Two Important New Year's Resolution

It is an introspective time of year when many of us review how we have done over the past year and evaluate what we can do to improve in the New Year. Many of us will make resolutions that are quickly abandoned, which is okay if you are one of those people that makes my gym extra crowed during the first few weeks of January. However, some resolutions are worth sticking to.

In no particular order I have two resolutions that I request that all landlords and property management professionals to consider. They are fairly interrelated, so if it makes you feel better you can consider them one resolution.

Resolution No. 1: I will take an active role in forming the laws that regulate the rental industry.
This is not nearly as hard as it sounds, and, like many things, pretty easy once you get started. It is important to be involved at the local(municipal) level, state and federal level. At each level laws and regulations are promulgated that will effect the ease with which you conduct your business and the costs and fees involved. In North Carolina we also have the ability to influence who our judges are too, which may influence how the laws and rules are applied.

Their are two ways to influence legislation. One is time and the other is money. Money is the simplest part. It is worthwhile to contribute to organizations, people and parties that align with your interest and what you are trying to do. Time is a little more difficult to define and can include: working on campaigns; contact your legislator by telephone or in writing about a particular issue or piece of legislation; taking part in public comment periods on legislation or rulemaking; and educating like minded people around you.

But, how do you find out about what is happening? Well, you can start by paying attention. Not just listening to the 6:00 o'clock news, but actually doing your own research. You can set up some RSS feeds on areas you are interested in, if you are technically inclined. You can also take advantage of the various real estate investment and landlording organizations and the many educational opportunities that they offer. This brings me to:

Resolution No. 2: I will increase my knowledge of the laws and rules affecting the landlord-tenant industry.
There are many ways to do this. Unfortunately, I don't think you will be able to go to Barnes and Noble and get a book or magazine that will educate you all that well. So you will have to take a more proactive approach. There are a few vendors such as Lorman and the National Business Institute(NBI) that will from time to time offer relevant seminars.

However, there are several local organizations that offer monthly opportunities for you to increase this knowledge, both through formal presentations and informal discussions with other people who have experience in landlording and real estate investment. I would highly recommend joining the Triangle Real Estate Investors Association (TREIA), the Wake County Apartment Association (I don't think you actually have to own your properties in Wake County), and the Triangle Apartment Association (TAA). Both TREIA and TAA are local affiliates of national organizations and have chapter throughout the state and throughout the country. Both the TAA and TREIA have committees that attempt to engage the legislators and influence the laws that affect your bottoms line. Also, these groups often have sub-groups that will further focus on your areas of interest. I hear you can often even get free legal advice at the meetings. Additionally, the level of sophistication of the members of all of these groups varies from newbies to the more experienced,and you should never feel intimidated about attending.

Happy New Year and Happy Landlording!

Norm Praet, Esq.

Who Provides North Carolina Smoke and Carbon Monoxide Detectors

The short answer is usually you, the landlord do.

SMOKE DETECTORS

The statute on landlord responsibilities NCGS 42-42
spells out pretty clearly that:

1) It is the landlord's duty to provide operable smoke detectors, either battery‑operated or electrical, having an Underwriters' Laboratories, Inc., listing or other equivalent national testing laboratory approval.

2)The landlord must install the smoke detectors in accordance with either the standards of the National Fire Protection Association or the minimum protection designated in the manufacturer's instructions, which the landlord shall retain or provide as proof of compliance.

3)The landlord shall replace or repair the smoke detectors within 15 days of receipt of notification if the landlord is notified of needed replacement or repairs in writing by the tenant. The landlord shall ensure that a smoke detector is operable and in good repair at the beginning of each tenancy.

4)However, unless the landlord and the tenant have a written agreement to the contrary, the landlord shall place new batteries in a battery‑operated smoke detector at the beginning of a tenancy and the tenant shall replace the batteries as needed during the tenancy.

Carbon Monoxide Detectors:

Carbon Monoxide detector regulations only apply to a dwelling unit having a fossil‑fuel burning heater or appliance, fireplace, or an attached garage. If any of these is present then:

(1) At the beginning of each tenancy the landlord must provide a minimum of one operable carbon monoxide detector per rental unit per level, either battery‑operated or electrical, that is listed by a nationally recognized testing laboratory that is OSHA‑approved to test and certify to American National Standards Institute/Underwriters Laboratories Standards ANSI/UL2034 or ANSI/UL2075.

(2) The landlord shall install the carbon monoxide detectors in accordance with either the standards of the National Fire Protection Association or the minimum protection designated in the manufacturer's instructions, which the landlord shall retain or provide as proof of compliance.

(3) The landlord shall replace or repair the carbon monoxide detectors within 15 days of receipt of notification if the landlord is notified of needed replacement or repairs in writing by the tenant.

