L.A. Soft Story Ordinance and Implications for Condominium/Apartment Owners

Written by Apartment Management Magazine on . Posted in Blog

By: Dilip Khatri, PhD, SE | Principal Khatri International Inc.

earthquake property

Los Angeles is on the “Ring of Fire”.  The Ring of Fire circles the perimeter of the Pacific Ocean refers to areas of the high seismic activity because of multiple tectonic plates that have been moving/grinding against each other for millions of years.  It’s no surprise that we are in the center of seismic activity with total unpredictability.  The Earthquake risk element affects every aspect of life in Southern California, most notably our buildings where we live, work, and entertain, because it poses a threat to our very existence.

The Soft Story Ordinance, passed by the City of Los Angeles in 2016, encompasses residential and commercial buildings (4 or more units) that have a weak story line which leads to potential catastrophic circumstances:  The entire upper level may collapse on the weak first story.  In order to minimize this structural calamity, the Soft Story Ordinance requires building owners to upgrade/fix/enhance their buildings to reduce this risk.

Khatri_Figure1

Figure 1

Figure 1 demonstrates this principle and shows the collapse mechanism.  It’s no different from having a heavy object on “stilts”.  A lateral force applied to the upper floors will cause the structure to tip over.  The objective of the Ordinance is not to save the building/property.  Rather, the prime and single goal is to save the People inside the building.  Many property owners don’t realize this objective, and its important to be clear that the Ordinance is not trying to save property values, it’s main object is Life Safety.

The L.A. Ordinance officially affects approximately 14,000 buildings but that number is changing because new buildings are being added to the list, and other Cities in Los Angeles County are decidedly passing similar Ordinances.

Khatri_Figure2

Figure 2

There are several engineering options available to resolve this dangerous condition.  At least five repair options are to be considered:

  • New Steel Moment Frames
  • Strengthening existing Steel Moment Frames
  • Strengthening existing Wood Shear Walls
  • New Wood Shear Walls
  • New Steel Flagpole Columns

Figures 2 and 3 show a few schematics of a Steel Moment Frame and Wood Shear Wall.
My advice to owners is to look at each of these options and evaluate the “best choice” from an economic feasibility standpoint.

Khatri_Figure3

Figure 3

Each property is unique and requires personal attention of a structural engineer and contractor. It’s definitely not a “one size fits all” scenario.  Look around, shop around, and do some diligence before you commit to a specific solution/vendor approach.  The time lines for compliance are 7 Years from the date of notice, 2 Years for plans and permits.  If you are interested to learn more about the Soft Story Ordinance, this author has produced an online video for your reference: https://vimeo.com/194302379

Dr. Khatri has 31 years of civil engineering experience involving land development, subdivision, commercial, residential, multi-family, industrial, and educational facilities. Design, construction, and overall management of major infrastructure improvements comprising sewer, water, storm drain, flood control, and grading design.

Why Senior Citizens Should Consider their Financial Planning Options

Written by Apartment Management Magazine on . Posted in Blog

By Jess Walter

retirement

The idea of retirement often conjures up scenes of golden sunsets spent on a porch in California. The days flow by and there is not a care in the world, apart from ensuring that the cookies come out of the oven on time. This may seem like the ideal scenario, however, there is a slightly darker side to retirement that people are loathe to consider. The inevitability of death always weighs heavily on the minds of those who have reached a mature age, and provision for loved ones needs to be considered.

Seniors and Debt – What You Need to Know

Going into retirement without debt used to be the norm, but with the changes in the economy and the ease of obtaining debt, many seniors now have to face their golden years with debt repayments looming overhead. Although there are age restrictions on many types of debt, retirement often occurs before the age cut-off. Seniors are faced with steep monthly expenditures without the corresponding higher income that they’re used to. Furthermore, mounting costs in terms of healthcare often necessitate incurring further debt.

Property Still Remains a Worthwhile Investment

After the 2008 economic crisis, property markets experienced spates of volatility. Purchasing a home has its advantages and affords the owner more flexibility and security than a rental. With this in mind, it’s important to understand that the obligation of the repayment will still continue in the event of an owner’s death. The debt will form part of the estate, and if the remaining spouse is unable to meet the obligations of the loan, they may lose their home. Furthermore, property happens to be an asset in the estate as well, which provides a legacy for the heirs.

