Taming Tough Tenants
Use these tips to solve the most common multifamily management issues .
t one multifamily
property, a tenant subleases his apartment to a rock band that
practices into the early morning hours. In another building, good
renters are decamping to a nearby complex with lower rents. Several
occupants in a high-rise haven't paid their rent for months due to a
problems plague multifamily property managers across the country, but
in soft markets, evicting bad tenants and reducing rents to maintain
good tenants may not be the best options. Lower rents obviously affect
profitability, but evictions are costly as well, in both monetary terms
and time lost, says Paul Daneshrad, chief executive officer of
StarPoint Properties in Los Angeles. In addition to the basic turnover
costs such as new paint, months of lost rent, and marketing expenses,
attorney fees for evictions can be exorbitant, he says. Also, tenants
may vent their anger by damaging the property. For example, one of
StarPoint's tenants claimed that his unit needed repairs and refused to
pay rent for more than two months, Daneshrad says. When the management
company began eviction, the tenant soaked his unit's walls and
carpeting with olive oil.
example is extreme, landlords faced with unhappy tenants need to think
creatively to protect their cash flow and their buildings. Expert
multifamily property managers who successfully have overcome such
problems offer their time-tested tips.
Problem: A Building Experiences High Tenant Turnover
The top reason tenants vacate apartments is repair disputes, Daneshrad
says. Thus, ensuring maintenance responses are timely, high quality,
and professional is the best way to maintain good tenant relationships.
To make maintenance requests easy for tenants, ?send around a monthly
note or door tag that tenants can simply check off and return to the
office to report a problem,? suggests James Verro, CCIM, vice president
of Larkin Commercial Properties in Albany, N.Y.
regularly repairing and upgrading apartments before complaints arise
relays the owner's pride in the building and respect for its tenants,
says Jeffrey W. Eales, CCIM, CPM, vice president of asset management
and leasing for Birtcher Anderson Properties in Laguna Niguel , Calif.
For example, he has replaced threadbare carpeting and installed new
appliances rather than perform band-aid-type repairs.
also often vacate under the perception that they can save money at a
different property. To rebut such assumptions, frequently monitor
competing properties' rents and amenities, Verro says. Gauge the
market, know where you are in it, and if you see rent decreases coming
over the horizon, then drop your rents now, agrees Todd D. Clarke,
CCIM, a partner at NM Apartments in Albuquerque, N.M. This strategy
ensures a higher occupancy and minimizes your loss to competitors who
compete on price alone.
renewals with good tenants three or four months before their leases
expire. Depending upon the market and our occupancy levels at the
time, we may offer a discount or incentive for renewal, says Jeff
Siebold, CCIM, MAI, president of Siebold Group Consulting in Little
Rock , Ark.
If rent increases are
necessary, they ?must be accompanied with a letter of thanks and an
explanation and must be personally delivered by on-site staff, says
Steve Kewin, CCIM, owner of Steve Kewin & Associates in Guelph,
Ontario. Eales suggests modest annual rent increases for long-term
tenants. Though it does take time to get an entire property to market,
the savings in vacancy and turn costs more than make up for it, he
says. The strategy works for Eales: None of his apartment tenants have
ever left due to regular rent increases.
valuable tactic to reduce turnover is creating a sense of community
among residents. Hold pool and holiday parties or gardening and
decorating contests, or distribute a building newsletter to which
tenants can contribute articles and share information, Verro suggests.
Problem: Tenants Aren't Paying Rent
Tenants withhold rent for a variety of reasons, from temporary
unemployment or cash-flow shortages to maintenance and repair
squabbles. Communication is critically important when confronting this
common problem, experts say. Understand the nature of the problem and
the tenant and negotiate, Daneshrad advises.
the tenant is temporarily unemployed or has other cash-flow problems,
the most-effective rent-collecting method is structuring payment
options. We recognize that occasionally people may struggle with
bills, so once a year we will accept partial payments from a resident,?
says Buck Blessing, CCIM, CPM, chief executive officer of
Griffis/Blessing in Colorado Springs, Colo. Prorating the delinquent
rent and late fees over the remainder of the lease is a good way to
collect, Daneshrad says.
negotiated partial application of the security deposit and weekly
partial payments to help with the tenant's cash flow, Eales says. But
getting a payment date commitment and following up to ensure payment
plan compliance will ensure success. Typically prompt-paying tenants
with short-term financial problems are ideal for flexible payment
plans, says Ted W. Dang, CCIM, CPM, of Commonwealth Cos. Real Estate in
If tenants no longer can
afford rent, landlords should consider moving them to smaller,
lower-cost units or setting them up with roommates, Daneshrad suggests.
Landlords who offer such options to tenants typically are rewarded with
?residents for life, as many recognize what you have done for them and
what their other choices were, Clarke says.
if communication and negotiation fail to fix the problem, experts
suggest convincing the occupant to leave voluntarily. ?If the resident
is not able to pay, then explaining [eviction's] long-term impact on
their rental history and credit will convince them to turn over
possession, says Marnie Coomes, a regional manager for Fairfield
Properties in San Diego who has eight years of on-site multifamily
property management experience. ?It is far more appealing to them for
their future, and the [occupant] does not end up with legal fees piled
on top of bad debt.