(4) Unless the landlord and the tenant have a written agreement to the contrary, the landlord shall place new batteries in a battery‑operated carbon monoxide detector at the beginning of a tenancy, and the tenant shall replace the batteries as needed during the tenancy. Failure of the tenant to replace the batteries as needed shall not be considered as negligence on the part of the tenant or the landlord.

(5) A carbon monoxide detector may be combined with smoke detectors if the combined detector does both of the following: (i) complies with ANSI/UL2034 or ANSI/UL2075 for carbon monoxide alarms and ANSI/UL217 for smoke detectors; and (ii) emits an alarm in a manner that clearly differentiates between detecting the presence of carbon monoxide and the presence of smoke.

Remedies

NCGS 42-44 provides the remedies for violations by the tenant or the landlord and states:

(a) Any right or obligation declared by this Chapter is enforceable by civil action, in addition to other remedies of law and in equity.

(b) If a landlord fails to provide, install, replace, or repair a smoke detector or a carbon monoxide detector within 30 days of having received written notice from the tenant or any agent of State or local government of the landlord's failure to do so, the landlord shall be responsible for an infraction and shall be subject to a fine of not more than two hundred fifty dollars ($250.00) for each violation. A landlord may temporarily disconnect a smoke detector or carbon monoxide detector in a dwelling unit or common area for construction or rehabilitation activities when such activities are likely to activate the smoke detector or carbon monoxide detector or make it inactive.

(c) If a smoke detector or carbon monoxide detector is disabled or damaged, other than through actions of the landlord, the landlord's agents, or acts of God, the tenant shall reimburse the landlord the reasonable and actual cost for repairing or replacing the smoke detector or carbon monoxide detector within 30 days of having received written notice from the landlord or any agent of State or local government of the need for the tenant to make such reimbursement. If the tenant fails to make reimbursement within 30 days, the tenant shall be responsible for an infraction and subject to a fine of not more than one hundred dollars ($100.00) for each violation. The tenant may temporarily disconnect a smoke detector or carbon monoxide detector in a dwelling unit to replace the batteries or when it has been inadvertently activated.

Words of wisdom:

Okay, first off, you should comply with the statute. It is not too expensive, it is the law, it is best for your property, and it is the right thing to do. Should the relationship break down between you and your tenants it is a good idea to have the tenant acknowledge in writing, either on the lease or the move in checklist, that the required smoke and carbon monoxide detectors are present.

Unfortunately this installment was not all that sexy but necessary all the same.

Happy landlording!

Avoiding the Retaliatory Eviction Defense

Ok, you have all of your ducks in a row, you have noticed your tenant, filed your complaint and had it served. Weeks have gone by and now you are finally ready to have your day in court with the hopes that you will soon be rid of a problem tenant. You put on all of your evidence and the tenant denies the claims.

No real surprises here, but then the tenant brings up that they complained to the building inspector eleven months ago. The judge or magistrate, who is just looking for a reason not to evict the tenant, finds that your real motive in the eviction was the complaint to the the building inspector and rules against you. You are left wondering what just happened, and should they have at least bought you a drink first?

To avoid this happening you need to become familiar with the Retaliatory Eviction Defense that can be found under Section 4A of the Landlord Tenant Act at N.C.G.S. 42-37.1.

First off, what is prohibited?

Seeking to evict a tenant for engaging in the following protected activities:
(1) A good faith complaint or request for repairs to the landlord, his employee, or his agent about conditions or defects in the premises that the landlord is obligated to repair under G.S. 42-42 (we addressed NCGS 42-42 in an earlier post);
(2) A good faith complaint to a government agency about a landlord's alleged violation of any health or safety law, or any regulation, code, ordinance, or State or federal law that regulates premises used for dwelling purposes;
(3) A government authority's issuance of a formal complaint to a landlord concerning premises rented by a tenant;
(4) A good faith attempt to exercise, secure or enforce any rights existing under a valid lease or rental agreement or under State or federal law; or
(5) A good faith attempt to organize, join, or become otherwise involved with, any organization promoting or enforcing tenants' rights.

How long can a tenant raise this defense?

A tenant may present evidence that the landlord's action is substantially in response to the occurrence within 12 months of the filing.

Surely, a tenant can't get away with not paying the rent and use Retaliatory Eviction as an excuse!

This is the good news. The act provides that a landlord may prevail in an action for summary ejectment if:
(1) The tenant breached the covenant to pay rent or any other substantial covenant of the lease for which the tenant may be evicted, and such breach is the reason for the eviction; or
(2) In a case of a tenancy for a definite period of time where the tenant has no option to renew the lease, the tenant holds over after expiration of the term; or
(3) The violation of G.S. 42-42 complained of was caused primarily by the willful or negligent conduct of the tenant, member of the tenant's household, or their guests or invitees; or
(4) Compliance with the applicable building or housing code requires demolition or major alteration or remodeling that cannot be accomplished without completely displacing the tenant's household; or
(5) The landlord seeks to recover possession on the basis of a good faith notice to quit the premises, which notice was delivered prior to the occurrence of any of the activities protected by subsections (a) and (b) of this section; or
(6) The landlord seeks in good faith to recover possession at the end of the tenant's term for use as the landlord's own abode, to demolish or make major alterations or remodeling of the dwelling unit in a manner that requires the complete displacement of the tenant's household, or to terminate for at least six months the use of the property as a rental dwelling unit.