Creating a Legacy

Apart from the inherent risks that debt poses for senior citizens, there is also the desire to leave a legacy for their children. Those who are unable to provide a legacy for their children with their assets have the option to take out certain life insurance policies to cover this wish.

Furthermore, investments and assets often form part of the estate, whereas insurances have the option to pay out to the beneficiary directly. This reduces the liability on the estate, which provides heirs with a tax-free inheritance. That discussion with a financial adviser can be the difference between a healthy or insolvent estate.

Jess Walter  is a freelance writer and mother. She loves the freedom that comes with freelance life and the additional time it means she gets to spend with her family and pets.

INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH

Written by Apartment Management Magazine on . Posted in Blog

IPMExpo_Blue Stacked LogoINCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH  

Surviving California’s Hostile Business Environment, The Soft Story Ordinance,
Property Taxes, Legal Issues & Other Seminars – Admission is Free

ExpoPhotos_PressReleasePASADENA (March 3) — Commercial and residential property owners, managers and investors can learn what’s new in financing, strategies and products at the 5th Annual Income Property Expo at Pasadena Convention Center, 300 E. Green Street, Pasadena, CA 91101 on March 14, from 9:00 a.m. to 4:00 p.m. Admission is free.

“This event offers experts, resources and strategies for cost-effective management and maintenance of rental, multifamily and commercial properties,” said Paul Smith, producer. Howard Jarvis Taxpayers Assoc. president Jon Coupal will discuss surviving the hostile business environment, plus experts seminars on the seismic retrofit ordinance, market analysis, rent control, landlord/tenant and property law and more will be held including:

  • Kathy Fettke, Real Wealth Network
  • Jon Coupal, Howard Jarvis Taxpayers Association
  • Dilip Khatri, PhD, P.E., S.E., Khatri International Structural & Civil Engineers
  • Robert “Rusty” Tweed, Tweed Financial Services
  • Tony Watson, Robert Hall & Associates
  • Elizabeth Harris, Exeter 1031 Exchange Services, LLC
  • Dennis P. Block, Law Firm of Dennis P. Block & Associates
  • Gene Guarino, Residential Assisted Living Academy
  • Steven Duringer, Duringer Law Firm
  • Brian Gordon & Vince Medina, Lotus Property Services, Inc.
  • Mike Brennan, Brennan Law Firm

Nearly 100 vendors will showcase the latest in building products, services, materials, energy systems and maintenance. The expo also features all-day networking with industry professionals and sponsors including Apartment Management Magazine, Real Wealth Network, Chase Bank, Robert Hall & Associates, Exeter 1031 Exchange, Duringer Law Group, Tweed Financial Services, Khatri Structural and Civil Engineers, Provident Bank, HD Supply, CIC Tenant Screening, and The Howard Jarvis Taxpayers Association.

Admission is free. Seminar seating is limited. For information, please contact Jordan Smith at (800) 931-6666
or email RSVP@IPMEXPO.com. Pre-register at www.incomepropertyexpo.com.

RED FLAG WARNING for Commercial Property Owners – a $45B Problem

Written by Apartment Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com
Commercial Building

This may be the year that billions of dollars in commercial mortgages go belly up. These loans were financed in 2007 and are maturing this year. That means some commercial property owners will be faced with huge balloon payments and for some, a major headache to pay them off.

The Federal Reserve stated in its semiannual Monetary Policy Report to Congress on Tuesday that commercial property prices were becoming a “growing concern.”

Specifically, the report said, “”Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels,”

While commercial property debt remains small compared to the overall economy the report said that the rising “valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.”

According to Reuters, commercial real estate loans by U.S. banks surpassed their pre-financial crisis levels in September 2015, and at last reading for January stood at a record $1.97 trillion. Small banks hold nearly two-thirds of that total, some $1.22 trillion.

Commercial property values in the U.S. have more than doubled from their 2009 low, according to Green Street Advisors’ Commercial Property Price Index. Things started slow down in 2016, with just a 3% rise in values.

And this all comes at a time when there’s also a concern about a tidal wave of commercial loans that will come due this year. Lending standards in 2007 were lax and real estate investors jumped in with both feet, taking on huge amounts of debt in that red-hot market. Back then it was difficult to see anything but skyrocketing real estate market.

Then, the impossible happened. The residential real estate bubble burst, and property valuations plummeted back to earth, and even below the water line. We know now that many homeowners lost their property because they couldn’t make the payments or because banks simply failed.

This is the year we could begin to see the same fall-out on their commercial loans.

