By Thomas Backal, Lazarus Financial Group, Dallas, TX

As a busy property manager, one of the trickiest and yet most crucial parts of your job is getting tenants to pay their rent on time, and in full. In an effort to avoid slow payers and delinquencies, you probably send out friendly reminders when rent is coming due or even incentivize early payments. But perhaps the key to getting people to promptly pay their bills, a study finds, is providing them with multiple (technologically advanced) payment options.

A recent survey conducted by The Marketing Workshop provided some valuable insight into how Americans prefer to pay their bills. What the study found was that people not only like having a bevy of payment methods available to them, but are also growing more and more fond of online and mobile payment channels. Some of the key findings from the study are listed below:

In 2012…

• 20% of Americans changed how they paid their bills from month to month.

• 75% of Americans…

• Used at least two bill payment methods each month.
• Said having multiple billing and payment options was “important/very important” to them.
• Who received electronic bills said it helps them manage their finances.

• 8 million online consumers (people who used the Internet at least once a week) paid a bill on a mobile phone – an increase of 41% from 2011.

• 73% of Americans who access the Internet at least once a week paid at least one bill online each month.

What Your Tenants Think About Rent Payment Options

The study revealed a growing shift in how people are choosing to pay their bills and a transformation to a more digital bill payment world. It is important as a property manager to stay ahead of these changes because, according to the study, those who pay bills online fall behind less often and incur fewer late fees than those who pay offline or by mail. Not only should you be offering digital payment methods to your tenants, you should be encouraging the use of them as well. Here’s why:

• 25% of infrequent and non-Internet users said they had at least one issue paying a bill because they had trouble keeping track of it.
• Infrequent and non-internet users were three times more likely to incur late fees because of bill tracking difficulties and were also three times as likely to report that they lost a bill that came in the mail (19% versus 6% of online payers).
• Only 7% of online bill payers said that trouble keeping track of a bill caused a late payment.

Why People Prefer Paying Bills Online or On a Mobile Device

Of people who paid bills on a mobile phone or tablet, 50% of them said they did so to save time, 44% said they did so because it offers anytime access, and 43% said they did so because it was most convenient when on the go. Also 69% of Americans who used electronic billing services said they preferred electronic billing because of the convenience, and 31% said they liked electronic bills because they received an email reminder each time a new bill was due.

So property managers take note! Your tenants most likely want to pay their rent online, and you should want them to as well. Not only can it lead to fewer late payments and costly delinquencies, but also can go a long way in improving your tenant relationships. In fact, according to the survey, 37% of Americans who received electronic bills in 2012 said it improved their relationship with the company from which they received the bill.

Don’t let yourself fall behind on technology. Your tenants will appreciate it — and better yet, so will your bottom line.

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

These days the stock market seems to live or die, grow or deflate, depending on the “employment” report.  How many jobs were created, how many folks are seeking jobless benefits? How many folks are no longer seeking “employment” because they have been out of work so long?

Whenever these reports are given, I have always wondered (because one naturally wonders this): Does that include “independent contractors”? Would the economy tank if, all of sudden, people were not employees but because “independent contractors” because their employers (I mean the people asking for work to be done) no longer called them employees, but decided to call them “independent contractors” instead?

Why ever would they do such a thing? Well, they could not really, and get away with it. The IRS and your local state government would not really like it, because it might mean less payroll tax and less government services as a result. But one consequence of retaining an independent contractor, rather than an employee, is that if the independent contractor injures a third party by his negligence, the person who hired him is not liable for injuries to third parties.

How we determine who is an employee and who is an independent is frequently a fact determinative question requiring jury analysis and a lot of preparation work. Work that keeps lawyers employed. Kidding aside, it depends on a number of factors but there are two key ones that are usually determinative. They are the hirer’s control over the hired, and whether the hired works only for the hirer or has other gigs.

