Pittsburgh, Pennsylvania
  • Ranks 9th overall for price-to-rent ratio (12.26)
  • Ranks 3rd overall for estimated annual cash flow ($6,276)
  • Median home values of $149,200 in 2019 (the 4th-lowest in the study)
  1. Nashville, Tennessee
  • The 3rd-highest increase (55%) in median home values from 2015 to 2019
  • Median home values of $287,300 in 2019
  • Median rents increased by nearly 30% between 2015 and 2019
  • An estimated average annual cash flow of nearly $4,300

Tips for Investing in Long-term Rental Properties

If you’re planning to invest in a long-term rental property, it’s worthwhile to work with a financial advisor. They can help guide you through the process of investing or advise you on how to invest your capital in a real estate investment trust (REIT).

Use an online mortgage calculator to determine how much your monthly payments would be and how much you can comfortably afford. Keep in mind that if you aren’t going to occupy the property, you’ll generally have to put down at least 20%. You’ll also want to factor in closing costs.

If you’re having difficulty determining rent prices, take a look at the rental income for the local real estate market for an indication of how much you should charge. Pay close attention to rent prices for homes that are in the same neighborhood and that have features similar to your rental property.

Lastly, long-term rental properties are an investment, so make sure to protect them by choosing the right tenants. Bad tenants can be a costly mistake, leading to potential property damage, late rent payments, or constant turnover. Be diligent when making your selection, and make sure to include thorough tenant screenings and verifications on top of personal interviews.

Posted by & filed under Background Check.

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With the decision in the case All of Us or None – Riverside Chapter vs. W. Samuel Hamrick, Clerk, California Superior courts have been removing the “date of birth” search fields in their online portals and public access terminals at the courthouses. This has severely impacted background screening. Often, the name is the only identifier that remains on the publicly available records—which isn’t enough to determine whether the record is about the individual in question.

On July 15th the Professional Background Screening Association (PBSA), along with the Consumer Data Industry Association and dozens of other organizations, submitted an amicus letter asking the California Supreme Court to review the decision that prohibited clerks from searching records that match a date of birth. A second supplemental letter was sent on July 22, with a total of 34 additional organizations joining PBSA’s request.

By August 20, many highly-populated counties had removed the date of birth from their online portals, with over 43% removing the date of birth from public access terminals. On September 1st, the California Supreme Court declined to review PBSA’s appeal.

What Does This Mean for Me?

With the Supreme Court’s denial, California courts will continue to redact the date of birth from both their online and public access terminals. It’s also possible that court clerks will stop verifying full dates of birth.

This means criminal records checks in California will continue to become increasingly difficult (and in some cases, impossible) to get.

Fortunately, PBSA is planning to enact additional strategies in addition to pursuing legislation; however, according to the organization, their efforts are unlikely to have an effect before late 2022. TSCI will continue to monitor the situation and post updates as they become available. If you have any questions about how this may affect your tenant screening services, please reach out to us at 1-800-523-2381.