Property Management FAQ's

After the initial lease term ends, may the landlord insist that the tenant sign an extension, or may the tenant insist on a "month-to-month" tenancy?

Under the Time Residential lease, the lease automatically converts to a month-to-month tenancy unless either party gives prior notice of termination (30 days or more). Before the original term ends, the landlord may notify the tenant that the parties must either execute a renewal or the landlord will terminate. While the landlord cannot compel the tenant to accept an extension or renewal agreement, the landlord may terminate the lease with proper notice if the tenant refuses to enter into an extension or renewal.

When the lease ended, the tenant gave the landlord a forwarding address but returned only one of three keys that were provided to him. Has the tenant fulfilled his obligations?

The tenant is required to return all access devices (keys) to the landlord when he surrenders the property. He is also required to give the landlord a forwarding address. If the tenant fails to deliver all the keys to the landlord but has clearly surrendered the property to the landlord, the landlord may deduct the cost of unreturned or lost keys from the security deposit. The landlord should provide the tenant with a written accounting of the security deposit not later than the 45th day after the tenant surrenders the property and gives the landlord notice of the tenant’s forwarding address.

What is the tenant liable for under a lease if he does not pay the rent or moves out early?

A landlord is required to mitigate his damages by exercising reasonable efforts to lease the property to another tenant. For example, assume a tenant breached a lease six months into a one-year lease with a $1,000 monthly rent payment. The landlord has potentially lost $6,000 in rent over the remaining term. If the landlord is able to lease the property to another tenant in two months, the landlord has lost two months of rent, or $2,000. The landlord is also entitled to recover any costs associated with re-leasing the property (for example, brokerage fees). Assuming that it cost the landlord $500 to re-lease the property and there was no damage to the property, the damages in this example are $2,500.

Why do I have to supply my social security number and driver’s license on the application?

The landlord will typically require a credit check or a criminal-background check or both. This type of information cannot be accurately obtained without the applicant’s social security number and driver’s license. It may be necessary for the credit-reporting agency to distinguish between people with similar names and aliases.

I gave my landlord proper notice that I will move out. I suggested that in lieu of paying the last month’s rent, the landlord apply the security deposit to the last month’s rent. May the landlord refuse?

Yes. Paragraph 7 of the Time Residential lease agreement provides that the tenant may not withhold the last month’s rent on grounds that the security deposit is payment for the last month’s rent. The security deposit is security for the tenant’s performance under the lease, including the tenant’s obligation to return the property without damage (excluding normal wear and tear).

I tendered a rent check to the landlord on time. The check bounced. At my request, the landlord resubmitted the check. I made sure that there were sufficient funds. The landlord now demands that I pay $29 for the bounced check–which I understand–and the late charges. May he charge me for the late charges?

Yes. A check that is returned for insufficient funds is the same as if the money had not been tendered. Until "good funds" are tendered, the rent remains unpaid. The fee for the bounced check is charged for the administrative costs associated with a bounced check. The late fees apply because rent was not timely paid.

Why am I charged for repairs? It is not my disposal or window that broke?

The Time Residential lease addresses which party will pay for the various repairs. If a tenant causes a condition that needs repair, the tenant will bear the cost of repair. Likewise, if the landlord causes the condition, the landlord will bear the cost. If a condition affects the health and safety of an ordinary tenant, the landlord must bear the cost of repair. The only exceptions are: if the tenant caused the condition; if the condition is a wastewater damage caused by improper objects in the lines; if the damage is to doors, windows, or screens; or if the damage is caused by windows or doors left open. If neither of the two preceding paragraphs applies to the specific repair in question, then the provisions of the lease control which party bears the cost. Under the Time Residential lease, the landlord will pay for all repairs not specifically addressed above, but the tenant may have to pay a portion of the cost if this requirement is specified in the lease. Furthermore, the lease may specify certain items that the parties agree will not be repaired if those items malfunction (such items are typically personal property such as refrigerators, washers, dryers, or microwaves).

The management agreement ended and there was a tenant in the property. How should the property manager, who is holding the security deposit, handle the security deposit?

