Rental Property Disclosure (Podcast #330)

When you go to show a rental property, how much information should you disclose? Maybe the neighbors are sensitive to loud parties or the basement floods a little when it rains. Whatever it is, podcast host, Andrew Schultz touches on how to much to disclose to tenants and more.

Also in this episode, we’ll discuss security cameras on rental properties. Should you have them? Are security cameras legal?

Last, but not least, Andrew talks about tenants who want to break their lease early, how to handle security deposits, and more.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number three, three zero. And I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about how much you should disclose about your rental property, whether or not you can install security cameras in common areas. And talking about a tenant who wants to break a lease. We’ll get to all that right after this.

Voice Over: (00:23)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:28)
Before we jump in today. I wanted to take a second to remind everybody to check out the Rent Prep for Landlords Facebook group, over at facebook.com/groups/rentprep. That group is coming up on 12,000 members now, and it’s a free resource that you can tie into. Get some opinions from other landlords around the country on any issue that you’re experiencing. You’ll find a lot of landlords with a ton of experience over there. It’s an excellent opportunity to tie into a great community. So be sure to check that out today, over at www.facebook.com/groups/rentprep, we’ll see you there

Voice Over: (01:06)
Forum quorum where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (01:13)
Today’s forum quorum comes to us from reddit.com over on the landlord subreddit. This is one of those topics that probably should fall under common sense, but I get the impression from this post that these are probably new landlords who just don’t know yet. So we’ll look at everything with a grain of salt here. The post reads as follows. We bought a place a year or so ago on the first floor, and I’ve enjoyed living there except for one major issue. When it rains heavily like a flash flood, the street will overflow our drains clog and the water will flood into our unit. The place shows really well. And when we had some potential renters show up, they seem to be very enthusiastic about renting. My question is, would you notify them about the water? Would you provide a cheaper rent? What would you do in this situation before we jump into deep here, there is one piece of information that’s missing from this post that I’m kind of kind of fitting in the puzzle piece.

Andrew Schultz: (02:03)
If you will. I think that these are homeowners that are now renting the space out. I think that this was not originally purchased as a rental and that these are probably homeowners that are now using this as an income property. I don’t get the impression from the post that this has been a space that’s been rented before, especially based on the fact that they’re familiar with the overflow into the end of the unit and things like that. So I definitely have a couple of concerns here with regards to this entire scenario. The first thing is, yes, you need to resolve this issue before you rent this unit out. You can’t rent a unit out knowing that it’s going to flood and cause damage to a tenant’s belongings or whatever the case may be. You just can’t do that. It’s not, it’s just not the right thing to do.

Andrew Schultz: (02:45)
You have to get this resolved or not rent this unit. So I’m going to start by saying that the first thing I would do would be contact the public works department and see if they can do something to assist with regards to the drainage. You may just have some drains that are blocked or something like that, which is not allowing the water to get off the street properly, which is then resulting in the flooding and stuff that you’re experiencing at the property. So that could be a very easy way to resolve this issue. I kind of wonder if you’re getting a sewer backup. It’s kind of what it seems like from the post here. You may be able to have a plumber come in and install some sort of a check valve or a backflow prevention valve that would stop sewer water from running back into the property.

Andrew Schultz: (03:28)
You know, assuming that that’s the issue, or if you just have water that is seeping in, you know, around the foundation walls or something like that, you may need to look into drain tile and a sump pump to prevent the space from flooding, regardless of the tactic you take, you have to resolve this issue before you attempt to rent this property out, or you’re going to wind up with so many more issues down the road for not disclosing it, or, you know, when a tenant has damage or something like that, you know, our renter’s insurance claim gets denied. They’re going to come looking at you because you knew that the property was prone to water damage. And by the way, you’re protecting your structure. You’re protecting your asset by resolving this issue. Like I don’t see any reason that you would not want to resolve this issue simply because it’s going to protect your asset and prevent it from being deteriorated by water.

Andrew Schultz: (04:15)
You know, it’s, it’s one of those situations, water and properties generally don’t agree. You want to keep it inside of a pipe at all costs and that’s it like you don’t want it floating around the house. So overall, that’s my thoughts on this one. Yes. This is a situation that you definitely need to make, right for yourself and for your renter. There’s no reason not to make this right. And if you find yourself in a position where you’re not financially able to take care of the situation or something like that, maybe you should be considering a sale as opposed to moving into becoming a housing provider. Just keep in mind that if you do opt to go the sale route, you are still going to have to disclose that flooding issue. If you don’t have it resolved by the time you put it on the market. So no matter how you slice it, the most advantageous situation is probably going to be to fix the flooding issue and either rent or sell the property. But definitely I’d say fixing the flooding issue is not something that you should be overlooking here.