Let’s use a real-life example. Remember my New Year’s Day spigot fiasco?  Well, the one we fixed in the back yard, with the help of my neighbor handyman, sprang a leak. Rather than do it myself (remember there is probably a rule somewhere against lawyers wielding power tools), I asked my neighbor to do it for me. He had just finished a big job for another homeowner. I invited him to inspect it, and he gave me an estimate: $100 plus parts. He said he would go about it a particular way, go to Home Depot, and get some things he needed.  And he brought his son over to help. A couple of hours later, it was fixed and moved to a better location closer to the garage.

Was this neighbor my employee? Did I exercise any control over the handyman? No.  He told me how he was going to go about doing the work. I didn’t understand half of it but understood that he’d fix it.  Did I tell him how to do the work? Other than that I wanted the leak stopped, I did not really tell him anything, much less how to do it.  Does he do work exclusively for me? It may seem that way given the number of times I require his services, but he doesn’t! He works for others.  These facts, and others, mean he is not an employee — unlike, say, a live-in nanny that would (in my dreams) work exclusively for me, and do what we say with regard to the children.  Next time we’ll talk some cases . . .

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submission do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

By Matt Donnelly, Buildium, Boston, MA

The stars seem to be aligning for a surge in the number of roommates, with implications for property managers.  According to the Insurance Information Institute,

One out of every eight homes in the U.S. is now inhabited by two or more people who are not related to each other—an increase of over 5 percent from 2000 to 2010, according to the U.S. Census Bureau. In other words, there has been a significant increase in the number of housemates/roommates, roomers or boarders, and unmarried partners living together.

Why is this happening? Look at the trends. First, there are a lot more home buyers than there are properties to buy (low inventory). This has had the effect in some markets of creating bidding wars, driving up home prices beyond what many can afford. The result is that more people are being forced to rent vs. buy.

This increase in the number of renters, combined with a shortage of rental space, is in turn driving up average rental prices (see what’s happening in a place like Manhattan, for example). Single people are thus less likely to be able to afford to pay the rent on their own, and that brings us to the solution of renting with a roommate. Or two. Or three. A 3-bedroom apartment that rents for $3,000 per month is certainly more affordable in today’s economic climate when split three ways.

As a property manager in the roommate rental business, it’s a good idea to use a roommate lease agreement (here’s an example). Having roommates as tenants can be a positive experience for all involved as long as some basic precautions are in place.

In terms of marketing to renters, there may be room for some innovation in advertising your prices. Rather than advertise a 2-bedroom unit for $2,000/month, why not consider offering it for $1,000 per person/month (assuming one roommate)? This pricing might appeal to cash-strapped renters who’d balk at carrying a a $2,000/month rent by themselves. Combine the roommate-friendly price with access on your website to online tools to find roommates, and you might be in a stronger position with a segment of the rental market that might not be in your sights at the moment.

As a property manager, do you prefer to rent to roommates as opposed to couples or single people? What advice would you give to other property managers considering renting to roommates?

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

Relationships. Everybody’s got them, but not everyone is liable for the actions of those in their relationship. We’re talking about “vicarious liability,” where the landlord is liable to a third party for the wrongdoings of someone or somebody it hired. This is a legal doctrine wherein the courts hold a passive actor responsible for the acts of another if there’s a relationship there and if the circumstances warrant imposing liability.

Here’s the doctrine. A landlord is almost always going to be liable for her employee’s negligent acts. In California there’s cases on it and a statute or two. (For all us working stiffs out there, remember, too, that in California the employer has to defend and indemnify you for negligent acts committed doing your job). As long as the employee does not stray from his duties and commit acts outside the course and scope — intentional acts that have nothing to do with the job — the employer will be liable for the employee’s act. If the delivery driver employed by a package delivery company runs someone down in a cross walk while delivering packages, the employer is liable. (As a practical matter, both the driver and the company are named as a defendant, but the employer is liable to the third party and foots the bill pursuant to insurance.) A landlord will also be liable to a third party for the acts of an independent contractor if there are particular risks involved in the activity being done by the contractor.

