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Six Ways to Ensure Your 1031 Exchange is Successfully Completed

Whether you are an investor or a real estate broker, selling investment or business real estate can be an expensive venture unless you are prepared to conduct a 1031 exchange.

Section 1031 of the federal tax code dictates that no gain or loss shall be recognized upon the sale of a real estate property held for business or investment purposes, as long as the seller purchases a replacement property of equal or greater value. This can be a solid opportunity, potentially, to preserve the gain and accrue additional wealth. However, the 1031 exchange can be a tricky process that has frustrated many amateur and professional real estate investors alike.

So, to help potentially avoid having your 1031 exchange blow up, here are six steps to consider as you advise a client on undertaking and entering into a 1031 exchange:

Step 1: Know the applicable deadlines. The IRS requires an investor to identify a replacement property within 45 days, and to close on the target property within 180 days of selling the relinquished property. That doesn’t leave much time to hunt for the right deal, but it’s enough time. Working with an expert 1031 exchange investment firm like Kay Properties can help investors successfully complete their 1031 exchange within these timelines.

Step 2: Get educated about acceptable types of replacement properties. The IRS requires an exchanger to reinvest in a “like kind” property. However, “like kind” does not necessarily mean the same type of property. There are a variety of options available. For example, if you are selling a duplex in San Diego, that doesn’t mean you need to replace it with another duplex. The 1031 exchange allows investors to replace relinquished real estate with a variety of asset types. It can be a medical building, single-family home, multifamily apartment building, raw land, self-storage facility or any other investment real estate. The type doesn’t matter as long as it is held for investment or business purposes. Ideally, investors should know what they are looking for in a replacement property well before going into escrow on the property they are selling. Again, working with a 1031 exchange investment firm like Kay Properties can greatly reduce the stress and confusion surrounding 1031 exchanges.

Step 3: Narrow down the options while in escrow. I cannot tell you how many times I have seen 1031 exchange investors in a desperate panic once they hit day 30 of their 45-day window with not a single replacement option identified for their exchange. This is an extremely stressful position. But don’t worry, this article should help spare you the anguish.

One good strategy is to locate five to 10 potential replacement properties as the closing date of the property you are selling gets closer. But be prepared that as you move through escrow, many of the new properties you have identified will likely be acquired by other buyers or will not prove to be satisfactory under the scrutiny of some due diligence. That’s why developing a short list of potential replacement properties prior to relinquishing the original asset can be one of the most important strategies for preventing having your 1031 exchange blow up!

Step 4: Make sure your financing is lined up ahead of time. Investors will often call me in a panic because they’ve located their replacement property, but they cannot access the financing necessary to purchase the asset. It is important to make sure that they have the financing lined up before closing on the property being sold to spare themselves from a stressful and potentially expensive predicament. That’s one reason fractional ownership structures for 1031 exchanges can be attractive for investors wanting to complete a 1031 exchange. For accredited investors, a Delaware Statutory Trust (DST) investment may be a suitable option. In addition, DSTs have a non-recourse financing component baked-in to each investment so the investor does not need to sign for a loan. A DST may be an ideal opportunity for an investor looking to a 1031 exchange to be a passive, turn-key solution with required financing already established.

Step 5: Have a backup property identified just in case. The IRS code allows investors to identify replacement properties using different rules. The most common rules used are to either identify three properties for their 1031 exchange or identify real estate valued at up to 200% of the property that’s being (or been) sold. This means there is room for back-ups. Take advantage of the opportunity. An exchanger should never leave an empty space on their ID form, which is submitted and filed with a qualified intermediary. More often than not, the exchanger’s primary option won’t work out … even if it looks like a sure thing! Also, I have often seen unscrupulous sellers exploit the buyer’s 45-day time clock in order to press their back against the wall, forcing the exchanger into an inferior negotiating position. Backup property options can strengthen the exchanger’s negotiating power by providing additional options.

For accredited investors, a DST can be an excellent option for a backup strategy. DST properties are already purchased, stabilized, and can potentially provide monthly distributions to investors. There is no negotiating and the due diligence is already complete. Additionally, an exchanger can often close on a DST in three to five business days. I often recommend my clients use a DST as a backup ID if there is room in their exchange and it is appropriate for their situation.