While commercial property in the most populated metro areas like New York City and San Francisco are seeing record high prices for real property,  the real-estate recovery has been a little lopsided.

There are many U.S. markets where valuations have not caught up yet. It’s those landlords who might have trouble refinancing their monster balloon payments, and if they can’t refinance because they are underwater on the loans, they might have to sell at a loss.

Bloomberg says that prices for suburban office buildings are still 4.8% below their peak compared to Manhatten skyscrapers that have surged 50% higher than they were at their previous peak. So when it comes time to refinance loans for buildings that aren’t worth as much, lenders may want landlords to cough up the difference… and that may not be easy to do.

Borrowers may also have to pay higher interest rates, or they may run into lenders who are now pickier about what the buildings they are willing to finance. Bloomberg writes that lenders may not be eager to finance retail properties, especially malls, as e-commerce takes a bite out of their sales.

Lenders may also have to retain a 5% stake in any loans they make to comply with the risk retention rule under the Dodd-Frank Act. That prevents them from making risky loans and selling 100% of the risk. It also makes banks more selective about the loans they grant.

The fate of the Dodd-Frank Act is uncertain however. President Trump has signed an executive order to begin the unraveling of those regulations and the risk retention rule is sure to be reviewed. But those changes won’t happen over night and maybe not in time.

So just how hard will commercial property owners get hit?

Bloomberg says the delinquency rate is expected to hit 5.75% this year,  after several years of declines. Because these mortgages are packed into bonds, there could be more bondholder losses as well.

According to Bloomberg, banks sold $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. But not all of them are maturing this year because many have already been refinanced or the properties sold. Property owners with less desirable properties and weak financials have already defaulted.

Using data from Morningstar, Bloomberg says the amount of debt that will actually come due this year now stands at about $90 billion dollars. From there, Morningstar is estimating about “half” of those remaining loans will run into refinancing roadblocks!

For people faced with this situation, it’s critical to have a back-up plan. You shouldn’t wait until the last minute or you might end up losing your property. It’s best to start working now on refinancing, or selling the property before you run out of time.

If you are looking for commercial investments, be careful about paying too much and accepting low cap rates. If you just wait a bit, you could find much better deals.

And all this is happening just as the economy is in a major shift. Baby boomers are turning 65 at a clip of 10,000 per day. Their spending habits will change and that will affect commercial property. Plus, technology and innovation is quickly making some industries obsolete practically overnight.

A commercial builder asked me if we’d like to finance the construction of an auto dealership in Sacramento, “because the auto industry has been booming.”

After researching it a bit, I told him that yes, it has been booming, but only because of easy financing. But this is the year that many leases will be returned to car dealers and we could very well see a huge glut in cars for sale. My daughter needs a new car and I told her to wait just a bit longer as we could see some steep discounts this summer.

Never base your decisions on the way things have been. In 2005, Fed Chair Ben Bernanke said, ”We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize…”

Bernanke was dead wrong, and made the fatal mistake of not taking into consideration massive debts from easy lending that couldn’t be repaid. We are seeing some of the same debt issues today, just not in residential mortgages.

We expect to see some bargains in the commercial property world over the coming year. If you’d like to be first to know about those, join the network to get on the VIP investor list.  www.RealWealthNetwork.com

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

Is Your Toolbox Equipped For You To Be A Successful Leasing Professional? 

Written by Apartment Management Magazine on . Posted in Blog

By Elaine Simpson, President of Occupancy Solutions, LLC

property manager success

Set yourself up for leasing success  by making a resolution to consistently use these basic leasing tools.  If you put all of them in your leasing toolbox and use them regularly and properly, they will lead you to success!

The Tour Path

As they say, “put your best foot forward”.  After making sure the office entrance and office look inviting, are clean and in order for the day, take the time to preview the path on which you  will take your prospects while touring and demonstrating why your community is perfect for them.  Be sure to pick up any trash or cigarette butts along your route.  While walking your tour path, be sure to take notes of maintenance or other issues that must be addressed to make your tour route look its best so you can impress your prospect.

Models and Vacant Market Ready Apartments

Preview the apartments that you will be showing. Create  a “sparkle kit” of basic cleaning supplies to carry with you so you can clean a mirror, dust a shelf, pick up a dead bug, change a light bulb, etc.  Include furniture markers to touch up scratches and scuffs on the model furniture.  All the interior lights in the apartment should be on.  Set the thermostat to the proper temperature for the day.  Turn on the radio and open the blinds.

