No, this is not some new fangled material for your three season porch to keep the mosquitoes out!

This is a new technique that some associations are using to manage the flow of tenants into their buildings and neighborhood.  Here is how it works:

• All building owners agree to collective tenant screening.   Occasionally, the association may require this via a covenants or rules change.
• When you have a vacancy, you notify the association.  You still do all the showings and advertising yourself, but when you get a prospective tenant that is interested in your property, this is where things changes compared the typical screening process.
• The prospective tenant fills out an application.  That application is actually sent to either the association management company for the credit, criminal, and housing checks or you do it yourself.
• If you wish to rent to this tenant, that application is then reviewed by an association board that looks at the application to see if the tenant meets the neighborhood standards.
• The board votes if they will allow you to rent to this tenant.

A slick part of this process is that the association keeps a running list of all tenants that have ever lived in the property.  This prevents bad tenants from moving from one building to the next in same neighborhood, which can often happen because the neighboring landlords were not talking or comparing notes.

Additionally, this association group can do a better job of seeing through the tenant application faleshoods.  I have seen this problem frequently, where Jane gets evicted from 1500 Main Street for lease violations such as criminal activity or bad behavior.  Interestingly, Suzie applies for and gets accepted on an apartment at 1520 Main Street, but does not disclose that Jane will be living with her (basically moving the problem down the block).

While this process may not work in all associations, it can be very effective where there are consistent tenant problems.  It can also have a big impact where the density of housing units makes one problem tenant frustrating for all the residents.

As I mentioned in a previous post, the Minnesota State Legislator passed a set of new laws that are being called the Tenant’s Bill of Rights.  The Minnesota Multi-Housing Associations represented all landlords and help the authors tweak and streamline the bill to lessen any undue impact on landlords.  We thank them for that as most of the items are simply clairifications of how we already do business as landlords.

One important section is worth exploring in more depth.  There were many shady things happening with screening fees and how tenant applications were being reviewed prior to this law being enacted.  This law cleans up any areas for abuse or discrimination against the tenants.  Here are some of the major points (these only apply when a landlord charges an application fee):

• A landlord may not collect or hold a tenants’ application fee without providing a written receipt for the fee if the tenant’s asks for it.  This seems pretty easy and obvious.
• The landlord may not cash, use, or deposit the application fee until all prior applicants have either been screened and rejected or they have been offered the unit and they have declined to take the unit (did not sign a lease).  This is a significant change as it was a previous unwritten rule to screen one applicant and only take that money until you have exhausted all options with that applicant, then move onto the second application.  Some landlords were cashing all the application fees, running all the tenant applications and picking the best one.
• A landlord must return the application fee if the prior applicant is offer the unit and accepts; subsequently entering into a lease agreement.  You can’t keep the application fee.
• You must disclose to the tenant, in writing, prior to taking the application or fee the criteria that your rental decision will be based upon.  I have been doing this for many years as it was required in certain cities, but this becomes a statewide requirement.
• If you reject a tenant application, you must notify the applicant within 14 days of that rejection as well as identifying the criteria that the tenant failed to meet (you should be citing something on the above written application screening criteria).  If you are rejecting the applicant for something that is not on the screening criteria document, you must return all their application fee.
• A prospective tenant who materially provides false information or omits information on the application is liable for damages, plus a civil penalty of up to $500, plus court costs.  I am not sure how this one is going to be regulated or tracked, but it could be interesting if some applicant lies to you and you can prove it.

These are some small, but important changes to how we as landlords run out investment properties.  You should make sure you thoroughly understand these.

I got an email from another member of my team today that was asking for some suggestions on how his customer should handle a tenant issue.  Here is his opening email:

I have a client that is very green in the rental business. He signed a lease with a tenant for 6 months.  The tenant moved in but hasn’t paid him a dime.  No month in advance, deposit, rent etc.  What can be done to get this person out?

Ouch!  Now, I suspect that 90% of new landlords have made the mistake of not getting a security deposit prior to move in, at least once in their career.  In my experience (and I have made this mistake before), you will get that deposit only about 10% of the time.  Once they move in, you have zero leverage to get that deposit.  That tenant has no fear of you actually doing anything to them.  In fact, you can’t!  No eviction in the world is going to work to get that deposit paid.

When the tenant signs the lease, you should get the damage deposit.  And before they move in, you should get the first month’s rent.  Worst case, if the time is short, get all of it prior to move in.  If the time is long between lease signing and move in, always get a deposit as the tenant can simply walk away from the lease.  While you could try to sue them for lost rent, good luck.  Actually, you could get into a wierd situation where legally you need to evict them to break the lease even if they never lived there.  Worst case, hold the keys until they give you the security deposit and first month’s rent.  This is the last leverage you have.