Step 6: Make sure to start to negotiate a 1031 contingency in your purchase and sale agreement. Many buyers are willing to allow a 1031 contingency that will permit the seller to extend escrow on the property being sold if the seller can’t find a replacement property. For example, try to negotiate a clause that extends escrow for you by including an additional 30 days if you are unable to identify a suitable replacement property. This can be a quick and easy way to buy additional time should you have difficulty locating the right 1031 exchange investment.

Bottom Line: a 1031 exchange can be a potentially great tool for building and preserving wealth, but it can be a daunting process if not properly prepared. If you decide to do a 1031 exchange, make a point to start early, get educated, narrow down their options, line up financing, have a backup ID, and negotiate for more time in case they need it. When appropriate and if they qualify as an accredited investor, use a DST as part of your 1031 exchange strategy. There are no guarantees in real estate, so it is always best to plan ahead when considering a 1031 exchange.

Position Realty
480-213-5251

Five Red Flags You Can’t See In A Tenant Background Check

Consider the consequences of renting your property to someone with a history of evictions for non payment of rent or a habit of writing bounced checks. Or the effects of allowing someone who has a criminal record or several collection accounts to live on your property. What about a terrorist or sex offender?

It only makes sense that a conscientious landlord would want to know everything possible about a prospective tenant before renting to them. But sadly, there are many property owners who do not take the time to properly screen their applicants. If they choose to rent based on feelings rather than facts and don’t run a tenant background check, they risk paying the price in the end.

In addition to the information revealed on a person’s background check for tenants, there may be red flags that become apparent as you meet with the candidate and go over their application.

#1 The applicant can’t or won’t give you contact information for their current landlord, employer, or personal references. What are they trying to hide? Perhaps these people have negative information or experiences with the candidate that could negatively influence your decision as to whether you’ll want to rent to them or not.

#2 The applicant provides suspicious pay stubs. If your applicant has not supplied employer contact information, you should ask for their most recent pay stubs to verify their employment. It is imperative that you check all the basic information on the pay stub closely and look for any discrepancies in the numbers, formatting and overall quality. This is a long-used scam that has become more popular with the rise in the number of websites that offer fraudulent pay stubs. Self-employed applicants should supply a tax return document with proof of earnings and income.

#3 The application omits information or is inconsistent. Carefully review the application for omitted information or inconsistencies. The profile on the reports should match the person who filled out the application. Make certain that the date of birth, employment history and most importantly, the Social Security Number match the person’s profile.

#4 The deposit check is greater than the amount you are asking for. Always ask for a cashier’s check or money order in payment for the security deposit and first month’s rent. When an applicant wants to pay the deposit or even their monthly rent in cash, it might be an indication that they run a non traceable business or have an illegal occupation.

Be suspicious if they ask you to accept a deposit check in an amount greater than you are asking for with a request for you to refund them the overpayment. Never accept more money than the specified rent for your property and do not accept an out-of-state cashier’s or paper check, especially if it is for more than you are due. This is a well-known scam that will leave you without your money and without a tenant.

Someone who wants to pay the deposit in installments probably lacks the income to rent the property. It may also be that they are not planning to make those additional payments at all. Do not sign a lease until you know that you will receive the security deposit in full before the move-in date. Keep in mind that there are a few cities that have passed “Renter’s Choice” bills which may allow tenants to pay their deposit in payments, but you can still incentivize tenants to pay the deposit in full.

If they are allowed to postpone paying the full security deposit, you may never see that money or the rent for the following months. Should you begin the eviction process, they know that it will be several months before they must vacate the premises. In the meantime, they are living in your property rent-free.

#5 The applicant insists you use a copy of the credit report they provide. Beware if the applicant tries to give you a copy of their “credit report” rather than have you order your own. This could be an attempt on their part to keep you from seeing their true financial history. With today’s technology available to anyone, it is surprisingly easy to create a favorable credit report that will lead you to rent to someone who is not a reliable tenant. Note, New York has recently allowed tenants to furnish their own credit reports, but that still doesn’t mean you can’t pay for and run a credit report yourself. Always verify.

Position Realty
480-213-5251

Renting? You’re Still Paying a Mortgage…Just Not Your Own

For those who invest in real estate, cash flow is king. Investors considering buying a rental property take into account how much rent can be charged compared to ownership costs. Those costs can include a mortgage, property taxes, insurance and maintenance. If the expected rental is more than that, the property will cash flow. Otherwise, it’s an expense and the investor is likely to move on to another property. There are also some tax incentives for real estate investors.