Leasing Binder

We love to use Leasing Binders to hold and organize our paperwork.  Leasing binders are generally 3-ring notebooks with tab dividers and pockets to hold: availability list; product knowledge; marketing materials including brochures, floor plans, photos and current flyers; market surveys so that you can educate your prospects regarding the competition (remember not to gossip but speak factually about what they offer or don’t offer); guest cards; applications; business cards; calculator; tape measure.  Also use page protectors to keep the documents and pages looking clean and crisp.

Product Knowledge Notebook

Make this section of your binder a place to keep all of the information that you can find about the physical asset:  year built, number of acres,  type of zoning, number of units, unit mix, type of construction, type of insulation, floor plans, room dimensions, window sizes, carpet and flooring colors, lists of upgrades, etc.

List of Competitive Advantages

Make a list of the things that set you apart from your competition to help you sell against them.  This list can help you when overcoming objections.

Telephone Call Log

Everyone in the office should be logging their telephone calls.  It will capture how many calls were answered by a person during business hours.  The data will also illustrate which days and times of day are the busiest.  Many people just hang up and won’t leave a message when they hear a voice message so try to answer every call in person.

Terrific Telephone Techniques

The goal is to give and receive as much information as possible in an organized way in very little time in a polite and professional manner that leads to an appointment to visit the community or a lease over the phone.  You can create your own leasing script.  We don’t want you to sound like a robot, but if you follow along with a script you won’t forget to ask important questions and to give each caller a brief description of the apartment interior and community amenities, invite them to tour and set up an appointment.  You should ask for each caller’s name at the beginning of the call and use it during your conversation to personalize the call.  Find out how each caller heard about your community so you can track what advertising sources are working and which ones are not working for you.  Your list of questions should also include: Desired floorplan? How soon needed? Number of occupants? Pets? Length of lease? Why moving? Your description should include: feature/benefits of apartment interiors; community amenities; utility information; deposits and fees; invitation to visit; location and office hours; directions if needed; instructions on how to apply, etc.

Ear Appealing Descriptions and Words to Avoid

Each leasing consultant should take the time to write out a description of each floor plan within the community and then practice verbally  using those descriptions for their presentations whether over the phone, on line or in person.  Think of your own “ear appealing” words to use in your descriptions.  Examples:  exceptional, unique, charming, cleverly designed,  stylish, etc.  Avoid using industry words.  Replace complex, property, site and unit with community and apartment or home.

Proper In-Person Greeting

Stand up to greet each prospect.  Look them in the eye, extend your arm to offer a firm handshake, verbally introduce yourself and welcome them to your community.

Guest Cards

Whether you use printed or computer guest cards, best practice is to fill out the guest cards for your prospects instead of asking them to do it.  You can ask questions and make notes while making conversation.  Record their “hot” buttons and note what is really important to them in finding their next home.  These notes will help you later during your presentation, tour and closing.

Product Demonstration

We suggest you show your selected vacant apartment(s) before showing your model(s).  This helps prospects envision their own furniture being placed in their new home. Use the information from your guest card and point out the features and benefits you already know will interest them.  Take this time to build rapport and start closing the sale.

Closing Techniques

There are several ways to approach closing the sale.  You can set the stage for closing when you first speak to a prospect on the phone or at the beginning of an office visit before you ever leave the office by asking two key questions:  1.  What other options are you considering?  2.  If you see something you like, are you prepared to lease today?  This will start the dialog you need to work your magic.

Fantastic Follow Up

It is a little old fashioned, but we suggest the use of a “tickler box” in your leasing office to keep track of ALL leads from ALL employees so constant, progressive follow up can be done with each prospect until they tell you that they have leased somewhere else or to stop contacting them.

Elaine Simpson, owner of Occupancy Solutions, offers awesome in-person training sessions on this property management topic and many others in addition to e-learning courses and webinars.  She can be reached at (800)  865-0948  or www.occupancysolutions.com.

How To Dodge A Tax Hit When Selling Rental Property By Making The Right Move, Sellers Can Sidestep The Capital Gains Tax

Written by Apartment Management Magazine on . Posted in Blog

By: Dwight Kay

Tax - scrabble blocks

The life of a landlord certainly isn’t easy.