What if the Court agrees with the tenant that the eviction is retaliatory?

If the court finds that an ejectment action is retaliatory it shall deny the request for ejectment; provided, that a dismissal of the request for ejectment shall not prevent the landlord from receiving payments for rent due or any other appropriate judgment.

Additionally, the rights and remedies created by the Act are supplementary to all existing common law and statutory rights and remedies. Which means that if the tenant can find any reason at all they will probably try to bring an Unfair and Deceptive Trade Practices Act (UDTPA claim against you. We will be discussing the UDTPA in a post shortly.

What if my lease states that the tenant waives the Retaliatory Eviction Defense?

Too bad. In case you thought that you could do an end run around this law by putting a waiver of this defense in your lease, the legislature made a special point of prohibiting the waiving of this defense.

Knowledge is power, and in the case of property management it can save you a lot of money too.

Happy landlording!

North Carolina Landlord Responsibilities

What are a landlord's responsibilities with respect to the rental premises?

The first place you should look is your lease. A properly drafted lease will clarify who is responsible for what, and not place too many unnecessary responsibilities on the landlord.

The next place you will want to looks is
N.C.G.S. 42-42. Hopefully, this statute was taken into account when your lease was drafted. 42-42 provides most of the answers about what is required of a landlord and provides that a landlord shall:

(1) Comply with the current applicable building and housing codes.

(2) Make all repairs necessary to put and keep the premises in a fit and habitable condition.

(3) Keep all common areas of the premises in safe condition.

(4) Maintain in good and safe working order and promptly repair all electrical, plumbing, sanitary, heating, ventilating, air conditioning, and other facilities and appliances supplied or required to be supplied by the landlord provided that notification of needed repairs is made to the landlord in writing by the tenant, except in emergency situations.

(5) Provide operable smoke detectors, either battery‑operated or electrical, having an Underwriters' Laboratories, Inc. The landlord shall ensure that a smoke detector is operable and in good repair at the beginning of each tenancy. Unless the landlord and the tenant have a written agreement to the contrary, the landlord shall place new batteries in a battery‑operated smoke detector at the beginning of a tenancy and the tenant shall replace the batteries as needed during the tenancy. Failure of the tenant to replace the batteries as needed shall not be considered as negligence on the part of the tenant or the landlord.

(6) If the landlord is charging for the cost of providing water or sewer service and has actual knowledge from either the supplying water system or other reliable source that water being supplied to tenants within the landlord's property exceeds a maximum contaminant level, provide notice that water being supplied exceeds a maximum contaminant level.

(7) Provide a minimum of one operable carbon monoxide detector per rental unit per level, either battery‑operated or electrical. The landlord shall replace or repair the carbon monoxide detectors within 15 days of receipt of notification if the landlord is notified of needed replacement or repairs in writing by the tenant. The landlord shall ensure that a carbon monoxide detector is operable and in good repair at the beginning of each tenancy. Unless the landlord and the tenant have a written agreement to the contrary, the landlord shall place new batteries in a battery‑operated carbon monoxide detector at the beginning of a tenancy, and the tenant shall replace the batteries as needed during the tenancy. This subdivision applies only to dwelling units having a fossil‑fuel burning heater or appliance, fireplace, or an attached garage.

(8) Within a reasonable period of time based upon the severity of the condition, repair or remedy any imminently dangerous condition on the premises after acquiring actual knowledge or receiving notice of the condition. Notwithstanding the landlord's repair or remedy of any imminently dangerous condition, the landlord may recover from the tenant the actual and reasonable costs of repairs that are the fault of the tenant. For purposes of this subdivision, the term "imminently dangerous condition" means any of the following:

a. Unsafe wiring.
b. Unsafe flooring or steps.
c. Unsafe ceilings or roofs.
d. Unsafe chimneys or flues.
e. Lack of potable water.
f. Lack of operable locks on all doors leading to the outside.
g. Broken windows or lack of operable locks on all windows on the ground level.
h. Lack of operable heating facilities capable of heating living areas to 65 degrees Fahrenheit when it is 20 degrees Fahrenheit outside from November 1 through March 31.
i. Lack of an operable toilet.
j. Lack of an operable bathtub or shower.
k. Rat infestation as a result of defects in the structure that make the premises not impervious to rodents.
l. Excessive standing water, sewage, or flooding problems caused by plumbing leaks or inadequate drainage that contribute to mosquito infestation or mold.
(I excerpted the statute slightly, so for actual language click on the link to it above.)