For renters, they need to consider how much they can comfortably afford each month for housing and utilities. Lenders typically view about one-third of gross monthly income should be used as a general rule of affordability. As rent is paid each month, the investor takes that cash and pays the mortgage with it. In essence, you are paying a mortgage, just a mortgage that belongs to someone else.

For first time buyers, getting financing can be a bewildering process for some. There’s lots of documents that need to be signed and reviewed. Lenders need to make sure you have enough funds on hand for a down payment, closing costs and leftover cash reserves. Credit is reviewed as is employment and income. But it doesn’t need to be an intimidating process. That’s also where a good loan officer comes into play, to walk with you side-by-side from initial prequalification to the settlement table.

Most renters will ultimately end up owning at some point in the future. In the long run, owning compared to renting makes sense in a lot of ways. In today’s interest rate market where rates are low compared to areas where rents are steadily increasing, it’s ultimately cheaper to own compared to renting.

Renters may have a goal of owning but not sure how to get there and when. They realize renting is not a long term solution, but their current situation makes it better to rent than own. Someone that is short term for example is probably a better renting candidate compared to someone with the intent to keep the property for the long haul.

It’s usually at this stage where renters first begin to get the urge to explore buying. They can do their own research online to get an idea on where rates are and even run a few mortgage calculators to see what monthly payments might be. Yet it’s important at this point to stop flying solo and contact an experienced loan officer. If you don’t know of anyone in the mortgage business, your real estate agent can point you in the right direction as well as friends, family and co-workers.

Your loan officer will provide you with an approximate qualifying loan amount for starters. This prequalification takes into account your gross monthly income and expenses and at some point, your credit report will be pulled along with credit scores. Your loan officer will give you an estimated amount for a down payment and associated closing costs. It’s a lot easier to be an owner than you might think. Maybe if you’re asking these questions, it’s time to get your own mortgage and stop paying for someone else’s.

Position Realty
(480) 213-5251

6 Steps Towards Making Security Deposits Less of a Hassle

Doing any sort of business is about reducing risk and increasing your return. When it comes to managing properties, things can fall between the cracks and strategies go by the wayside. You can do simple things to streamline every process so you can enjoy more rewards with less of a hassle.

First, Food For Thought

New landlords assume falsely that security deposits are adequate protection against having to pay big bucks for tenant-caused damages. The truth is, it will barely cover minor damages. And, major damages to property can cost landlords tens of thousands of dollars.

Another factor to consider is that while the security deposit might cover normal wear and tear, they can appeal that decision if a tenant disagrees. Courts tend to take the side of the renter if there is even a little question about damage. 

Even though security deposits offer marginal protection, they are important. The trick is to know how to manage them in such a way that it does not make you want to pull your hair out or stop taking them altogether.

Tenant-Proofing Property

Landlords can take steps towards making properties tenant-proof. Reducing the chances of property damage works out better for both the renter and the landlord.

  • Vinyl Plank Flooring vs. Carpet — Carpet was once the most popular flooring. But, it stains and wears out rather quickly. Vinyl plank flooring lasts far longer and typically does not require replacing between tenants.
  • Glossy Paint — Paint is one of those things that have changed over the years, too. It is not unusual to have to repaint between renters. When using glossy paint, the risk is less because it is far easier to simply wipe down.
  • Door Stoppers — One of the cheapest remedies can save a landlord the most money. Door stoppers save walls by preventing holes in drywall.
  • Garbage Disposal — Garbage disposal-related problems cause some of the greatest headaches. Removing them will help reduce late-night phone calls and expensive repair bills.

Normal Wear and Tear

The entire point of a security deposit is to cover minor property damage. Wear and tear happen, and it comes with the territory. But, it is always the best policy to explain to a possible tenant what you consider wear and tear. 

Different states have different definitions, but remember that the law tends to lean towards the tenant. It is important to research so you can lay out in a lease agreement what you consider wear and tear versus excessive damage. It will make your position clear and help reduce confusion.

Move-In Inspection

Performing a detailed move-in inspection is likely already on your checklist. But, do you do the walk-through with your tenant? If you do it together, you both can make notes of the property’s condition. Recording it using audio, video, or both will help if a former renter challenges a security deposit return. 