There are plumbing issues that eat into time and money. There are tenants who fail to pay the rent. There are broken leases and leaky roofs.And the hassles don’t even end when the beleaguered landlord finally decides to sell the property. After the deal closes, the Internal Revenue Service is waiting in the wings to collect a capital gains tax on the profits from the sale.

“Depending on your situation that can definitely end up being a significant hit when tax time arrives,” says Dwight Kay, founder and CEO of Kay Properties and Investments (www.kpi1031.com).
But Kay says with the right planning those landlords – and anyone who sells commercial property – can sidestep paying the capital gains tax.

Here’s how: When they sell their property, they can invest the proceeds in what is referred to as “like-kind” property using Section 1031 of the Internal Revenue Code. Essentially, they are exchanging one piece of commercial property for another, but hopefully one that better meets their needs, Kay says.

“A landlord who decides he’s tired of all the work he has to put in on his rental property could use the exchange to get an income-producing property where someone else is dealing with all the problems,” he says.

All types of commercial properties can be considered “like-kind,” including apartment buildings, vacant land, farmland, office buildings and warehouses among other properties.
One drawback is that the seller has just 45 days to identify what property they are going to exchange into. It’s not always easy to find 1031 exchanges quickly, but there’s also a solution to that, Kay says.

If the seller qualifies as an accredited investor, which is generally defined as an investor with a net worth of greater than $1 million dollars excluding their primary residence, the seller can potentially invest in Delaware Statutory Trust properties. A Delaware Statutory Trust (DST) is a trust that lets investors buy an interest in commercial property, but managing the property is left to professional asset managers. Because Delaware Statutory Trust properties are pre-packaged for 1031 exchange investors, they provide a viable solution for those concerned about meeting that 45-day deadline.

Also, despite the name, the property doesn’t have to be in Delaware. Kay, for example, says his Los Angeles and New York City-based company works with clients and properties in all 50 states. Kay goes on to say, “A Delaware Statutory Trust property could be a property that has a long term lease with Costco or Walgreens or it could be a 200 unit apartment community built in 2014 and located in Denver, Colorado. Investors are able to invest as little as $100,000 into each DST thereby creating a diversified portfolio for there 1031 exchange.”

Kay says there a several potential benefits for investors. Here are just a few:

Eliminating the day-to-day headaches of property management. The Delaware Statutory Trust 1031 property provides a passive ownership structure, allowing the investor to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more passionate about instead of property management.

Increased cash flow potential. Many investors are receiving a lower amount of cash flow on their current properties than they potentially could be, Kay says. That might be because their properties have under-market rents or multiple vacancies. It could be that they have raw or vacant land that is sitting idle. These Delaware Statutory Trust exchange properties provide an opportunity for investors to potentially increase their cash flow on their real estate holdings.
Portfolio diversification. Often times, 1031 investors are selling a property that comprises a substantial amount of their net worth. They want to reduce their potential risk and instead of buying one property they decide that investing into a diversified portfolio of Delaware State Trust properties is a better fit for their goals and objectives.

Dwight Kay

CEO and Founder

Dwight Kay is the Founder and CEO of Kay Properties and Investments, LLC (Kay Properties). Kay Properties is a provider of DST brokerage and advisory services headquartered in Los Angeles, CA with an office in New York, NY. Registered Representatives at Kay Properties and Investments specialize in helping 1031 exchange clients throughout the country purchase DST properties and are securities licensed in all 50 states, Washington D.C. and the U.S. Virgin Islands. Mr. Kay has personally been involved in over $200,000,000 of client purchases of DST properties and other securitized real estate products.

kpi-real-estate-investment-3d_smallDwight is a published author with multiple published white papers and articles on 1031 exchanges, Delaware Statutory Trust (DST) properties and real estate securities. He has been interviewed on local and nationally syndicated radio stations on the matters of 1031 exchanges and replacement properties. He also is the author of the published book “Delaware Statutory Trust (DST) Properties: An Introduction to DST Properties for 1031 Exchange Investors.”

Dwight began his career in commercial real estate working for a national commercial real estate brokerage firm focusing on multifamily and commercial real estate. Mr. Kay received his Bachelors in Business Administration from Point Loma Nazarene University in San Diego, California, and successfully obtained his Series 7, 22, and 63 securities licenses as well as a real estate broker’s license.

Risks & Disclosures

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. 303-962-7267.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

Taxes, Fees, Charges and Assessments: What Difference Does It Make?