As with most legal doctrines, there is a thought process behind it. “The principal justification for the application of the doctrine of [vicarious liability] in any case is the fact that the employer may spread the risk through insurance and carry the cost thereof as part of his costs of doing business.”* So the landlord who employs folks to do maintenance around the yard, in the common areas, will be liable to the third party injured by the deficient work-related acts of that employee. Like the janitor that left the chairs near the window in a post a few months back, the doctrine applies.

There is an issue of whether someone is an employee or an independent contractor. Some businesses attempt to avoid the consequences of liability and other payroll obligations by classifying folks who do work for them as independent contractors. There is a whole body of law on that and what constitutes an employee or independent contractor. So we’ll talk about that in the next post, and then move on to some examples of landlord employees gone wild . . .

*Johnston v. Long, 30 Cal. 2d 54, 64 (1947)

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submission do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

By Matt Donnelly, Buildium, Boston, MA

If your tenants don’t own pets, they’re in the minority. That’s the finding of a new Apartments.com survey, in which a full 75% of renters said they owned one or more pets. That’s up a staggering 32% since last year. Most of these pets are cats and dogs, with fish trailing behind at 6%. (Sorry, Nemo.)

Curiously, only 63% of renters who own pets said they were required to put down a pet deposit. The most common deposit was $200+.

What’s possibly more interesting is that 58% of renters who don’t own a pet still sought out pet-friendly buildings. They want to live near pet owners. Of those renters surveyed in 2013, 78% said they lived in pet-friendly buildings, up from 59% in 2012.

The trends are clear: More renters are owning pets, and more renters without pets are warming to the idea of living near them. Add to this the fact that 65% of pet-owning renters said they had some problems finding pet-friendly rentals, and it seems clear that having pet-friendly units could put your property at a competitive advantage. Put another way, if you’re not allowing pets, you’re turning away a large subset of renters.

Are the risks of allowing renters’ pets greater than the rewards? Do you allow pets in your units? Why or why not? Share your experiences in the comments section below.

(Note: The dog featured in the photo belongs to Buildium’s own Ian Pirro.)

By Matt Donnelly, Buildium, Boston, MA

If you’re a property manager, how can you encourage your tenants to support local businesses? Create a rewards card.

This is the approach taken by LLC Property Management, based in Los Angeles and Dallas. They offer each tenant a card they can use to get discounts at local shops. The tenant saves money and local shop owners get more business.

“Tenants usually save about 5-10% with each purchase. For example, every time they shop at their local markets or grocery stores, they can show their LLC Rewards card and receive the discount,” says Stefanie LaRue of LLC Property Management. “Dollar stores are very popular too. The vendors appreciate us directing local business their way, and the tenant’s savings adds up over time to where they truly value being a part of the program. They never leave home without their cards.”

This is just one of many ways that property managers can add value for their tenants. For example, Gallagher & Lindsey Property Management, based in Alameda and the East San Francisco Bay Area of California, rewards some long-term tenants (12 months or more) with a cash rebate that can be applied when those tenants buy a home through Gallagher & Lindsey REALTORS.

Another example comes from the Barrington Group, which manages properties in Ohio, Michigan, Indiana, Georgia, and Florida. It has created a Residents Reward program in which tenants are rewarded with points for doing things such as paying their rent on time, helping orient new tenants or donating to a local soup kitchen. The points can be exchanged for apartment upgrades such as granite countertops, new carpeting or custom painting. The objective is to increase tenant loyalty, foster a feeling of community and ultimately reduce turnover.

There are numerous other rewards programs offered by property management companies. What programs does your company offer to your tenants?

By Matt Donnelly, Buildium, Boston, MA

Think of an English butler, and your thoughts probably turn to a devoted servant willing to do whatever it takes to make his employer happy.

Apply that same idea to property management, and you have what new UK-based property management company London Management Company is calling “butler” service. By “butler” service, they mean providing uncompromising one-stop service to tenants and property owners. London Property Management is convinced there’s a need in the UK property management market for world-class service, implying that it’s now lacking.

What can you as a property manager do to provide “butler” service to your tenants and property owners? Here are a few ideas:

• Put the tenants first: You might have lots of other things to do, but you should always strive to reply to tenant emails quickly and pick up the phone if you get a call.