Move-Out Inspection

A move-out inspection is just as crucial as the move-in inspection. It is best if you perform it with the tenant. Retrace your steps and compare notes with the former occupant. It makes it easier to cross-reference and make a decision about the security deposit. Transparency goes a long way to making the process less stressful.

Applicant Red Flags

Interviewing potential tenants does a number of things. You can see how they interact and what they say. A huge warning sign is if they start to complain about security deposits. It likely means one of two things — the candidate does not have the money for the deposit or fears they will lose the money. Both are glaring red flags that should not go ignored.

If you can inspect where the potential tenant lived prior, you can get a better idea of who you are dealing with. It goes a long way towards drawing up the lease and deciding if they are more a liability than a respectful renter.

Security Deposit Alternatives

Alternatives to security deposits exist to help fill vacancies faster. Our Lease Insurance Guarantee is one such option helping tenants put out less cash upfront while providing the landlord with more protection against evictions and property damage. Landlords of all sizes, even one property, can benefit from this type of service.

Landlords can ask their tenants to purchase LeaseGuarantee instead of handing over a security deposit. They offer rental income protection up to $10k to cover legal fees, rental losses, and damages. It covers way more than a security deposit and reduces your overall stress and concern.

Wrap-Up

Sometimes little things make all the difference. Security deposits are sometimes more of a hassle than not. However, they are important to hold tenants accountable and help cover any property damage. 

You want to maximize your return and minimize your risk. You can do this through straightforward renovations, a property management service, or both. The important part is streamlining the security deposit process to make it easier for you and more transparent for your tenant.  

Position Realty
Office: 480-213-5251

5 Ways for Landlords to Evaluate a Self-Employed Renter

Self-employed renters naturally strike fear in a landlord’s heart. Sure, we admire their moxie. But what about paying the rent? What about the ebbs and flows of business? How can you be sure a dip in sales won’t leave them weeks or months behind on paying up?

The same goes for freelancers, gig workers, and all those other professionals without standard, 9-to-5 jobs. They’re worrisome.

Fortunately, you don’t have to take a leap of faith when these tenants come calling to your rental property. There are many ways to both evaluate a self-employed renter’s income and ensure they’re a good fit for your rental all in one fell swoop. Here are five of them.

1. Ask questions

Get to know the prospective tenant. Ask them about the nature of their business, how long they’ve been operating, what types of clients they work with, and more.

You should also find out about the tenant’s credentials, past employment, and education history. How qualified are they to be doing what they’re doing? How likely is it they have the connections and skills to keep their business afloat?

You can also special order a business credit report from AAOA for $59.95 to find out if their business has good credit, high debt, lawsuits, violations, or high risk of default. Call (866) 579-2262 to request a comprehensive business credit report.

2. Research the business

You should also research the business. Do they have a website? Are they registered with your state? Are they licensed and insured? These are all indications a self-employed person is legitimate. (You might even be able to check out their pricing if you find their website!)

I had to rent a home a few years after I transitioned into freelancing, and my portfolio and published links (like those right here at Millionacres) were just a few of the items that helped prove my business’ legitimacy and success.

3. Request bank statements

If you want the most accurate depiction of the tenant’s income, ask for recent bank statements (business ones, if they have a business account). Pay careful attention to the deposits — how much they are, the consistency/cadence of them, etc. — and make sure the expenditures don’t outweigh the incoming cash.

Tax returns can work for verifying income, too, but these often don’t reflect the person’s full earnings — nor are they the most updated picture of their cash flow (they are annual, after all).

4. Pay special attention to their credit report

You’ll also want to pay special attention to the tenant’s credit. Look at the balances on any credit cards, loans, or other accounts they have out, as well as the monthly payment those come with.

You should also look carefully at payment history: Have they had any problems paying bills on time or in full? Are there any collection efforts or derogatory notes in their name? Have they had any bankruptcies or foreclosures? These can all give you insights into the tenant’s financial health — as well as any struggles they may be having.