Most management agreements address this issue specifically. Under the Time Residential property management agreement, the manager may, before releasing the security deposit to the owner, require evidence from the owner that the owner gave the tenant a statement acknowledging that the owner is responsible for the security deposit. It is probably best for the manager to call this provision to the owner’s attention and report to the owner that the manager stands ready to forward the security deposit to the owner upon receipt of the evidence. If the owner refuses to provide a statement to the tenant about the security deposit and insists that the manager give him the security deposit, the manager should seek the assistance of counsel. There are several alternatives that may be available. For example, the manager may: insist on the owner’s compliance with the property management agreement and interplead the security deposit into a court or ask for injunctive relief (which means asking a court to resolve the issue); or forward the security deposit to the owner and provide written notice to the tenant that the manager has sent the security deposit to the owner and that the owner is now responsible for the return of the security deposit.

I normally negotiate sales of residential properties. Occasionally, I negotiate leases. May I use the same lead-based paint form in lease transactions that I use in sales?

No. There is a separate lead-based paint addendum for use in residential leases. While the two forms are similar, federal regulations require a separate notice for leases.

The landlord or the property manager wants a nonrefundable application fee and a security deposit from my client, the tenant, along with his offer to lease the property. Why must the tenant tender a security deposit at this time? Can’t the landlord or the property manager just run the credit check and verify the information in the application to see if the tenant is acceptable without asking for a security deposit at this time?

This question addresses practice and procedure. The landlord may do as the question suggests: namely, run the credit verifications without obtaining the security deposit first. Many landlords may want a check for the security deposit in hand as a showing of earnest intent. Sometimes, it is a matter of convenience, especially if the terms of the lease have been negotiated and the parties will sign the lease when the landlord approves the tenant. Sometimes, the landlord needs the check for the security deposit to verify adequate funds.

It is not uncommon for the landlord to ask for a nonrefundable application fee, a check for the security deposit, and a check for the first month’s rent or prorated rent. Whatever procedure is followed, the parties should be clear about the conditions under which the checks are tendered and whether the checks may or may not be deposited pending final execution of the lease.

This question also relates to "application deposits." An application deposit is given to the landlord in connection with an application and is refundable to the applicant if the applicant is rejected as a tenant. Application deposits are more typically used in the apartment industry, but may be used in connection with any rental application. If an application deposit is used, the parties will typically sign a written agreement that defines the conditions under which the application deposit is given to the landlord. Under such agreements, the tenant gives the landlord a deposit that will become the security deposit under the lease if the landlord approves the tenant and the parties sign a lease. If the landlord does not approve the tenant, the landlord will return the application deposit. If the landlord approves the tenant and the tenant subsequently refuses to sign a lease with the landlord, the landlord may keep the application deposit (subject to certain conditions). An enforceable agreement for an application deposit will also need to address contemplated lease terms. Application deposits are not application fees. Application fees are typically nonrefundable fees used to pay the administrative expenses related to a landlord’s review and verification of an application.

My client receives poor service from his landlord. He wants to buy a house and I have found him one he wants to buy. It is a good deal. My client has eight months left on his lease ($1,000 a month). My client is willing to give up the security deposit. Do I have any exposure if I recommend that he buy the property and move-out of the rental unit?

Under these facts, yes. If you advise the tenant to take a certain course of action under the lease, you are moving into the unauthorized practice of law. The Real Estate License Law prohibits a broker from inducing or attempting to induce a party to a contract or lease to break the contract for the purposes of substituting a new contract in its place. Your actions may violate the Real Estate License Law. Finally, the landlord may bring an interference action against you. You have only one choice in this scenario–tell your client to seek the assistance of counsel before he agrees to buy the property or breach the lease.

I have terminated my management agreement with my property manager, but my property manager is charging "remaining management fees." Why?

Most management agreements detail what amounts, if any, will be due the manager upon termination. It is not uncommon for a manager to be paid a percentage of rents under a lease. Consider a situation in which a manager procures a tenant under a one-year lease and, one month after the lease begins, the owner terminates the management agreement. It is not uncommon for the management agreement to state that the owner will pay the manager the amount the manager would have otherwise been entitled to receive had the management agreement remained in effect through the end of the lease. Such a clause allows the manager to be compensated for procuring the tenant and permits the owner to terminate the agreement. Of course, all fees payable to real estate brokers are negotiable.