• Sweat the small stuff: Sometimes it’s the small things that mean the most to tenants. You don’t always have to resort to grand gestures. Are there any small requests you can take care of today that will brighten your tenants’ day?

• Think of ways to make your tenants’ lives easier: What about online bill payment? How about letting them log maintenance requests online?

• Be innovative: What about giving your tenants “shrinking” lease payments if they consistently pay on time? How about offering a rewards card with discounts from local merchants?

• Invest in upkeep: If your units are looking their age, it might be time to invest in some upgrades. Don’t let repairs wait — take care of them quickly, and your tenants will notice.

Customer service — or the lack thereof — can be the difference between happy, lease-renewing tenants and a merry-go-round of empty units or new tenants. Which would you rather have?

Now it’s your turn. What do you do to provide “butler” service to your tenants? Please leave a comment below to continue the discussion.

By Brooke McDonald, VSM Real Estate, St. Paul, MN

The federal government has dedicated the month of April to spreading awareness about fair housing in the United States, especially legislation like the Fair Housing Act. For property managers, understanding fair housing legislation is vital to ensure a smooth, fair and respectful tenant selection process that does not result in unwanted lawsuits. Choosing the right tenants (people who will respect your property and reside in it responsibly) must also be balanced with complete compliance with federal, state and local laws concerning discrimination.

A thorough understanding of fair housing legislation (both federal and state-specific) is important, whether you own a large property management company or simply manage a few rental properties on your own. The legal implications for discrimination are not nice, and you risk tremendous financial loss, as well as respect in the community, if you refuse someone housing for the wrong reasons.

A brief history of fair housing legislation

Current fair housing legislation began with the federal Fair Housing Act, Title VIII, in 1968, which prohibited discrimination in the sale or rental of housing based on race, color, religion or national origin. An amendment from 1974 prevents discrimination based on sex, and in 1988 the law was further amended to protect disabled persons and families with children, and it also introduced stiffer penalties for violators of the law.

Real estate practices covered by this legislation include your advertising pre-sale, the terms of your rental agreement or sale, and the actual denial of housing based on whatever reason.

Legal implications for discrimination

The legal implications for property owners charged with discrimination are grim and often financially serious. If a tenant has perceived discrimination in the buying or rental process, they can file a complaint with their state department of human rights. They may also contact an attorney. Tenant advocacy groups protect tenants too, and the last thing you want is to go to trial for perceived discrimination.

If found guilty of discrimination, you can potentially lose your real estate license and be required to pay substantial damages, settlements or attorney’s fees.

Having respect for all in real estate: Be aware and be informed

Nolo has an informative article on the types of housing discrimination prohibited by the Fair Housing Act. I’d recommend that all property managers read it. Here is some further advice for property managers on maintaining awareness about fair housing and discrimination:

• Be consistent in your meetings with prospective tenants. Having a standard set of questions you always ask and speaking with a polite, respectful tone will help you ensure that your standard of communication is always high. If you consistently strive to maintain a respectful tone in every screening, showing and phone call, you will do much to avoid unintentional discrimination or anything that could be perceived as unlawful.

• Decide on the level of accommodations you will employ across the board. Set a standard for yourself about the kinds of accommodations you make for tenants, and then follow it in every situation as best you can. You don’t want one tenant to accuse you of withholding advantages that you offer other tenants, or accusing you of favoritism or inconsistency.

• Stay away from preconceived notions or stereotypes. Always give prospective tenants the benefit of the doubt. Obviously if warning signs arise, take heed, but do not let peripheral factors or preconceived ideas about someone color your treatment of them, whether in the tenant screening process or once they have inhabited the property.

• Stay up-to-date on your state laws. A secure understanding of local legislation will protect you from unwanted legal action. Taking the initiative on this to educate yourself will pay off in the future.

Conducting your real estate business with respect and consistency will do much to ensure great interactions with prospective and current tenants. Awareness and education about what is expected of you legally as a property manager is the next step. For cultivating awareness about this whole issue, HUD’s new fair housing app on iTunes is a great start.