5. Talk to past landlords

Finally, be sure to ask for the contact information for any past landlords the tenant has had. Call them up, ask about their payment history and, most importantly: Find out whether the landlord would be willing to rent to them again. Typically, if a landlord says “no” here, you’re best off moving to the next candidate. (Just make sure you’re abiding by fair housing laws and not discriminating!)
One last tip

If you’re not sure whether the tenant is a good fit, you can always consider requiring a cosigner, also known as a guarantor. This is someone who agrees to vouch for the tenant financially, as well as cover the rent if they’re unable to down the line. You can also have the tenant pay for a LeaseGuarantee policy which can cover future rental losses.

Position Realty
Office: 480-213-5251

Landlord’s Successfully Challenge The CDC’s Residential Eviction Ban

Earlier this year, the Eastern District of Texas invalidated — commerce clause grounds — the Centers for Disease Control and Prevention’s (CDC’s) ability to halt residential evictions during the COVID-19 pandemic. Subsequently, in Tiger Lily, LLC v. U.S. Dept. of Housing & Urban Development, the Sixth Circuit Court of Appeals granted another win to landlords in Tennessee, who argued the agency’s order exceeded its authority.

On March 29th, the court denied the government’s emergency motion to stay a lower court’s order barring enforcement of the CDC’s Halt Order, which extended the moratorium on residential evictions until December 31, 2020. The Sixth Circuit found the government could not show a likelihood of success on the merits of its appeal such that enforcement of the lower court’s order should be stayed.

The decision turns on questions of statutory authority and whether Congress granted the CDC the power to extend the moratorium on residential evictions past the date set out in the CARES Act. After the act’s congressionally authorized moratorium expired on July 25, 2020, the CDC unilaterally issued the Halt Order, extending the eviction ban until December 31, 2020. The CDC based its ability to do so based on Section 361 of the Public Health Service Act, which allows the secretary of Health and Human Services to issue regulations necessary to prevent the introduction, transmission or spread of communicable diseases and allows the secretary to provide for “inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures, as in his judgment may be necessary.” The government argued that a nationwide moratorium on evictions is among the “other measures” for disease control covered by Section 361.

The Sixth Circuit disagreed, finding the Halt Order to be outside the scope of the statute. The court reasoned that the residual phrase “and other measures” was controlled by reference to the enumerated categories before it, and that “[p]lainly, government intrusion on property to sanitize and dispose of infected matter is different in nature from a moratorium on evictions.” According to the court, regulation of the landlord-tenant relationship is historically the province of the states, and, if Congress intended to alter the usual constitutional balance between the states and federal government, it would have done so in “unmistakably clear” language. The absence of such language in the Public Health Service Act was dispositive in the court’s opinion. Notably, the constitutionality of government intrusion onto typically state-dominated areas concerned the Eastern District of Texas case as well.

Given the success of the recent challenges to the CDC’s authority, more lawsuits are sure to come. And, while the public health effects of COVID-19 will diminish as more Americans are vaccinated, the economic effects on both landlords and tenants are sure to endure. It remains to be seen whether Congress will issue a new eviction ban, or whether President Biden will address the issue via executive order.

Position Realty
Office: 480-213-5251

How to Screen a Tenant Who Does Not Have a Social Security Number

Landlords to Take a Different Tact with Tenant Screening Without a Social Security Number

Some states, such as California, prohibit a landlord from inquiring about a tenant’s or prospective tenant’s immigration status or citizenship and requiring proof of legal residency or citizenship as a prerequisite to renting.

A SOCIAL SECURITY NUMBER IS NOT REQUIRED TO RUN A TENANT SCREENING REPORT. With Position Realty we don’t only pull a credit report but we also run a tenant screening report. Call us Today!

The law does not prohibit a landlord from requiring documentation necessary to verify a prospective tenant’s identity or financial qualifications to rent, it may be necessary for a landlord to find other ways to screen a prospect who has no credit.You may want to decide to screen using personal references, and independent income verification.

According to a spokesperson for a national screening company, a social security number is not mandatory for a credit check. You can order a credit report with a name and address. However, when the prospect does not have a social security number, you are highly likely to get a “no hit” or “no report available” response. Before a person is noted by the credit bureaus, a file has to be created. The landlord’s act of requesting a report may be the very thing that initiates this person’s credit history. Still, ordering a tenant credit check may be worth a try to see what information might have been reported earlier.

Other Reports Available

  • A tenant background checks does not require a social security number. A full name and date of birth are crucial for determining if you have the right information.
  • Eviction reports are available without a social security number.

