Residential Rentals are HOT!
The US rental market for single family and multi-family homes is booming. Everywhere you look apartments are under construction and the “for rent” sign is being placed in front of single family homes. I know from my community Facebook page, someone is always looking for a rental in a limited inventory market. Some attribute the boom to damaged credit and slow financial recovery from the 2007 mortgage crisis and others attribute it to baby boomers and millennials seeking smaller homes with less hassle and more amenities. Whatever the cause, servicing clients in a rental market is different than traditional list/sell. Below are some best business practice tips to keep your practice prosperous in this hot rental market.
Most residential lease agreements are adhesion contracts, meaning the tenant has limited flexibility to negotiate terms. That said, understanding some contract basics will be helpful in navigating your owner/tenant client through the rental process. In Ohio, lease agreements can be in writing or oral, although it is always the best business practice to utilize a written agreement. If the lease is for a term that exceeds 3 years, the landlord must sign a written rental agreement and the signature must be attested and acknowledged. Additionally the agreement should have the name and address of the landlord and/or the landlord’s agent.
The rental agreement may contain any requirements that are not prohibited by statute. Examples include pets, snow removal obligations, payment of utilities and subleasing prohibitions. However, the agreement cannot require the tenant to waive certain protections contained in Ohio’s Landlord Tenant Act. One such example is giving the landlord the right of “self-help” or ability to “lock-out” a tenant for default on rental obligations. Even if a tenant were to agree to give the landlord such rights, the rights are unenforceable as they are contrary to the provisions of the Ohio Landlord Tenant Act. Last the rental agreement cannot impose fees that are excessive and bear no relationship to actual damages. Sorry, a $300 bounced check fee is likely unenforceable.
Landlords are required to comply with all housing, building, health and safety codes. The municipal code enforcement officer will evaluate whether a condition is of imminent threat to the health, safety, morals or welfare of the public. Complaints concerning cosmetic items are unlikely to get attention over working utilities or mechanicals. In short, the landlord has a duty to keep the premises in a habitable condition and all mechanicals provided with the premises in working order. This means if the landlord provides a washer and dryer, the landlord an obligation to maintain it in working condition. Additionally, the landlord is required to supply reasonable amounts of hot/cold running water and trash receptacles for dwellings with 4 or more units.
The tenants of course has duties as well. Tenants are required to dispose of garbage, keep plumbing and fixtures clean, operate plumbing, mechanicals and electrical systems properly and refrain from destroying, defacing, damaging or removing any appliance, fixture or other part of the premises. Typically the rental agreement will address whether the tenant is permitted to make improvements, as even if tenant improvements increase the value of the premises, such are not permitted if they are done without landlord permission or in violation of lease provisions.
Next article we will discuss the payment of rent, rent escrow and the eviction process. A better understanding of the framework of a rental transaction will help you to better service your clients in this HOT rental market.