Contributed by The Verification Company

(Editor’s Note: In the June issue of “Apartment Age Magazine,” we published an article titled “California Passes Legislation to Help Renters Establish Credit for Paying Rent” which explained the requirements imposed under Senate Bill 1157.  This article provides a solution for reporting rental payments to major credit bureaus.)

There are currently about 43 million rental housing units in the U.S. today, and it is estimated that less than 1% of rental payments being made are reported on renters’ credit reports.   Renters in historically marginalized, impoverished, and distressed communities that often can be disproportionately of color, immigrant or Native American are unable to build solid credit histories and credit scores when their largest monthly payment, the rent, is never reported to the credit bureaus.  This is contributing to a growing, new national crisis termed as “Credit Inequity.” 

Let’s start with what we know.

President Biden’s American Families Plan contains tax proposals with major implications for IRS Section 1031 like-kind exchanges. If adopted, they would land the following 1-2 punch:

1. Limit the cumulative amount of gain to $500,000 an individual ($1 million a married couple) can defer from taxation on the increased value of exchanged investment property;
2. Tax the un-deferred portion at ordinary income rates for taxpayers with adjusted gross income over $ 1 million. (This $1 million income includes the gain from the sale of the building.) The top federal rate will be 40.8%.

By Roderick Wright, California State Senator (Retired)

I understand your desire to protect the County’s renters, however, your proposal to extend the eviction moratorium gives very little consideration to smaller rental property owners.  We are small business owners and like all other businesses we deserve to receive income for the housing services that we provide.  No other business is required to give away their services or products for free, yet we have been forced to do just that because of your eviction moratorium. 

The eviction moratorium did not forgive our mortgages, income and property taxes, utilities, trash hauling fees, nor the costs of our landscaping or repairs.  The replacement, 30-gallon water heater I just installed cost $1,000, yet I am unable to collect the rent needed to pay for this and many other costs.  The County’s eviction moratorium provides no protections to me from bank foreclosures.  Many similarly situated small rental property owners in Los Angeles County are being foreclosed on today.  As we small owners are driven out of this business, the “big guys” will swoop in and buy our properties resulting in the loss of affordable units within the County. 

By Yardi Breeze

Fraud prevention is always a priority in property management, but it’s an even bigger issue now that many (or most) interactions occur online. So, how do you really know someone is who they say they are? What steps do you need to take to prevent fraud in your community? 

This article is based on a virtual session from our 2021 IRO Summit. Check out the full discussion between Paul Vengilio, owner of LVPM, and Patrick Hennessey, vice president at Yardi. They discussed some refreshingly simple ways to verify renter identify, keep technology on your side and not get bamboozled by fraudsters.

Types of fraud

There are a few common ways fraud occurs. Property managers may recognize these common strategies:

• An applicant poses as someone else (e.g., family helping family when the true resident has bad credit)
• A new, false identity is invented
• The identity is real, but some details are slightly changed

Ted Kimball, Esq.

1.  Question:  Are email communications between tenant and landlord admissible in court?

Answer:  Yes, emails can be admitted into evidence (if all rules of evidence are met), but emails should not be used to serve notices (other than as specifically allowed by law).

2.  Question:  When a month-to-month resident decides to vacate without any notice, do the owners have the right to charge for thirty days after the move-out to comply with their month-to-month agreement?

Answer:  Yes, you can charge up to the time the premises are relet or thirty days from the date of their departure, whichever occurs first, so long as you make diligent attempts to relet the property.

By Steve Haskell, Vice President, Kay Properties and Investments

There are various strategies when using DSTs (Delaware Statutory Trusts) for a tax-free, 1031 exchange. Some investments are easy and can be as a simple exchange from one property into a single DST. Other times DSTs are used to invest leftover equity from an exchange so an investor is not taxed on leftover funds, called “boot.”  Investors may routinely use DSTs as a backup identified property just in case their target replacement property does not work out.  In addition, on occasion, investors may utilize all of these strategies in one sophisticated effort to mitigate risk and defer as much tax as possible.  This article covers one such example.