Unfortunately, you cannot receive a PATH report, the address history, which could create a hardship when cross-checking criminal and eviction reports. There is no doubt that a social security number is an important identifier when weeding out duplicate names.

Position Realty
Office: 480-213-5251

Tenant Rights to Smoke Cigarettes or Marijuana in Rental Units

There Is No Absolute Right to Smoke

Tenants don’t have a universal right to smoke in their rentals. There is no law, either state or federal, that provides people with the freedom to smoke when and where they want. Nor are bans on smoking discriminatory: State and federal laws prohibit discrimination on the basis of certain attributes (such as age and national origin), but being a smoker isn’t one of them.

In fact, states, cities, and the federal government can place restrictions on all types of smoking. However, the laws regarding how, what, and where people can smoke vary.

Federal Smoking Laws

The federal government has the power to regulate almost any substance you might consider smoking, including tobacco and controlled substances such as marijuana.

Tobacco. Smoking tobacco is legal under federal law. The federal government doesn’t restrict its use in private rentals but does restrict it in public housing. The U.S. Department of Housing and Urban Development (HUD) requires all public housing agencies (PHAs) to prohibit certain tobacco products:

  • in all indoor areas (including individual units) and
  • all outdoor areas within 25 feet of a building.

HUD makes all PHAs ban the use of cigarettes, cigars, pipes, and water pipes but allows PHAs to decide whether to prohibit e-cigarettes. Each PHA can also decide to be entirely smoke free or create stricter anti-smoking rules than HUD’s. No matter what, if you live in public housing, you won’t be able to smoke in your unit.

Marijuana. Using and possessing marijuana for any purpose (including medical reasons) is illegal under federal law. Because it is a banned substance, using it anywhere—even in the privacy of your rental unit—exposes you to the possibility (even if remote) of being charged with a federal crime.

State and Local Smoking Laws

States and cities have the power to pass laws and ordinances that protect the health and safety of the public. This power includes the ability to restrict or ban smoking in rental properties.

Many states and cities have laws that prohibit or limit smoking in or around multiunit buildings due to the fact that smoke migrates so easily across shared spaces. In some areas, even buildings with as few as two units are considered multiunit for these purposes. Often, if the law doesn’t ban smoking altogether, it prohibits it in a certain percentage of units or in shared spaces such as common areas and parking lots. It’s also possible for a state or city to pass a law banning smoking in all rental properties—even single-family homes.

Most state and local anti-smoking laws clearly define what activities are considered smoking. For instance, a law might prohibit the use of pipes, cigars, and cigarettes. When a law is unclear about the definition of smoking, though, it’s probably safe to assume that it applies to anything that involves lighting or heating and inhaling the substance. Many anti-smoking laws also apply to vaping and using electronic smoking devices such as e-cigarettes.

Marijuana. If marijuana is illegal in your state, state and local anti-smoking laws definitely apply to it. If, on the other hand, marijuana for medical or recreational purposes is legal in your state, you’ll need to look at the relevant statute or ordinance for guidance. Some anti-smoking laws carve out an exception for smoking medical marijuana. Others define “smoking” as involving, or even define “tobacco” itself as, any plant matter that can be smoked. Many others are silent on the matter. To find out what the law is in your area, do an Internet search for “anti-smoking laws” or “smoking ban” where you live, or contact your city manager’s office.

Although landlords who manage properties subject to laws that limit or prohibit smoking should attempt to inform tenants of the rules, it’s the tenant’s responsibility to be aware of and comply with the law.

Landlords Have the Right to Restrict Smoking

Even when there’s no applicable anti-smoking law, landlords can limit or prohibit smoking anywhere on the rental premises, including individual units. Health concerns about secondhand smoke aside, landlords often prohibit smoking in an effort to limit fire hazards on the property, reduce fire insurance premiums, and avoid stains and odors. Landlords might also prohibit smoking to avoid lawsuits—tenants have sued landlords who allow smoking on various legal grounds, such as:

  • nuisance (for example, odors from smoking annoy other tenants) and
  • breach of the duty to keep the rental habitable (for example, units subject to secondhand smoke being uninhabitable because of health concerns).