In North Carolina several municipalities put additional responsibilities on a landlord as well as additional prohibitions, such as no pine straw within a certain proximity to the rental units.

Finally, you can look to federal laws and regulations. This is more often the case if you have tenants receiving rental assistance and is beyond the scope of this article. We will probably get to it another time though. Additionally, their maybe requirements on a landlord under certain disability protection statutes.


What if I don't fulfill my responsibilities?

If a landlord fails to comply with his duties the penalties may include fines, rent abatement, civil judgments, and in some cases criminal prosecution. However, a tenant still is not entitled to withhold rent with a judicial order.

How do I keep on top of all this?

I can't emphasize enough that careful lease drafting, as in every other facet of the landlord tenant relationship, is important in defining a landlord's responsibilities. It is best when you are starting out, and from time to time thereafter, to have your forms prepared by, or at least reviewed by, an attorney who specializes in real estate law.

Additionally, it is very important that every landlord keep abreast of any changes in laws and regulations, and the best way to do this is to get involved in real estate investors and/or apartment associations such as the Triangle Real Estate Investors Association or the Triangle Apartment Association.

Happy Landlording!

How to Keep From Getting Beat By Your Tenants

As a landlord you can never completely guard yourself against a tenant owing you money, there are simply too many laws in the tenant's favor, however you can take steps to level the playing field.

Tenant Selection
The first step to avoid ending up with a tenant owing you money is to carefully choose that tenant. The single most important tool for finding a responsible tenant is check your prospective tenant's credit score. Job history is good, prior landlords may not be trustworthy, or possibly may not even be prior landlords at all, but credit scores are pretty objective. If you wish to accept a tenant whose score is lower than you would normally accept make sure that you get a co-signer. The better practice is to have objective criteria such as at least a credit score of 660. If you base your decision on who you rent to on objective criteria it will make it much more difficult for anyone to win a fair housing lawsuit against you.

Security Deposit
The next step is to always require the maximum security deposit that the law, and the market, will allow. In North Carolina the maximum security deposit a residential landlord can require is: (a) If the term of the tenancy is week to week, the landlord can require two weeks rent; (b) If the term of the tenancy is month to month, the landlord can require one and one-half month’s rent; or (c) If the term of the tenancy exceeds one month, the landlord can charge two months rent. See N.C.G.S. 42-51.You must require this security to be paid prior to giving your new tenant keys. I have seen kind hearted landlords get beat for unpaid rent many times by tenants who were going to send the security deposit "next week."

A Good Lease
The third step is to make sure you include necessary lease provisions allowing you to bring an eviction action immediately upon a breach of the lease, such as non-payment of rent. Evictions in the best of circumstances take several weeks from when you file. There is no reason to get stuck waiting an extra ten days because you do not have a properly drafted lease.

Lease Enforcement
You did not go through the trouble and expense of getting a good lease just to hide it in a folder. File on you tenant as soon as they are late, and make sure if they are going to stay they reimburse you for your fees and costs surrounding the filing. Also, make sure you require that late fees be paid. Make it in the tenant's best interest that they pay you timely.

The Paperwork
Keep a file on each tenant with their application and require that they update the application when any information changes. Additionally, if your tenant pays by check keep copies of the checks at regular intervals so that you know where your tenant banks. This information will be invaluable if you have to sue your tenant for unpaid rent, and you wish to collect on the judgment.

The Human Touch
Finally, you or your property manager should try to keep on friendly terms with your tenant(s) so that you will know when there are any changes in their lives that might render them unable to pay rent. Problems with tenants are much easier to deal with if you catch them early.


As always, if any of the readers have suggestions I am always open to new ideas. Feel free to comment or send me a personal e-mail.
Happy Landlording!

Can My Tenant Withhold Rent?

This question trips up landlords, attorneys and even judges from time to time.

The short answer is a resounding NO.

North Carolina statute N.C.G.S. 42-44(c) provides that "The tenant may not unilaterally withhold rent prior to a judicial determination of a right to do so." This begs the question, "when can a judge determine a tenant has a right not to pay rent?"

For the answer we must back up a little to N.C.G.S. 42-41, which states "The tenant's obligation to pay rent under the rental agreement or assignment and to comply with G.S. 42‑43 and the landlord's obligation to comply with N.C.G.S. 42‑42(a) shall be mutually dependent." N.C.G.S. 42-42(a) sets out a landlord's responsibilities with respect to maintaining the property, and N.C.G.S 42-43 sets out the tenant's responsibilities regarding maintenance of the property. You can click on the statute if you would like to view it, but a more detailed discussion of these responsibilities will be in another post.