Voice Over: (05:09)
Water cooler wisdom, expert advice from real estate pros,

Andrew Schultz: (05:17)
Today’s water cooler wisdom also comes to us via the landlord subreddit over@reddit.com. Has anyone put security cameras in common areas? There’s too much debris stolen packages and used fire extinguishers. And I’m hoping to get things under control. If you have, have they worked, can you use the footage for evictions, et cetera, and are there better brands? So the first thing I’m going to recommend on this is that before you go about installing any sort of a camera into a common area, you do a little bit of research or speak to an attorney that can tell you accurately what the laws are for recording and common areas in your state. And it does vary from state to state. So this is definitely something you’re going to want to look into in some States allow for audio and video. In some States they allow for just video and in some States, I’m pretty sure you can’t even put a camera in a common area.

Andrew Schultz: (06:06)
So it’s definitely something that you want to look into before you make a decision as to what you’re installing and where they may also have different disclosure requirements. You may have to put up signage or something along those lines. If you ever walk into a grocery store or something along those lines, a lot of times when you walk in the door, you’ll notice that it says right on the door that the property is secured via video camera or something along those lines. That’s probably because the state requires them to have some kind of a disclosure stating that there’s video recording happening on-premises. So that’s kind of where I would start in a situation like this is finding out what you’re legally allowed to and not allowed to do, given the issues that you’re having. I think something else that you need to consider is number one, the placement of the cameras in the common areas so that it’s not aimed into any areas that would capture the inside of a tenant’s apartment.

Andrew Schultz: (06:57)
Maybe when they open a door or something like that, you definitely can’t record inside of a tenant’s apartment. And I could see where a tenant might get a little bit particular about something like that, if their camera, or if their doorway for instances right by the camera. So you can constantly see them coming in and out of their apartment or look into their apartment every time the door opens or something, you know, most tenants are not going to be super tolerant of that. You’re also going to probably need to consider how you’re going to protect the cameras because it sounds like you’re having issues with some vandalism and things like that. So you may need to look into cameras that can be either mounted high enough, that people can’t get to them or some sort of a protective globe over top of the camera to prevent people from screwing with it.

Andrew Schultz: (07:36)
You know, you’ve got some options out there depending on the cameras that you’re looking into and things like that as for a particular brand. I’m not going to issue a brand recommendation on here because there’s so many different brands of cameras out there. It really just boils down to what your needs are and what, what type of services you’re looking for. The one thing I would definitely recommend with whatever camera system you decide on is make sure that you can access it from anywhere via, you know, a website, a smartphone app, something like that. So that it’s recording when there’s motion or something along those lines, being able to access that data from anywhere is super important. The other thing I would mention is get something that uploads to the cloud gets something that uploads to the internet, such that if somebody walks into the room where you have your, your DVR, where the cameras would be recording on like an older system, you know, you’re in a situation where if somebody takes that DVR, all of your evidence just walked out the door.

Andrew Schultz: (08:29)
So, you know, find something to uploads to the cloud so that you at least have, you know, access to the video footage in the event that something happens to the camera individually or to the, you know, the system, if you’re using one of those systems where all the cameras come back to a central point. One of the questions that was asked was will this work, do you think that having cameras in place will stop tenants from damaging common areas? And the answer to that question really depends on the tenants. If tenants are going to become respectful of the common areas and stop causing damages and things like that, realistically speaking, they probably wouldn’t need a camera in order to kind of keep in line if you will. But it sounds like if you put a camera in there, you know, it might do something to kind of help dissuade them from causing damages.

Andrew Schultz: (09:13)
All that being said, I don’t know, as though it’s necessarily going to be the most effective solution out there, then again, I don’t know what other solutions you would want to try to put in place. I think a camera’s probably the most logical one, the most logical place to start. So as far as the footage being able to be used for evictions and things like that, I’m not entirely sure because again, that would be a state by state type of a situation. And also probably a courtroom by courtroom type of situation. If the courts where you are, anything like the courts, where we are, where some judges enforce things a little bit more to the letter of the law than others and others seem to take a little bit of leeway. So something to consider as you are shopping for cameras, you know, keep in mind that you’re definitely gonna want to make sure that they’re positioned in such a way that they’re not going to be easy for people to cause damage to because now you’re just paying for equipment, that’s getting damaged just like the common area.

Andrew Schultz: (10:05)
So definitely keep all that in mind and good luck. Our second water-cooler wisdom from this week comes from the Rent Prep for Landlord’s Facebook group. Don’t forget to check that out. And this one is a question on how to terminate a lease early. It reads as follows. A tenant wants to move out a couple of months early. I’ve seen where other landlords allow this. If the tenant helps with showings and pays rent until a new tenant can be found, do you give back the deposit? If the rental is in good condition or does the tenant forfeit the deposit regardless of helping to place a replacement, tennis, curious how others handle this situation. So I’ll preface this by saying that I’m going to explain this from my point of view, as a property manager, when we do a tenant placement for a property owner, when we put a tenant into an apartment, we charge that owner of fee.