Another mistake that I am sure happens, but I made only once in my earlier landlord years was to accept a personal check for the deposit and/or first month’s rent.  I am sure you can guess what happens next; the check bounces.  Now you have a tenant living in your investment property that has not paid anything to be there.  Much like the guy above.  If you have several weeks prior to move-in, you have time for a personal check to clear.  Also, if the check is drawn on a local bank, drive it over there and have it cashed immediately so you get the funds directly instead of depositing in your bank, they send it to the tenant’s bank and then it gets returned 14 days later NSF.

A slight twist on this mistake is when you are dealing with a tenant that get’s a rental subsidy like Section 8.  The tenant talks the talk like they know exactly how it all works, saying they have talked to this person or that agency and you are going to get your money.  Never take the tenant’s word for it.  Call the agency or have the tenant provide written proof of the subsidy.  Just because they say they are getting emergency assistance to pay the security deposit, doesn’t mean they qualify for it.

Taking some precautions and holding the keys ransom for the money is the best option.  By they way, I told this agent to file the eviction immediately (since they also owed the first month’s rent).

I know it is very common for people to rent this homes or apartments to friends.  I suspect that like most things in life, 80% of those rental relationships do just fine. I probably just here about the 20% that do not.  Here are some tips to making sure that you as the landlord (not as the friend) is protected if this friendship goes south and your “friend” becomes the bane of your existence!

• Many “friend” landlords simply let the tenant “friend” move in and just pay them some verbally agreed on amount of rent.  WRONG!  You need a standard written lease.  This may seem formal, but this really protects both of you.  With a written lease there is no opportunity for one party to remember the conversation differently.  Plus, as the landlord, if the friend stops paying you or does something you disagree with, it will be difficult (but not impossible) to evict them.  One example is a couple that let a brother rent this old house in the country.  After about 6 months, the brother started paying parts of the rent every couple weeks when they would hound him.  He then started to remodel the house, plus he moved in a couple other roommates and they all had parties every weekend.  Without a lease in place, these landlords had a terrible time getting this guy out.
• Keep a key to this home and install a 2nd one in a lock box that only you have the combination to.  You can give out this lock box code to repair guys that need access to the property for repairs without bothering your friend.
• Do not allow your friend to be late on the rent.  This will be worse than letting the average stranger tenant be late on their rent.  You will get into this strange situation where you want to hang out with your friend, but will be frustrated when he is buying a round of drinks for the bar, all the time you know he owes you back rent.
• Consider putting your friend on a month to month lease.  Then you can simply give him 60 days notice to move out if the relationship starts to sour.  Then there doesn’t need to be an eviction involved (unless he doesn’t leave).  You just part company from a housing standpoint and go your separate ways.

Renting to friends can be a great way to have a quick and most likely wonderful tenant.  Just don’t leave all your landlord experience and common sense behind!

There is a rental scam using Craigslist that has targeted some properties listed for sale on NorthstarMLS. Property information and photos are taken by criminals from public broker/agent Web sites and then listed as a rental home through a Craigslist classified ad at an unbelievably low rate. The landlord-who had to leave the country and travel to Nigeria-asks that you wire him two months’ worth of rent. You arrive at the home on the agreed-upon date, but there’s just one small problem-the house is not actually for rent and its owners know nothing about your agreement. This latest scam being perpetrated by Nigerian criminals located halfway around the world has been seen in a number of U.S. states, perhaps in response to the current housing market-with fewer people buying, more people are renting.

What to do if your listing is a victim of this scam

Email the details to abuse@craigslist.org. Be sure to include the URL (or 10-digit post ID number) in your message. For further recommendations, check out the Craigslist page on who to notify about fraud attempts. You may also report it to the FBI’s Internet Crime Complaint Center to help them determine the extent of the problem.

I have written several posts about how to write “For Rent” ads in Craigslist.  Although I was previously the Director of Information services at Caribou Coffee, sometimes technology improvements can sneak by me.  This might be such old news that you are going to send me hate mail telling me I need to get rid of my Pentium 1 computer!

Here goes…As most of you know, Craigslist ads are quite dry and simply text in a white background.  You can add HTML to the ad, but that is time consuming and not for the average non-geek.  A customer of mine recently posted a “For Rent” ad on Craigslist.  He wasn’t getting many calls so I told him to send over the ad.

What he sent over floored me.  It was a colorful, well-formatted web page inside of Craigslist.  This customer happens to be a geek so I figured he wrote the entire thing in HTML and posted it.  When I mentioned it, he said he found a website called Postlets.com.  This free service allows you to create a beautiful page for your rental ad or your “home for sale” ad and then simply cut and paste the HTML into Craigslist.  You can add up to 18 pictures and even a virtual tour!  If you upgrade to the paid service you can have a single property website.

Now, no more boring Craiglist ads.  Start using this today!