Problem: Bad Tenants Slip Through the Screening Process
A simple application and credit check may not reveal prior tenant
problems sufficiently. Landlords should conduct thorough background
screenings involving interviews, credit checks, and employment and
rental histories for all prospective tenants.
No. 1 problem/solution in my [15 years as a landlord] relates to tenant
selection, says Al Kemp, chief executive officer of the Rental Owners
and Managers Association of British Columbia . He suggests the
following screening techniques.
contrary to popular opinion, landlords' main goal during showings is
not to sell units; instead, they should use the opportunity to
interview applicants and learn why they are moving and what they expect
from their new rental community. Also, landlords should have
prospective tenants complete the application during the initial
showing. Allowing them to return the form later, gives applicants the
opportunity to create histories and recruit friends to portray current
and previous landlords and employers, Kemp says.
researching applicants' backgrounds, speak with previous, not current,
landlords. If this is an undesirable tenant, the current landlord may
give a glowing reference hoping to make the tenant your problem, he
says. Also contact prospective tenants' direct supervisors instead of
their employers' human resources departments. ?A reliable, honest,
cooperative employee is likely to exhibit the same traits as a tenant,
Yet room for compromise
exists. Someone with bad credit isn't necessarily a bad tenant because
people tend to pay housing costs first, Daneshrad says. If only one
factor of a prospective tenant's background check is blemished, experts
suggest proceeding with caution. Depending on the severity of the
problem, we may offer an applicant residency for a three-month
probationary or trial period with a larger-than-normal security
deposit, Siebold says. It's a method to share the risk with the
tenant, and often it works out well.?
Problem: Tenants' Activities Disrupt Their Neighbors
Although effective screening can eliminate many problems, it may not
prevent future disputes between neighbors, a problem Eales knows
had one tenant who would stay up late and play music well into the
morning, he says. The downstairs tenant would get upset and call me
to complain. In another instance, a tenant fed birds from his upstairs
balcony, and the seeds and shells littered another occupant's garage
area. The latter complained about the seeds, and the other complained
about the crazy lady who complained over a few seed shells, he says.
solution for such disputes is to suggest tenants solve disagreements
between themselves with ?a subtle message that if [the property
manager] has to get involved, someone won't be too happy with the
resolution, and someone might get booted out,? he says. In the birdseed
case, Eales said he would ban the upstairs neighbor from feeding the
birds if he couldn't resolve the problem with his neighbor. [The
disputing tenants] didn't like each other, but they did learn to
respect each other and get along, and I never got any more complaint
calls regarding the birdseed, he says.
tenants can't resolve their problems, mediation may be the answer,
Coomes says. If neither party is cooperative, taking a calm approach
and explaining the consequences will help in resolution. The residents
know the net impact will be on them and not on management, she says.
added protection, ensure rental agreements contain property rules and
regulations, as well as ?tight clauses regarding these nuisance issues
that management can refer back to later with the troublesome tenant,
Problem: A Building Has a Bad Reputation
Whether drug dealers loiter in the entryway or tenants regularly host
disruptive parties, apartment buildings can develop unsavory
reputations that affect landlords' abilities to attract quality
tenants. Tangible measures such as repainting, fixing neglected
landscaping, and changing the building's name must be immediate, so
residents see instant changes even if they may be small in the
beginning, Blessing says. The important thing is to see immediate,
managers experienced in multifamily repositionings advise involving the
local law enforcement early in the process. Contact the police to find
out if particular units generate an above-average number of police
calls, says Terry Moore, CCIM, director of ACI Commercial in San Diego
, who once bought a foreclosure property that had several residents
engaged in illegal activities. "With active cooperation of law
enforcement, we removed the bad actors off the property within three
months," he says.
paid for a police substation in one of its properties' leasing offices;
as a result, many problem tenants immediately vacated voluntarily,
Daneshrad says. "In the case of real problem tenants, offer free
apartments to cops and probation officers," suggests Stuart Silver,
CCIM, president of Silver, Silver & Silvers in Ft. Myers, Fla.
weeding out bad tenants, institute a system in which the remaining
tenants receive cash or partial-month rent credits for referrals, Kewin
suggests. Such a referral system should help repopulate a property with
Also, don't hesitate to
advertise your efforts. "Networking with other property managers and
building rapport will help get the word out about the positive things
you are doing," Coomes says. After completing the repositioning, "erect
road signs announcing the property's new name and management to build
community awareness," Kewin adds.
Eviction: The Ultimate Solution
Multifamily property managers should employ the above strategies when
dealing with tenant problems, but in some cases eviction may be the
percent of the times I have given a tenant a second chance, it became
necessary to give a third chance, a fourth chance, and more chances,
until the inevitable eviction was done," Silver says. "The result was
less rent, more aggravation, and wasted time."
find that a very public eviction of the tenant with the worst problem
sends a message to the balance that you are serious about treating the
property with respect and you expect them to do the same," Clarke says.
"Since landlords must prove cause for eviction in court, they should
keep detailed logs of tenant nuisances as evidence, "Dang advises.
multifamily property managers agree that eviction can be the only
resolution in some cases. But to avoid involving lawyers and the court
system, landlords must remain visible and available to tenants both
before problems arise and after. "The key is to become the person that
can offer solutions," Coomes says.