Written by Apartment Management Magazine on . Posted in Blog

By Jon Coupal

taxes

What’s the difference between a tax and fee? There is no easy answer and the political class likes it that way. In fact, they would prefer that the public remain confused to the point of apathy.

The political class, of course, consists of elected officials, bureaucrats and their special interest allies who are to the Capitol what insider traders are to Wall Street. Working in lockstep, their approach to increasing the take from taxpayers was best outlined by Jean Baptiste Colbert, Minister of Finance under Louis XIV of France: The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.

But taxpayers are not defenseless because they have approved three constitutional amendments defining – and limiting – taxes and fees. These include Propositions 13 (1978), Proposition 218 (1996) also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which provides comprehensive definitions of taxes and fees. All three provide effective weapons against an insatiable government ever in search of more revenue.

However, to protect themselves, taxpayers must be knowledgeable, alert and ready to fearlessly protect and exercise their rights.

Therefore, while most taxpayers don’t have a law degree, here are some basics about the difference between a “tax” and a “fee.” There are very few legal limitations on “taxes.” About the only way a tax could be unconstitutional is if it impaired a fundamental right (a “poll” tax on the right to vote) or if it singled out some group for discriminatory purposes. But fees are different. A fee is a charge for something that confers a benefit to the fee-payer that is not available to those who do not pay the fee. A classic example is a charge for entering a state campground.

Until the passage of Proposition 26 in 2010, the legislature could approve fees with a simple majority vote. But in 2011, the Legislature approved, with a simple majority, charging 850,000 rural homeowners an annual “fire fee” of $150. The “fee” was not accompanied by any additional benefit or service, clearly making it a tax requiring a two-thirds vote of the Legislature. This issue is currently being litigated by taxpayers, but it is a classic example of the dishonest ends to which tax raisers are willing to go to wring ever more money from taxpayers.

Moreover, the political class has a habit of pursuing taxes that are not apparent to the general public. Almost any tax on business fits into this category. As Howard Jarvis liked to say, businesses do not pay taxes, “we do.”

As part of Obamacare, the federal government imposed a tax scheme designed to stop employers from offering top quality health plans. Backers of the Affordable Care Act included a 40 percent tax on providers of what were derisively described as “Cadillac” plans.  As these plans disappear, the uninformed will assume that it is their employer who is responsible, when, in fact, it is government.

Here, in California, a major hidden tax is cap-and-trade legislation, not approved with a two-thirds vote, that compels companies to buy carbon credits. Of course, these costs are passed on and drivers feel the impact every time they fill up with gasoline that costs, by the most conservative estimates, an additional 12 cents per gallon with more increases on the horizon. Unaware of the impact of cap-and-trade, many motorists may mistakenly assume that the high cost of gas is entirely due to the petroleum companies.

This is why taxpayers are closely watching a case just argued before the Sacramento appeals court, where opponents argue that cap-and-trade charges amount to an unconstitutional tax. The court is expected to render a decision within 90 days but, regardless of the outcome, the loser is likely to appeal to the California Supreme Court.

CoupalPubPhoto2Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.  

Property News Reports – Landlord Lessons with Kathy Fettke – Protect Yourself by Protecting Others

Written by Apartment Management Magazine on . Posted in Blog

Property News Reports provides you with the latest in Real Estate Investment Strategy, Market Analysis, Property Management Trends, Leasing Strategies & more for the Single Family, Multifamily & Commercial Real Estate Markets from leading industry experts and reliable sources.  ‘Subscribe‘ to stay informed!


Kathy specializes in teaching people how build multi-million dollar real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more about Kathy & the Real Wealth Network at http://www.RealWealthNetwork.com

Should you be Required to Accept All Emotional Support Animals?

Written by Apartment Management Magazine on . Posted in Blog

By Becky Bower

emotional support animals

The term “emotional support animal” has always produced mixed opinions, with some property managers claiming that it’s a loophole term to get applicants’ pets accepted, while others cite federal law concerning tenants with disabilities. Whether your pet policy attracts applicants out of the 79 million households that own cats and dogs or prohibits residents from having their own big red dog, California property managers might be required to allow tenants to have emotional support animals, regardless of their pet policy.

What are the Differences between Service Dogs, Psychiatric Service Dogs, and Emotional Support Animals?