Now this is starting to get confusing. N.C.G.S. 42-41, stating that a tenant's obligation to pay rent is dependent on a landlord maintaining the property, seems to contradict N.C.G.S. 42-44, which says a tenant may not unilaterally withhold rent. The two statutes are reconciled by allowing the judge to determine the actual value of the property above that stated the tenant cannot withhold rent. The two statutes are reconciled by allowing a judge to determine the value of a property in disrepair, subtracting that from the actual rent, and awarding the tenant an abatement in the amount of the difference.

The way this works is: $750.00 (amount of rent) - $500.00 (rental value of property in disrepair) = $250.00 (rent abatement). The landlord will then have to return to the tenant the abatement amount. There is also the possibility that a tenant can in limited circumstances prevail on an Unfair and Deceptive Trade practices claim relating to failure to repair, which can get very expensive. I will discuss this process in greater detail in a subsequent post, because this is a bad news topic, and this is a good news post.

The good news being that a tenant does is not allowed to withhold rent.

One more quick point: This is particularly good with respect to repair issues because a tenant cannot fail to pay rent and then try to blame some sort of minor property defect as the reason for this failure, justifying the tenants non-payment.

If you have any questions relating to North Carolina Landlord Tenant Law that you would like addressed in this blog send me an e-mail at norm@starklawgroup.com

Big Changes to Lease Backs for Sellers in Default!

The second major change for property owner's in the Homeowner and Homebuyer Protection Act("the Act"), effective October 1, 2010, affects foreclosure rescues. Below I explain how to comply with the Act and avoid trouble if you engage in these deals.

What does the Act consider a foreclosure rescue?

A rescue is a sale of real property where:

a. It is the principal residence of the seller;

b. The seller is in default (defined as the seller being more than 60 days delinquent on any loan or debt that is secured by the property, including real estate taxes) or foreclosure;

c. The purchaser or his agents make representations that the sale of the
property will enable the seller to prevent, postpone, or reverse the effect of foreclosure and to remain in the residence; and

d. The seller retains an interest in the property conveyed, including a tenancy interest, an interest under a lease-purchase agreement, an option to reacquire the property, or any other legal, equitable, or possessory interest in the property conveyed. This would include any "subject to" deals.

What types of property are affected?

Property that has one or more single-family dwellings, including an individual condominium unit, cooperative unit, manufactured home, or mobile home.

What does the Act require?

The purchaser must pay the seller at least 50% percent of the fair market value of the property as set by a licensed appraiser. The appraisal must be performed no more than 90 days before the sale. Further, the appraisal must be delivered to the seller within 3 days after it is performed and at least 7 days before the sale.

This would make "subject to" deals much more difficult if the seller is in default.

Are there any new contract requirements?

The contract shall be in writing, signed by all parties, and contain all the terms to which the parties have agreed. The contract shall contain the following:

(1) The names and addresses of all parties to the contract;

(2) The legal description of the property being transferred;

(3) Any financial obligation of the seller that will be assumed by the purchaser;

(4) The total amount to be paid by the purchaser;

(5) The fair market value of the property;

(6) A description of the interest in the property retained by the seller; and

(7) The terms of the seller's right to any future possession or ownership of the property.

If I don't comply with the act what are the penalties?

Failure to comply with the act is considered an unfair trade practice. The seller may bring an action for the recovery of damages, to void a prohibited foreclosure rescue transaction, as well as for declaratory or equitable relief, and attorney's fees.

Are there any exemptions or exclusions?

The following buyers are exempt from the Act:

a. A member of the seller's immediate family;

b. A government agency or organization;

c. A bank, savings institution, or credit union; or

d. A licensed mortgage lender or mortgage servicer.

In summation the big change is that you will need to purchase rescue properties for at least 50% of their appraised value.

If you have any questions or comments on the Act or this post feel free to contact me by e-mail or telephone.

Security Deposits: How Much Can I Require, and What Do I Have to with Them?

Residential security deposit law in North Carolina is governed by the Tenant Security Deposit Act and can be found at N.C.G.S. 42-50 through 42-55. As is often the case in tenancy law, this act primarily addresses issues in residential tenancies so this article will be addressed to residential security deposits.

How much can I charge for the security deposit?

Unfortunately the answer to this question is a moving target. The amount of security deposit depends on the term of the tenancy as follows:

(a) If the term of the tenancy is week to week, the landlord can require two weeks rent;

(b) If the term of the tenancy is month to month, the landlord can require one and one-half month’s rent; or

(c) If the term of the tenancy exceeds one month, the landlord can charge two months rent. See N.C.G.S. 42-51.

Are there additional fees a landlord can charge?

Landlords are also entitled to a non-refundable "pet fee". The only requirement for the "pet fee" is that it must be reasonable, and the tenant must have a pet.

I have the security deposit, now what do I do with it?