A real estate investor sold an investment property for approximately $2 Million.  Roughly 25% of his property was leveraged; therefore, $1.5 Million was sitting in his qualified 1031 Exchange intermediary account.  He then pursued a partial 1031 DST exchange.  The real estate investor / seller wanted to purchase a property on his own, but something smaller and easier to manage than the property he recently sold. He wanted to put part of his exchange funds into a completely passive DST option that would require no management on his part. The DST part was relatively easy. However, he was having a hard time finding a replacement property to own outright, and the 45-day period for identifying a replacement property was about to end.  With the help of Kay Properties and Investments, the real estate investor created a multifaceted strategy that supported him and met his goals from a variety of angles.

Late last year, the City of Long Beach once again set out on a warpath by attacking a small group of residents comprised of those of us in the City who willfully provide rental housing to the vast majority of residents of the City.  As “landlords,” we are too often portrayed in a negative light by our elected officials who are unstoppable in their efforts to pander to a voting bloc of a City’s renters.  For the mere audacity of providing roofs over the heads of the City’s renters, severe negativity is constantly directed toward us in the form of unbalanced ordinances that seemingly always favor those who are being pandered to, which in our case is always the tenants.  This is the situation in Long Beach with the City’s so-called “Tenant Anti-Harassment Ordinance” that was passed late last year.

More recently, and now moving its way through the “system” at the City of Los Angeles is a newer, far more draconian version of a tenant anti-harassment ordinance.  Having passed through the confines of the City’s Housing Committee (a/k/a, Anti-Landlord Committee), many controversial and potentially harmful amendments to the ordinance had been put forth by the Socialist and far left leaning Councilmember Nithya Raman.  While many of Ms. Raman’s amendments failed in Committee due to our advocacy efforts, those that remained may still put rental housing providers who have not engaged in harassment at risk of being subject to frivolous litigation and prosecution. 

Homelessness and affordable housing are major issues facing the City of Los Angeles

By Jack Humphreville, L.A. Watchdog for CityWatch

But this does not give the City the right to commandeer hotel and motel rooms for use as homeless housing or to seize an apartment complex through eminent domain at prices that are less than fair market value.  As part of the City’s effort to renew and expand “Project RoomKey,” Councilmembers Mike Bonin and Nithya Raman instructed the City Attorney to report on what steps need to be taken to “begin commandeering hotels and motels for use as homeless housing.”

In response, City Attorney Mike Feuer confirmed that the “Mayor’s emergency powers grant him the authority to commandeer private property for public use when needed for the protection of life, and to bind the City to pay fair market value to compensate the property owner.”  But City Attorney Feuer fails to define what is an emergency.  Nor does he discuss the potential financial liabilities, the potential legal fees, the moral hazards, and the impact on the City’s reputation associated with the commandeering of private property, all of which may be substantial.

To start something new is to accept that you will probably fail at first while figuring it out. You don’t know what you’re doing and while you can research and study up, some things must be learned the hard way. No one has perfect balance without falling a few times. No one can master a new language without accidentally saying something dumb. No one can start a new adventure without getting lost somewhere. Everyone must start somewhere, and that means that usually, everyone will make some pretty bad mistakes along the way.  If this is part of your research on getting started as a landlord, that’s wonderful! There are some big mistakes you could make, but you can avoid with just a bit of research.

No Screening

Here’s the thing, tenant screening can require time and money. Sure, it seems like a great corner to cut: faster acceptance time, more people applying, and your property may be vacant for a shorter period of time. The problem is that tenant screening exists for a reason. There are certain liabilities you do not want to risk on your property. People who are prone to property damage are a costly concern. If someone has been arrested and convicted for damaging property there is no promise they would have care and respect for your property.

“Ask Kari” – As it Was Just May, Mold is Surely Here to Stay

By Kari Negri, Chief Executive Officer, SKY Properties, Inc.

Seasonally, the month of February is usually our wettest month of the year, but here in sunny Southern California, one may never know what we are going to get. Spring is a season favorite of many people but as we go into the warmer weather, we will likely still see some rain showers followed by heat.   Do April showers bring May mold, or mold in June, July or August?  Maybe so, but it can be avoided if water intrusion is addressed quickly and correctly.

What we need to know, as building owners and managers, about heat and water is that together they are the perfect combination to grow mold.  As of January 1, 2016, mold is considered a substandard housing condition as defined in California Health and Safety Code Section 17920.3  Here is a general introduction, with some tips and recommended links that building owners might consider in regard to mold.