Service animals are animals that are trained to help a specific individual with a disability. Some states, like California, limit service animals to dogs (and in some cases, miniature horses as well). Psychiatric service dogs are individually trained to help a person with a mental disability. Both of these service animals are trained to aid someone with a disability, whether it be pulling a wheelchair or responding to the owner’s panic attack. Emotional support animals, on the other hand, can be any type of animal and are not trained to perform a specific act that relates to an individual’s disability. These types of animals give their owners emotional relief, rather than physical relief, and unlike most service dogs, they do not need to wear any form of identification (like a vest or harness).

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In compliance with the Americans with Disabilities Act (ADA), the Fair Housing Act (FHA) requires housing providers to provide reasonable accommodation to tenants with disabilities, allowing them to “request a reasonable accommodation for any assistance animal, including an emotional support animal.” Federally funded housing (like Section 8 housing) is required to accept emotional support animals without proof.  That being said, legally, you may not request to show proof that the animal has any specialized training. This means, if a resident with a disability requests for reasonable accommodation and provides a letter legitimatizing the need for an emotional support animal, under the FHA, you legally must provide reasonable accommodation for their support animal regardless of your rental policy on pets. If you deny their request for reasonable accommodation, the resident can file a discrimination complaint with the Department of Housing and Urban Development (HUD).

Potential Legislation could require the Admittance of All Emotional Support Animals in California

Currently, it is within a property owner’s right to disallow pets on the property, and deny applicants (who are not covered under the ADA) based off of those written rental requirements. However, according to Ron Kingston of East Bay’s Rental Housing Association, that might change. Their online magazine, Rental Housing (issue Dec. 2016, page 22), illuminates that California’s Department of Fair Employment and Housing (DFEH) is currently proposing “broad new regulations requiring rental property owners to allow tenants to have ‘emotional support animals’ of all breeds and types to live with them in their units.” While (as said above) federal regulations require residents to request reasonable accommodations for support animals, Ron Kingston argues that the DFEH’s proposal is too broad and gives property managers limited authority to “deny a support animal request when the animal poses a threat to health and safety of other tenants, and to the property.”

As the transportation industry has enabled service and emotional support animals to fly on airlines for free and an increase in emotional support animals on airlines has been present, the validity of emotional support animals has come into question. Brian Skewis, California State Board of Guide Dogs for the Blind executive officer, has previously stated that he has found a “misuse” of the service dog law in airports. While Sacramento International Airport spokesman, Mark Haneke, has said that he is not aware of a false service dog problem, it puts into question whether or not significant misuse could be present in rentals.

Big cities like Los Angeles (which has the highest percentage of renters) have been facing a pet-housing shortage for a long time. Early last year, the City of Los Angeles even stated that they’ll start creating pet-friendly housing legislation to combat the 22.6% of dogs and 18.6% of cats that are surrendered to animal shelters due to pet restrictions. While no legislation has been passed since this statement, with misuse, the DFEH’s proposition could inadvertently cause rentals to become pet-friendly to avoid a discrimination case.

Although the California proposition has yet to be released in full detail (be sure to subscribe for updates), its broad nature would limit Californian property owner’s rights. While it might positively affect the pet-housing shortage in large cities, federal regulations already protect the resident’s right to request reasonable accommodation that allows emotional support animals. If these rights are already protected, the big question is what does this law really do?

Regardless of whether your community is pet-friendly or has a strict no-pet policy, make sure your online application has space to provide additional information (like about service animals or pets) and that you perform thorough screening of all your applicants. Just because an applicant doesn’t come with a furry friend in tow, doesn’t mean they’re a perfect fit for your community.

Becky 201509 Becky Bower is a writer for the ApplyConnect® Blog and the communications executive at ApplyConnect®, a consumer initiated tenant screening company.  She has also spent several years in compliance and auditing.  Becky holds a degree in English with a focus in creative writing from CSU Channel Islands and is a published writer.

2017 Rental Housing Legislative Changes

Written by Apartment Management Magazine on . Posted in Blog

By Becky Bower

legal-update

From new laws that will affect California’s tenant background check to Seattle, Washington’s “first come, first served” renter law, 2017 has brought an onslaught of new rental housing legislation. Here are some passed and pending bills you should look out for this year.

NATIONWIDE LEGISLATION

PENDING: HUD’s Smoke-Free Public Housing (view rule)

The department of Housing and Urban Development (HUD) has proposed a rule that requires each public housing authority (PHA) to implement a smoke-free policy. This smoke-free policy applies to all public housing living units, indoor common areas, PHA administrative buildings, and in outdoor areas extending up to 25 feet from both the public housing and office buildings. This rule is currently up for comment until January 19th, 2017. Once this rule is published with the Federal Register and the effective date is established, all PHAs must implement the smoke-free policy within 18 months.