A landlord must place the security deposit in a trust account with a licensed and insured bank or savings institution in North Carolina, and notify the tenant of the bank's name and address within 30 days after the beginning of the lease term. There are a couple of minor exceptions to this rule but they involve the landlord obtaining a bond for the amount of the deposit, and will not affect most landlords.

If you know where you will place the security deposit at the time you prepare the lease, it is wise to include this notification in the lease.

If you move the security deposit at any time, you should notify the tenant immediately in writing of the new location.

When must the deposit be returned?

The landlord must return the deposit to the tenant within thirty days after the end of the rental period. If the landlord deducts from the deposit for damage to the property, or for unpaid rent, those charges must be described to the tenant in writing, and the writing (also referred to as an accounting) plus any portion of the deposit still due to the tenant must be delivered within that same thirty-day period.

If the extent of the landlord's claim against the security deposit cannot be determined within 30 days, the landlord shall provide the tenant with an interim accounting no later than 30 days after termination of the tenancy and delivery of possession of the premises to the landlord and shall provide a final accounting within 60 days after termination of the tenancy and delivery of possession of the premises to the landlord.


What deductions can the landlord make from the security deposit?

You may only take deductions from the security deposit for: the tenant's nonpayment of rent and costs for water or sewer services; damage to the premises beyond reasonable wear and tear; nonfulfillment of rental period; any unpaid bills that become a lien against the demised property due to the tenant's occupancy; costs of re-renting the premises after breach by the tenant; costs of removal and storage of tenant's property after a summary ejectment proceeding; or court costs in connection with terminating a tenancy.

Additionally, it should go without saying but, you can only deduct your actual damages, and you should keep receipts to substantiate your deductions in case you are sued by the tenant.

What if I don’t know where to send the security deposit to the tenant after he vacates the property?

If the tenant's address is unknown the landlord shall apply the deposit as permitted after a period of 30 days and the landlord shall hold the balance of the deposit for collection by the tenant for at least six months.

It is a good practice to send the deposit to the tenant via certified mail. If the mail is returned unopened put in the tenant’s file the same way. If you are later sued for failure to return the deposit you will have clear evidence that you attempted to return it.

What if I fail to comply with the act?

If the landlord fails to account for and/or refund the balance of the tenant's security deposit as required by this Article, the tenant may institute a civil action to require the accounting of and the recovery of the balance of the deposit.

The willful failure of a landlord to comply with the deposit, bond, or notice requirements of this Article shall void the landlord's right to retain any portion of the tenant's security deposit as otherwise permitted under G.S. 42-51.

In addition to other remedies, the tenant may recover damages resulting from noncompliance by the landlord; and upon a finding by the court that landlord is in willful noncompliance, the court may award attorney's fees to be taxed as part of the costs of court.

What if I sell or buy a rental property already occupied by tenants?

Within 30 days after the termination of the landlord's interest in the dwelling unit in question, the landlord shall, do one of the following acts:

(1) Transfer the portion of the deposit remaining after any lawful deductions made under this section to the landlord's successor in interest and thereafter notify the tenant by mail of such transfer and of the transferee's name and address; or
(2) Return the portion of the deposit remaining after any lawful deductions to the tenant.

Upon receipt of the deposit the purchaser must place it in a trust account with a licensed and insured bank or savings institution in North Carolina, and notify the tenant of the bank's name and address within 30 days after the beginning of the lease term.

Happy landlording!

Big Changes to Lease Options in 2010

If you, the landlord, ever offer your tenants a lease option to purchase the rental property then you should learn about this new law. The Homeowner and Homebuyer Protection Act, Senate Bill 1015 takes effect on October 1, 2010, and can be found at http://www.ncga.state.nc.us/Sessions/2009/Bills/Senate/PDF/S1015v8.pdf.

What options are affected?

The new law affects all options to purchase contained in a lease, or executed concurrently (at or near the same time) with the lease. If you offer an existing tenant an option to purchase then this law should affect you.

Are there any changes to the option contract?

The option contract is now required to be in writing and given to purchaser. Further, the option contract must be recorded by the seller at the register of deeds within five business days after signing by both parties. In the alternative, the seller can record a "Memorandum of Option Contract," which must contain the names of the parties, the signature of the parties, a description of the property, the time during which the option must be exercised, and a statement that the purchaser has the right to cure a default once every twelve months.

The option contract itself must contain:

1) full names and address of all parties to the contract;
2) the date the contract was signed by each party;
3) a legal description of the property to be conveyed subject to the option;
4) the sales price of the property;
5) all fees or payments paid by each of the parties including the option fee;
6) all duties whose breach will result in forfeiture of the option;
7) the time period during which the option may be exercised;
8) a statement of the rights of the purchaser, including the right to cure a default once during each 12 month period; and
9) a statement in at least 14 point boldface directly above the purchaser’s signature, that the purchaser has the right to cancel the option any time prior to midnight of the third business day following the signing of the option.

