Five Lease Violations to Avoid

Five Lease Violations to Avoid

Lease violations are just that; a violation of the lease terms agreed to by the Resident and owner or Property Management company.  These terms are set in writing.  Violation of the terms provides grounds for ending the lease.

In the business world we all put up with a certain level allowable deception.  Some is under the guise of honest mistakes, other times blatant lies.  In many instances these incidents cause no harm, like a waiter spilling water on your table; it's a little annoying but no harm done.

Then there is overt deception with purpose; actions intentionally performed to cause harm or loss for the benefits of the perpetrator.  On property, these actions can be as simple as a Resident consistently parking in another person's parking spot to vandalism, to theft.   Correction can be in the form of a verbal warning for enforcement to requiring police action.

These actions are costly, in the very least in terms of staff time for investigation and simple remedy.  More serious infractions, if unattended,  can place much more at risk; life and property.

Bodily harm that occurs on property is often based on a falling out of some sort between people who know each other.  If the person causing the harm is not a resident, how often are they on property?  If the incident occurs on property it is of concern to ownership and management.

Following are five types of lease violations that can cause harm to assets under management.  Property managers are charged to reduce and/or eliminate these types of activities if they constitute a lease violation.  Having systems in place to address these matters will go a long way towards that end.

Undocumented Sex Offenders.  In every state sex offenders must be registered. If they are residing on your property you must know they are residing on your property.  This is why in so many leases there are clauses limiting visitors to three to five days as anyone staying longer can be considered undocumented resident.  Housing undocumented sex offenders has potential liability for the asset.

Convicted Felons.  There are varying degrees of felonies.  Property managers are not in the policing business, but we do have a right to know about the criminal record of Residents on property as this information is part of the Resident selection process.  I point this out as on occasion people do become felons "after" moving in. This is just a point to ponder for your consideration at time of renewal; do you re-run criminal backgrounds at renewal? Consider a thoughtful response.  As stated earlier, all felonies are not equal and as a society we have a responsibility to allow those that have reformed to re-enter the collective community without perpetual impunity for time served.  Follow your company policy. 

Excess Pets.  Pets are fine when allowed.  Isn't it amazing how they sometimes grow in size and number over time?  I can recall one eviction where seventeen cats were found.  The next day the cleaning crew found one more in the kitchen cabinets. This is a friendly reminder about performing interior inspections at time of renewal and counting pet heads.  Does the number match the original lease or is there a change?

Business Operations in Units. Most leases exclude running a business from the property.  A common business that is run from apartment homes is child day care.  Whereas this may seem harmless enough, every business has certain liabilities.  What if a child is harmed in some way.  Do you have some liability here? The best way to avoid this is to assure that no such business is being operated on site.  As stated earlier about inspections, they can often identify when a business is in operation in an apartment home.

Subsidized Housing. The age-old familiar story with any form of subsidized housing is when the grown "grandson" is residing with Grandmother when the lease clearly states for whom the subsidy is for; Grandma and no one else. As a property manager, allowing additional occupants negatively affects the future qualification of the Resident and property revenue.  If a Resident with subsidized housing wants to violate their lease it will have to be somewhere else and not on your property.

You can see the theme throughout these actions; all provide negative connotations for the asset with no upside potential whatsoever.  If anything, they will collectively decrease asset value. The easiest remedy; good resident screening followed up by periodic unit inspections and annual inspections at time of renewal.

Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 - How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets. Multifamily Insight Vol 2 is set for release in 2015.

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About This Blog: Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel.

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