Andrew Schultz: (10:54)
When a tenant comes to us and wants to move out of an apartment and needs to have a tenant placed in the apartment, we also charge a fee. So that fee is predetermined and it’s actually written right into our lease in the section of our lease, that discusses how to go about doing a sublet and the way that we allow a tenant to do a sublet is they have to notify us first and pay the fee upfront. They’re responsible for continuing to maintain the utility service as well as continuing to pay rent until a new tenant is found or until their lease, the original term of their lease expires. And they have to allow for showings as well as allow us in to get good photos so that we can market the apartment, get it online, things of that nature. So you really need a tenant.

Andrew Schultz: (11:35)
That’s going to be cooperative. If you want a situation like this to work out well, if the tenant is motivated to get out of the unit, then they tend to be more cooperative. So if you have somebody that’s moving for work and they have to move across the country, for instance, they’re probably going to be super cooperative versus maybe a tenant that is moving out early, because they can just no longer afford the unit or something like that. You know, when you start telling them that there’s going to be a fee to get out of the unit and they have to continue to pay rent, they may not be quite as cooperative as the, as the previous tenant would be. So that is definitely something to keep in mind in terms of whether or not they get their security deposit back. Yeah. As long as they clean the apartment out and don’t have damages and things like that, we treat the security deposit just the same as we would.

Andrew Schultz: (12:22)
Any other security deposit disposition when a tenant moves out after they’ve been there for the full duration of their lease, the only difference here is you basically have to make sure that the attendance account is current in terms of, you know, back rent or making sure that the fee is paid for the sublet or whatever the case may be as you’re processing that deposit. And hopefully, your state will allow you to pull from the security deposit for any sorts of unpaid charges like utilities or background or whatever the case may be. And not just strictly for straight up damages or whatever the case may be. I want to go back for a quick second to the fees that we were talking about at the beginning of this and why the fees exist. So when we place a tenant for an owner, we’re taking on the responsibility of doing, you know, the showings, the marketing, the screenings, the credit and background checks, all of the stuff that kind of goes along with that.

Andrew Schultz: (13:11)
And it’s a whole process. You know, the move in photo set, generating the lease, getting the lease, signed, screening the applicant, you know, checking the credit and backgrounds to make sure that everything checks out the way that it’s supposed to verifying the employment, verifying the landlord, references, all of that takes time and it comes with an expense. So that’s why there’s a fee to the owner on the front end, when we place a tenant, the reason that we would charge a fee to the tenant on the backend would be because it’s not the owner, that’s looking for a new tenant, it’s the tenant. That’s looking for a new tenant. So they’re then responsible for that same fee, that same tenant placement, just as if it was going to be an owner who is looking to fill a vacancy, you have a tenant, that’s looking to fill a vacancy.

Andrew Schultz: (13:51)
They’re going to be responsible for that fee. You know, it’s, it makes sense when you say it out loud, but you would be shocked at the number of people who have trouble wrapping their mind around it until you actually take the time to explain that to them. So that’s, that’s how we handle it in our office. As property managers, you might take a little bit different tactic if you are an owner-operator or something like that it’s completely up to you and what’s allowable in your state. And what you feel most comfortable with as an operator really is what it boils down to. But in terms of the security deposit, as long as they’ve been good about making sure that their rent is paid on time, there’s no damages in the apartment. You know, their account is current and what, what not. I would refund the security deposit as much of the deposit as possible.

Andrew Schultz: (14:36)
Because realistically speaking, that’s your obligation. That’s your tenant’s money. You’re holding it as a liability. And when you wrap up that security deposit disposition, if there’s money that’s due back to the tenant, it should definitely be returned. That pretty wraps things up for this week’s episode of the rent prep for landlords podcast. Thank you all so much for listening. We really do appreciate it before you go. I do have one ask of you. If you could share this podcast with a friend, a family member, someone who’s considering getting into the industry, and maybe they’re just beginning to build their knowledge base. Our goal is to share information with as many people as possible, and you can help us to achieve that goal by sharing what you heard here today. If you found some value in it and you think somebody else would find some value in it, please do us the favor of sharing this podcast with them.

Andrew Schultz: (15:22)
If you’re looking to get in contact with me, I can be found over at ownedbuffalo.com. From there, you can find links to our Facebook page, our YouTube page, our Instagram account, et cetera, et cetera. Don’t forget that I actually run a second show, every Wednesday, 10:00 AM Eastern on our Facebook page. It’s also content geared towards landlords. So that’s definitely something that’s worth checking out as well. If you’re looking for top tier tenant screening services, head on over to rentprep.com and check out the service offerings over there. And last but not least, don’t forget to check out the Facebook group over at facebook.com/groups/rentprep. Again, thank you all so much for listening and we’ll talk to you again next week.