What happens if the purchaser defaults?

In the case of default, as stated above the purchaser has the right to cure once every 12 month period. The seller must be given at least 30 days from receipt of the notice before he is evicted or loses the option. Additionally, the seller must provide a written notice of default that advises the purchaser of:

a) the nature of the default, including the amount if the default is a failure to pay;
b) the date by which the purchaser must cure the default or the option will be forfeit; and
c) the name and address of the seller or the attorney for the seller.

The notice of default must be served by hand, sheriff, or certified mail or equivalent.

What if the purchaser does not remedy the default?

The seller must obtain and record a mutual termination executed by both the purchaser and the seller, or obtain a judgment by a judge of competent jurisdiction that terminates the option and extinguishes the purchaser’s right of redemption. The judgment must be recorded at the register of deeds as well.

After the default notice has been served, and not cured within 30 days if it is the purchaser's first default of the year, the seller may move forward to cancel the option and the purchaser's equitable right of redemption by either:

a)filing an agreement terminating the option, signed by all parties, at the register of deeds; or
b)obtaining a court order terminatng the purchaser's option, and filing the order with the register of deeds.

What if the seller defaults?

If the seller defaults on a loan secured by the property during the option period the purchaser may cancel and rescind the option contract. The seller will have to return all monies paid by the purchaser under the option, less the fair market rental value of the property while it was occupied by the purchaser and compensation for any damage to the property by the purchaser that is beyond normal wear and tear.

What are the penalties for violating the act?

A violation of this act is an unfair and deceptive trade practice subjecting the seller to treble damages and attorney’s fees, as well as equitable and declaratory relief.

Are there any other changes taking place?

YES, there are new rules governing purchases with lease backs, and installment land contracts. You should read the act in it is entirety and/or contact the writer or other competent legal counsel. In future posts I will address these other changes.

You Purchased a Property at Foreclosure and there is a Tenant in it. Now What?

So, you have bought a property in foreclosure and you find there is a tenant living there that you would prefer did not live there. Maybe you didn't do as much due diligence on the property as you should have, or maybe the tenant is paying under market value for the property. Whatever the reason you want him, her or them out.

The rules governing what you need to do to remove this tenant changed last year under the The Protecting Tenants at Foreclosure Act of 2009 (PTFA), part of the Helping Families Save Their Homes Act of 2009 (Public Law 111-22, approved May 20, 2009).

Does the PTFA affect all residential rental property?

The act applies to "a federally-related mortgage loan or any dwelling or residential real property after the date of enactment of this title. . ."

Does it affect all tenants?

Only "bona fide" tenants are protected by the PTFA. A bona fide tenant:
a) has a lease that was entered into before the Notice of Foreclosure;
b) who is not the mortgagor, their child, spouse or parent;
c) whose lease was an arm's length transaction; and
d) has a lease that is not substantially less than fair market value.

So it affects most properties and most tenants, what do I have to do to comply?

If new owner does not intend to personally occupy the dwelling, he may give the tenant 90 days written notice to quit the property, unless the tenant is under a lease that does not expire within 90 days from the notice, then the tenant is entitled to remain through the end of their lease.

If the new owner intends to occupy the rental unit, then it does not matter whether there is an unexpired lease term. The new owner must simply terminate the lease immediately and give the tenant 90 days written notice to vacate.

What if the tenant doesn't vacate?
If the tenant does not vacate at the expiration of the 90 days you will need to file a summary ejectment action just as you would for any tenant holdover. The landlord should be able to sue the tenant for rent during the time that you held the property, but that is a topic for another post.

Additionally, the act was scheduled to sunset on December 31, 2012, but was extended 2 years to December 31, 2014 by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Bed Bugs!!!!!!!!!!!!!!!

Bed bugs have made a resurgence all over the world and North Carolina has not been immune. This is not a problem that any property owner or manager should take lying down. Below I am posting an e-mail from the Wake County Government about an upcoming Bed Bug informational meeting they are having on October 6, 2010

From: Carla.Piedrahita@wakegov.com [mailto:Carla.Piedrahita@wakegov.com]
Subject: Bed Bug Interest Meeting - October 6 - Please RSVP


Wake County Government has observed an increase in the
number of reports of bed bugs in the community. While
bed bugs do not transmit disease, they can severely
impact the quality of life of our citizens. Reported
cases of bed bugs seem to be on the rise, but we still
believe there is an opportunity to develop education and
outreach programs and services that can serve as
valuable resources to our citizens to address this problem.

