COSTLY LANDLORD MISTAKES

by Francine Traiger Poor

            If you are like many small property owners, you've probably assumed that there was nothing to renting an apartment except finding a tenant and collecting the rent.  Unfortunately, there’s a lot more to being a landlord and what you don’t know can hurt you. 

Screen Your Tenants

    It's hard to evict tenants once they are in the premises, even for non-payment of rent. It's much easier not to rent to a problem tenant in the first place.  Some simple research can help you to avoid future problems. 

    Have each tenant fill out an application, a simple form is available from the Greater Boston Real Estate Board/Rental Housing Association, (go to http://www.gbreb.com/rha/ for more information). Be careful not to ask for irrelevant or unlawful information, such as race, religion, age, or sex, which could give rise to a discrimination claim. If you have access to a credit reporting agency, do a credit check and speak with the present and previous landlords and work references.   Ask specific questions. Did the tenant pay all rent due? On time? Did they keep the apartment clean?

Put it in Writing

    With a written rental agreement, you can spell out  the terms of the tenancy and who is responsible for what.  Another reason for using a written lease or tenancy-at-will agreement is to take advantage of specific clauses which define the terms of the tenancy. You can restrict the tenant's right to sublet and right to bring in new occupants without your approval. The tenant also has the right to have pets unless there is a written agreement to the contrary.  If you want the right to a key, and to restrict the tenant's right to change locks, you must reserve that right in a written agreement.  A written agreement also allows you to require the tenant to pay for heat and hot water.
    Other advantages of a written rental agreement or lease are clauses allowing you to collect attorney’s fees in the event of an eviction, provide for the method of service should legal action become necessary and define the amount of notice you have to give in the event you choose to evict.  If you’re using a standard lease form or rental agreement, read it over carefully to make sure you understand what you’re signing.  If you need to make changes, make sure that all changes are made on all copies of the lease. You and the tenant should both initial each change.  And make sure that all paperwork is complete before you give the tenants the keys and let them move in.

Understand Your Responsibilities

    The area where most landlords run into problems is with the tenant’s security deposit and last month’s rent.  Since the rules are different for security deposits and last months rent deposits, it is important for you to make it clear as to which kind of deposit you are taking. If the tenant pays by personal check, be sure the description of the payment in the "memo" section of the check is correct. If the tenant pays in any other way, be sure to give a receipt which includes an accurate description of the payment. For a security deposit, you must:
    place it in an escrow account in a Massachusetts bank in both your and the tenant’s name;

    give the tenant a receipt showing the amount of the deposit, your name, the address of the premises, and the name of the bank and the account number in which the security deposit is being held;

    give the tenant a statement of the present condition of the premises (The Greater Boston Real Estate Board has a form to comply with this requirement.);

    if the tenant submits to you a separate list of damages, return a copy of the tenant's list to the tenant within fifteen days of receiving it, with either your signed agreement with the list or a clear statement of your disagreement attached;

    pay the tenant 5% interest per year (or the amount of interest you receive from the bank each year if that is less) on the deposit;

    keep careful records on the security deposit and make them available to the tenant at your office during normal business hours;

    transfer the deposit to the new owner when you transfer the premises;

    you must return the deposit within 30 days after the end of the tenancy. You may only deduct unpaid rent which has not been validly withheld or deducted and the cost of damage the tenant has done to the premises (This does not include normal wear and tear);

    if you deduct for damages, you must provide the tenant with an itemized list of damages, signed under penalties of perjury, itemizing in precise detail the nature of the damage and the repair necessary to fix it.  You must also provide written evidence, such as estimates, bills, invoices, or receipts, indicating the actual or estimated repair cost, within 30 days after they move out.

This must be followed exactly, or you may have to pay treble damages plus attorneys fees.

            For the last month's rent, you must give the tenant a receipt that states:

    the amount of the rent,
    the address of the premises,
    the person receiving the rent,
    that you must pay 5% interest.

        You must pay the tenant 5% interest yearly or notify the tenant that the interest may be deducted from the next rental payment. You don't have to hold the last month's rent in an escrow account, but you may not deduct for damages to the unit from the last month's rent. If you do use an escrow account for last month's rent, you may pay the tenant the amount of interest you actually receive in the account, if it is less than 5%.

               If you fail to comply with any of these requirements, the law allows the tenant to sue you for damages including return of the deposit. For some violations, damages include three times the interest due or three times the amount of the deposit, plus the tenant's attorney's fees.

            Under current law, the security deposit provides very little protection against a tenant damaging the apartment. Almost any damage will cost more than the deposit. If you try to keep any part of the deposit for damages, you can be almost certain of a lawsuit from your tenant. And if the court disagrees with any part of the deduction, the tenant's award could be trebled, and you will have to pay the tenant's attorney's fees. It's a lot cheaper and less aggravating to protect yourself by carefully screening tenants.

Don’t “Let it Slide.”

    Stay on top of late rent payments.  Once a tenant at will (without a lease) is one week late on his or her payment, it is time for a notice to remind them of their obligation to pay on time.  If the tenant becomes one more week late after being given the notice, it is time for a 14 day notice to quit.  Allowing a tenant to become several months late in payment can be disastrous financially.  Many times the tenant will not be able to pay a large rent bill, requiring the landlord to spend significant amounts of money to get paid.