By Matt Donnelly, Buildium, Boston, MA

In many parts of the U.S., there are fewer rental units, and a greater percentage of Americans are renting than they were just a few years ago.

Those are two key findings contained in the latest research by the U.S. Census Bureau on the housing market. The national vacancy rate dropped from 8.4% to 7.4% between 2009-2011, while the number of households that rent grew from 34.1% to 35.4% during the same time. In many metro areas, renters are also spending a higher proportion of their household income on rent.

This development and the 12-year low in housing inventory have combined to create a market that would seem to favor landlords and property managers. But what’s curious in the Census data is that many metro areas (57) had gross rent decreases, while less than half as many metro areas (23) had gross rent increases. This seems to be evidence that property managers and landlords were keeping rents low in light of the recent economic recession, as many Americans struggled with job losses and underemployment.

What will be interesting to see is whether rents will begin to increase as more Americans begin to turn positive about the overall direction of the U.S. economy, as well as their personal economies.

Is now the right time for you to raise rents? Consider a few questions:

• Are there a lot of vacancies in your area? Given the market realities, your tenants will be more or less inclined to absorb a rent increase.
• Are you prepared to scare away prospective tenants that might have been a better fit for your past pricing? Raising the rent might price some quality tenants out of your pool of potential applicants.
• Are you prepared to possibly lose your current tenants? Your best tenants tend to have more options when it comes to finding another rental, while your other tenants may not have as many options and will be forced to absorb an increase. The cost of finding and screening quality tenants isn’t insignificant.
• How will you communicate a rent increase to your current tenants? Sometimes it’s more about how you communicate a rent increase. Make sure you acknowledge that you’re placing an additional financial burden on your tenants, and try to explain why the increase is needed.

Raising the rent is always a tricky prospect, and there’s no black-or-white answer. On one hand, there are the increased costs of running a business. On the other hand, there are the costs of finding and screening new tenants if your tenants move out due to a rent increase.

How are you navigating today’s economic realities as you consider your operating expenses and possible rent increases? What advice would you give to other property managers who are currently weighing their options?

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

I have to admit that recently I started watching a new cable show called “World’s Worst Tenants” on Spike TV. The premise for the show if you haven’t seen it depicts three individuals who are hired by various property management companies to handle unusually odd tenant related issues. The issues range from your basic nonpayment of rent to more bizarre and serious issues that can leave any self-respecting property manager shaking their head in disbelief. The show makes for great TV and entertainment, but on a serious note it can offer some insight to the importance of exterior and interior property inspections.

I noticed that usually the trio of characters hired to resolve the tenant related issues would indicate that the out of state owner or property manager had lost communication with the tenant and in most cases both were unaware of the property condition. This dangerous combination usually lead to disastrous situations leaving the rental property completely destroyed, and in some cases declared uninhabitable by city, state, and federal laws. I can’t help but think that regularly scheduled inspections would act as a deterrent in the outcome of some of these situations.Here at SDP Management our company policy is to conduct two exterior and one interior inspection annually. At the lease signing we advise the tenants of this policy and make it known that the property owner and the management company have a vested interest in making sure that the condition of the property is maintained. The exterior inspections are done randomly and documented via photo log. The interior inspections which are preceded by 24 hour written notice are detailed in a report. If concerns or violations are found during the course of either inspection, a notice of cure or solution to remedy the problem will be issued to the tenant before the situation gets out of control or causes damage to our client’s property.

Inspections are not intended to be viewed as “Big Brother” looming but more like a friendly reminder that the property management company will enforce the tenants contractual lease agreement to maintain the property in a certain condition. In some instances we hold raffle drawings and issue gift cards as a “Thank You” to unsuspecting tenants for maintaining curb appeal and general upkeep of their rental property. Keeping both parties happy (owners & tenants) may not always be easy but when you conduct regular exterior and interior inspections you may just avoid being on the next episode of “The World’s Worst Tenants.”