Landlords typically inform tenants of a no-smoking policy or smoking restrictions through a clause in their lease or rental agreement. Most likely, such a clause applies to smoking of any sort, not just tobacco, but if you’re not sure, ask your landlord—preferably before you sign anything. However, even if your lease or rental agreement doesn’t mention smoking, you should familiarize yourself with any state and local smoking laws, as they might apply regardless of what’s in your lease.

Can a Landlord Evict a Tenant for Smoking?

A clear no-smoking policy prohibits all forms of smoking, including smoking marijuana for medical reasons. A landlord who has included a no-smoking policy in a lease or rental agreement can terminate the tenancy of or evict a tenant who smokes. When the no-smoking policy is part of the rental’s rules and regulations (but not incorporated into the lease or rental agreement), the landlord might only be able to terminate the tenancy or evict if the tenant repeatedly violates the rules.

Landlords might also be able to end a tenancy or evict based on a lease’s or rental agreement’s “illegal activity” clause. Again, under federal law, possessing and using marijuana is a crime. Whether a landlord will be able to evict a tenant for smoking marijuana based solely on the illegal activity clause depends on the circumstances. Many judges won’t evict when the tenant doesn’t have a history of breaking the law and the illegal act is relatively minor (especially if marijuana is legal under state law).

If you plan to smoke in your unit, it’s best to find out the smoking policies before you sign a lease or rental agreement. If a landlord tells you that you’ll be able to smoke in your unit, make sure you get that statement in writing. Otherwise, don’t enter into a lease or rental agreement knowing that you’re going to violate the no-smoking rule. Hold out for a rental that meets your needs—the risk of legal hassles or even eviction just isn’t worth it.

In the last election in Arizona, it was approved for adults 21 and over to possess up to one ounce of marijuana and for adults 21 and over to grow up to six plants per household.

Position Realty
Office: 480-213-5251

Landlords’ Guide to Navigating The Extended CDC Eviction Ban

Congress just passed a COVID-19 stimulus package that extends the federal eviction ban until Jan. 31, 2021, and provides rental assistance. The president signed it into law Dec. 28. The Centers for Disease Control and Prevention (CDC) halted residential evictions in September in an effort to stop the spread of COVID-19. The order was set to expire at the end of the year.

What do landlords need to know about the CDC’s order?

  • Landlords cannot evict “covered persons” from residential properties in any jurisdiction to which this order applies through Jan. 31, 2021.
  • It doesn’t apply in any state, local, territorial or tribal area with a residential eviction ban that provides the same or greater level of public health protection.
  • It does not relieve a tenant’s obligations to pay rent, make housing payments or comply with other obligations the tenant may have under contract.
  • It does not bar landlords from charging or collecting fees, penalties or interest based on the tenant’s failure to make timely payments.
  • Landlords can still file evictions for reasons other than non-payment of rent.
  • Violations of the CDC order can result in criminal penalties.

How can tenants get the order’s protections?

To invoke the protections of the order, tenants must provide an executed copy of a declaration that meets certain requirements. Each adult on the lease must complete a declaration that states under penalty of perjury that:

  • The tenant has used best efforts to obtain all available government assistance for rent or housing.
  • The tenant either:
    1. Expects to earn no more than $99,000 in annual income for 2020 (or $198,000 if filing jointly)
      Was not required to report any income in 2019 to the IRS
      Received an Economic Impact Payment (stimulus check) through the Coronavirus Aid, Relief and Economic Security Act

  • The tenant is unable to pay the full rent due to substantial loss of household income, loss of compensable hours of work or wages, a layoff or extraordinary out-of-pocket medical expenses.
  • Eviction would likely render the tenant homeless or force the tenant to live in close quarters in a new shared living setting because the tenant has no other housing options.
  • The tenant is using best efforts to make timely partial payments that are as close to the full payment as the tenant’s circumstances permit.

If tenants don’t meet these conditions, are they still protected from eviction?

Landlords should note that tenants who do not meet the criteria for protection under the federal ban might still be protected under state or local orders.

Landlords should also stay up to date with other federal tenant protections:

  • The Federal Housing Administration (FHA) extended its ban on evictions from properties secured by FHA-insured single-family mortgages through Feb. 28, 2021.
  • Government-backed mortgage buyers Freddie Mac and Fannie Mae have barred landlords of single-family properties with Freddie Mac- and Fannie Mae-backed mortgages from evicting tenants until at least Jan. 31, 2021.
  • Certain owners of multifamily properties backed by Freddie Mac and Fannie Mae can extend their loan forbearance. If they do so, they cannot evict tenants during the term of the forbearance.

