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Minimizing Rent Losses in Evictions |
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All landlords fall into two great classes: those who have been through an eviction proceeding, and those who will go through one. The eviction of a tenant is always a mini and can be a major catastrophe, exceeded in severity only by an unsuccessful eviction attempt. An eviction is a loss mitigated only by the chance, and it is but a chance, that the tenant obtained to fill the resultant vacancy will be better than the one removed. There are things a landlord can do to minimize, though likely not eliminate, this loss. We do not here refer to screening of prospective tenants, which is a subject in itself and with which we deal elsewhere on this web site. This column assumes that the best screening in the world has not avoided the irresponsible tenant.
While there are many reasons why a tenant may be removed, nine out of ten eviction cases result from a stoppage in the payment of rent. By far the largest single loss in the eviction process is the loss of rent during the time the process is invoked and followed. All jurisdictions have laws which govern how the tenant may be dispossessed of his rental unit, and these laws mandate processes known by a number of different names. They all share similar characteristics, however. First, they are designed to replace self help in effecting tenant dispositions with legally mandated action by law enforcement officers. Second, they all feature expedited procedures designed to minimize the amount of time consumed in obtaining the legal help (from the Sheriff, Marshal, Constable, or Police) necessary to dispossess the tenant. Third, they provide notice to the tenant and an opportunity for him to be heard in his defense in case the attempted dispossession is wrongful. Fourth, they result in rent loss because of this necessary delay, and the amount of delay will average about a month, more or less, even in cases which are uncontested.
Procedural due process is not going to go away, nor should it. Certainly the most biased landlord would object to a procedure which would permit his mortgage holder to divest the landlord of title to his rental property without notice or hearing or opportunity to defend.
All tenant dispossession processes consist in a series of steps designed to give the tenant notice of what is happening and an opportunity to be heard, and so fulfill due process requirements. Each of these steps takes time and so lengthens the period during which the landlord must do without rent. It makes sense to attack the loss problem by minimizing the amount of time it will take to get the order or writ which will permit the landlord to call out law enforcement to effect the displacement. Compared to this rent loss, the amount of money consumed in court filing fees, process server fees, etc., pales to insignificance.
As with most things, a little forethought goes a long way. Cynical as it may sound, eviction planning starts before the landlord purchases the rental, before the "for rent" sign is posted in the front lawn, before the rental agreement is negotiated. Establishment of rental standards, a competent and thorough tenant screening, and the collection of as large a security deposit as is permitted by the law and the market, are the best prophylactics against rent loss. Because it takes about a month to get a dispossession order and enforce it in most jurisdictions, it makes sense to get a security deposit which amounts to at least one month of rent, more if the market and the local laws will permit. Ensure that the rental agreement defines this as a general deposit, which can be applied to remedy any loss arising out of breach of the lease. If you do not, and label the deposit as "last month's rent," you are stuck. You must apply it to the tenant's last month's rental obligation first regardless of any excessive damage done to the rental.
During the term of the tenancy, manage the property sanely. The landlord must keep good records of rent paid and unpaid and other charges which arise out of the tenancy. Maintenance must be handled as a matter of routine and done promptly. The landlord must keep track of who is in possession of the rental unit, as unknown additional occupants have a habit of surfacing in the middle of an eviction proceeding and forcing loss of time. All of these are subjects of articles available on this web site (www.landlord.com).
The hard decisions start when the rent stoppage does. At some point, usually at the fifth or sixth of the month it will become obvious that the rent is at least going to be late. The landlord should always contact the tenant as soon thereafter as practical and ask when payment will be made. If an unsatisfactory response is made, the landlord should never fail to deliver a paper or perform a legal act necessary to move the eviction process along. It is always possible, and sometimes advisable, to slow down or even stop at some point down the road. But the landlord must do it at a place of his choosing, when his rights to possession are vested, and he can do so without excessive loss of time. Holding up the dispossession process for a month to give the tenant a chance to catch up will only result in the loss of another months of rent. The process will have to be started from scratch, but this time with two months of rent in default rather than one.
As the proceeding is going on, the landlord should be cautious of weird deals and protracted payback schemes. Cash on the barrelhead should be the policy. A new promise to pay is of no more value than the original promise to pay (the rental agreement) and a good deal less reliable. After all, the original promise has already been breached. At minimum, the landlord should insist that upon failure to pay dispossession will occur without further proceedings. In reality, there are always "further proceedings," so such an arrangement should be entered into only with the assistance of an attorney or professional service which can walk the landlord through the process of eviction.
For most landlords, it is probably a good idea to form a relationship with an attorney who specializes in landlord tenant law, or an eviction assistance service of good reputation. These professionals can assist the landlord in developing a strategy to minimize loss of time (money) in getting through the process.
The careful landlord will follow the following course to minimize eviction losses:
1. Establish sound rental standards.
2. Formulate an effective rent collection policy and religiously follow it.
3. Learn the procedures leading to forceful dispossession of a tenant and about how long they take.
4. Obtain a security deposit sufficient to cover the rent which will accrue while forceful dispossession takes place (usually a month or so) or more if the law and market forces will permit.
5. Do not procrastinate but prefer to initiate proceedings and stop them, if appropriate, rather than not start them and lose time.
6. Develop a good business relationship with your tenants, do not let personalities clash.
7. Maintain good records so there is proof of what you are owed.
8. Maintain the property so as not to hand defaulting tenants a defense to use to delay the eviction.
9. Keep proceedings simple: either the tenant pays what he owes or not, no special deals.
10. Develop an ongoing relationship with an experienced attorney who can assist with prompt service and objective advice.
While losses can never entirely be avoided, they can be minimized if these simple rules are followed.
This article is courtesy of Landlord.com . Landlord.com is the premier national rental property owner and manager content and services provider on the Internet. They provide a wide range of on-line property management and do-it-yourself services, including how to articles, law resources, resident screening, forms processing, apartment locators, handyman referrals, and future e-commerce services.
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