The National Consumer Assistance Plan (read our full article)

Announced in September of 2016, the three major credit bureaus will be enacting the National Consumer Assistance Plan to new and existing public record data on July 1, 2017. Experian® anticipates that the new standards will likely affect about 96% of civil judgement data, making getting a tenant screening service that includes eviction data even more imperative.

CALIFORNIA

Landlord/Tenant Unlawful Detainer Proceedings (AB 2819)

There will be no public access to unlawful detainer (eviction) records, unless the plaintiff/landlord prevails within 60 days of filing. The previous law had the defendant/tenant required to prevail within 60 days to bar public access. This goes into effect, January 1, 2017.

Pesticide Application in Common Interest Developments (AB 2362)

Homeowner associations in common interest developments must now provide tenants advance written notice when over-the-counter pesticides are applied to separate interest dwellings or common areas. Notice must be provided at least 48 hours before application, however, if the pests pose a high and immediate threat, notification can be posted one hour before pesticides are applied.

Landlord/Tenant Bedbugs Disclosure (AB 551)

This amendment requires landlords to give information about bed bugs (as specified) to new tenants starting July 1, 2017 and for existing tenants starting January 1, 2018. Notice must also be given to tenants of units inspected by a pest control operator and provide the findings within 2 business days. This bill also prohibits landlords from showing, renting, or leasing a vacancy that the landlord knows has a bed bug infestation. By law, tenants must cooperate with bed bug inspections, permitting entry into the unit by the pest control operator.

Landlord/Tenant Commercial Leasing Disclosure (AB 2093)

Requires property owner(s) or lessor to state on every lease form on or after January 1, 2017 whether or not the premises have been inspected by a Certified Access Specialist (CASp). The landlord must provide tenants with a current disability access inspection certificate or report, or a copy of the CASp inspection report if the report indicates that they meet applicable disability standards. If the property does not have a disability access inspection certificate, then the lease form or rental agreement must state that, on the request of the tenant, a CASp inspection may be performed (as specified). Landlords are responsible for making repairs or modifications to correct violations of construction-related accessibility standards.

Amendments on Accessory (Second) Dwellings (AB 2299 and SB 1069)

Effective as of January 1, 2017, these two bills revise the zoning restrictions on second dwellings, allowing the creation of 2nd units in single-family and multifamily residential zones (with specified provisions regarding where the 2nd unit may be located, standards, etc.).  In addition to changing the term from “second unit” to “accessory dwelling units”, AB 2299, in particular, revises parking requirements for accessory dwellings. The previous law requires second units to not exceed one parking space per unit or bedroom, with additional authorization for more than one parking space. The amendment removes the need for additional authorization for accessory dwelling parking.

Junior Accessory Dwellings (AB 2406)

Local governments can now establish laws for the creation of junior accessory dwellings in single-family residential zones. Local governments are prohibited from requiring additional parking as a condition of granting a permit.

Removes Certain Disclosures for Transfer of Residential Property (AB 73)

This bill revises the requirements of certain disclosures that are to be made when transferring residential property. Now, the property owner, their agent, or the agent of the transferee of the property are no longer required to disclose the occurrence or manner of death of an occupant (as specified). The bill also no longer requires the disclosure that an occupant of the property was living with human immunodeficiency virus (HIV) or died from AIDS related complications.

Landscape Irrigation Equipment (AB 1928)

This bill requires new performance standards and labeling requirements for landscape irrigation equipment and would postpone the date by which the commission is to adopt the performance standards and labeling requirements to January 1, 2019, and would prohibit the sale or the offer for sale of that equipment manufactured on or after the effective date.

Water Conservation in Landscaping Act (AB 2515)

On or before January 1, 2020, and every 3 years thereafter, the Department of Water Resources are required to update the model water-efficient landscaping ordinance or find another means to improve water efficiency. This means landscaping requirements might change in the future, and continue to change every 3 years.

Becky 201509 Becky Bower is a writer for the ApplyConnect® Blog and the communications executive at ApplyConnect®, a consumer initiated tenant screening company.  She has also spent several years in compliance and auditing.  Becky holds a degree in English with a focus in creative writing from CSU Channel Islands and is a published writer.