Position Realty
Office: 480-213-5251

Tips For Safer Property Management During COVID-19

Many people are leery of changes, moves or disruptions to their routines during COVID-19 and with good reason. Information may be difficult to distill from regular news sources, so here are seven tips to help you manage a property during this crisis.

Routine Maintenance
There are many routine maintenance activities that must be taken care of regardless of the current pandemic. Garbage must be removed, landscaping tended, and clogged sinks need attention. All the routine jobs that keep your property in good shape can continue to be done with certain precautions.

Create a schedule and let tenants know when someone will be cutting the grass or cleaning public areas of the building. This way contact can be avoided between personnel and tenants. And if someone is moving into the building, it’s important to communicate very clearly during this time.

Showings
Managing a property requires that you show prospective tenants the various spaces that are available to rent.

The safest method is to use digital tools. Use your smartphone to create a virtual walk-through. If a prospective tenant expresses real interest you can text, email or speak to them and find out specific areas they would like to see virtually or take them on an individual tour using FaceTime.

Seriously interested parties can arrange to visit the property in person. Sanitize all touchpoint areas of the home before and after their visit and if you will be there to guide them continue to wear your personal protective equipment (PPE) and ask them to do the same.

Communicate with Tenants
Whether you’re in a COVID-19 hotspot like some luxurious Chicago neighborhoods or a rural area with very few cases, current and new tenants will want to be notified of any changes regarding their homes. If amenities are closed because they could pose a health risk, make sure to get that information to everyone in clear, concise language.

Work out rooms and swimming pools are two areas that potentially involve close contact and potential viral spread. If you would like to make certain amenities available to your tenants, figure out a schedule and a cleaning system that reduces contact between people and sanitize, sanitize, sanitize. Continuous updates, with good and bad news, should be given to residents on a weekly basis.

This assures them that you are mindful of their health. Include links to sites with more information, like the CDC. Send information to tenants using mail, email, texts, and bulletin boards. Let everyone know what additional precautions and procedures are being used to keep everyone healthy.

Protocols for COVID-19 Emergencies
It is a fact that people can carry and spread COVID-19 and never feel ill themselves. Asymptomatic spread is perhaps the most dangerous method of spread because a person does not realize that they are a threat. In the event someone in a building you manage does become ill there are certain legal guidelines you must follow. Though it may seem like a good idea to notify everyone that the person living in unit 2314 has become sick, legally you cannot do this.

Disclosure of such information is a violation of federal privacy laws and can subject you to liability. While there are no mandatory federal guidelines for protocol in this situation, there are guidelines from the CDC, local and state health departments.

There also may be terms suggested in the lease which require a landlord or property manager to notify all remaining tenants of a health threat. Most landlords follow similar guides and protocols, so communication should be very detailed.

Residents should be warned that a co-tenant, employee, or vendor has become infected and has been encouraged to self-isolate. Follow up with reminders to continue to practice precautionary hygiene procedures and limit contact with other people.

Requests from Tenants
Although you may want to limit contact between staff and tenants there are times when an incident requires immediate attention.

Think plumbing. Not only could a plumbing issue be inconvenient for the resident, but this type of issue can also cause serious damage to one or more units.

When something like this occurs make sure to prepare your staff with all necessary PPE to mitigate possible contamination from close contact with a tenant. Assure the tenant that all safety precautions are being taken and if possible, ask the tenant to leave the apartment while the issue is addressed.

Monitor Personnel
It is incumbent upon you to provide a safe work environment for your employees. Taking temperatures before working, asking questions about employees’ contacts and how they are feeling are completely acceptable if your employees are aware of the procedures. Avoiding becoming a virus hot spot is beneficial to you, your employees, and your tenants.

Be Nice
The old saying, “You catch more flies with honey than with vinegar” is always appropriate. Be nice to your employees during these demanding times. You depend on them to keep your buildings running smoothly. Your employees should be your allies in the fight to keep buildings and grounds safe for everyone. Hand out a small bonus periodically. It could be cash or a grocery store gift card — really anything that shows you appreciate the work they do.

With a little kindness and diligent sanitizing, you can easily maintain your properties with safety during COVID-19.

Position Realty
Office: 480-213-5251

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