On Wednesday, October 6, 2010, from 10 am until noon, Wake
County Government will host a meeting of concerned parties
to discuss the issue of bed bugs in our community. The
meeting will be held in the Boardroom (344) of the Health
Department, located at 10 Sunnybrook Rd in Raleigh (next to
WakeMed Hospital). We would like to use the meeting to
review and discuss information regarding the current degree
of bed bug infestation in the community, public health concerns
associated with bed bugs, programs and services that are
currently available to citizens to address bed bugs, methods
and techniques used to eliminate bed bugs, current research on
bed bugs, and lessons learned from other communities. At the
conclusion of the meeting, it is anticipated that a series of
follow up meetings will be scheduled as part of a plan of work
to develop bed-bug related education and outreach programs and
services for our citizens.

We are looking forward to meeting you on October 6th. Please
RSVP to Carla Piedrahita by replying to this e-mail. If you
are unable to make the meeting, or if there is another person
from your office that would be more appropriate, feel free to
send a representative. Please don't hesitate to call if you
have any questions in the meantime.

Thanks for your interest in attending this meeting.

Tommy Esqueda
Director
Wake County Environmental Services

Carla Piedrahita
Health Educator
Communicable Disease Program
Wake County Human Services
10 Sunnybrook Rd., PO Box 14049
Raleigh, NC 27620-4049
919-250-3891


E-mail correspondence to and from this address is subject to
the North Carolina Public Records Act and may be disclosed to
third parties unless made confidential under applicable law.

I Need to Evict a Tenant. If I Sue Will I Get a Money Judgment, Possession, or Both?

In North Carolina a landlord or property manager seeking eviction has the option of choosing to obtain both a money judgment and a judgment for possession or just a judgment for possession, pursuant to N.S.G.S. 42-28. Although it seems that you would want to get both remedies at the same time, this is often not the case

I will start with the reasons why you would not want to get both a judgment for possession and money damages at the same time.

1) You may only be able to sue a tenant for money damages once, and you will only be allowed to sue for damages through the date of trial. Lawyers like to say, "you only get one bite at the apple." You probably will not know the full extent of your money damages until you have obtained possession and access to the rental unit, or possibly until you re-let the unit or the lease expires.

2) You must personally serve the tenant(s), or the tenant must appear in court for a money judgment, but you can serve the tenant(s) by posting the summons and complaint on the property in a judgment for eviction, pursuant to N.C.G.S. 42-29. Generally, you want an eviction action to proceed as quickly as possible so that you can cut your losses and move on. If you have trouble locating the tenant(s) this could delay your action.

3) If you are suing in Small Claims Court, your damages are limited to $5,000.00. Hopefully, your damages will not exceed this amount, especially because you should be holding a security deposit, but the damages can add up quickly.

Reasons to sue for both a money judgment and possession of the rental unit at the same time:

1) You may only need to appear at court one time.

2) You will not have to wait to begin collecting on your money judgment.

3) You may have difficulty locating the tenant after they have been removed from your property.

4) The tenant may be more likely to make payment arrangements if they realize they are facing a money judgment together with the eviction.

Different landlords and property managers will have their own preferences. The important thing is that you make an informed decision and don’t unnecessarily discard your rights.

What Every Property Management Professional Should Know!

For the inaugural post to this first property management blog on North Carolina law I drew from my decade of experience in property management and landlord/tenant law to find the most important piece of information I could impart.

By far the most important thing I can tell you is to learn everything possible about this business, and there is a lot to learn. The more knowledge you have, the less costly mistakes you will make, and the more likely you will have a good (profitable) experience.

How do you do this though?

First, it is necessary to surround yourself with knowledgeable people. You will ideally want your professional support (accountants, attorneys, realtors, and contractors) to have property management experience. If you pay attention you will learn a lot from these people. If they are doing something you don't understand ask them, it may save you some money the next time.

Next (or possibly first if you are not already a property owner) you should join a real estate organization that focuses, at least in part, on property management issues. There is a lot you can get out of these organizations, and for the price they are a great value.

Now that you have joined a property management organization, you will be surrounded by people dealing with the same problems you are, and hopefully a few that have already dealt with those problems. Also, many landlord organizations have frequent educational opportunities and offer monthly publications on both fundamental and cutting edge issues. Some of these organizations in central North Carolina are the Triangle Apartment Owner's Association (a division of the National Apartment Association), the Wake County Apartment Association, and the Triangle Real Estate Investors Association (a division of the National Real Estate Investors Association). Usually these groups have monthly meetings most of the year, and often they will have sub-groups depending on your property types or goals. In addition to the educational opportunities there will also frequently be investing opportunities and vendor discounts will be worth the price of your membership.

These groups may be contacted as follows: Triangle Apartment Association- http://www.triangleaptassn.org/; Triangle Real Estate Investors Association- http://treia.com/; and Wake County Apartment Association- http://www.thewcaa.com.

In future posts we will deal with the entire range of issues and developments affecting property management in North Carolina, from the most basic issues to the most advanced. I hope to hear from you regarding questions you may have or things that have happened to you that you think other readers will benefit from.