We all know the pandemic has caused a lot of unforeseen changes in every industry. Residential property management has been – for better or worse, depending on whom you ask – at the forefront of many of these changes.
Nationwide, Legislatures and Governors have enacted laws affecting the relationship between tenants and landlords, existing contracts be damned. The idea behind these legislative changes has supposedly been to help the downtrodden, helpless tenant, and to level the playing field vs. the greedy, evil landlord. The perils of insurmountable economic insecurity have been stated as the catalyst for these changes. Money has been doled out millions of dollars at a time, and landlords have been forced to sit on the sidelines and watch helplessly, in many cases, while their tenants live rent-free in a home they did not buy and do not own. These so-called “mom-and-pop landlords” make up 100% of our clients, and we know that these properties are in most cases intended as a wealth-building retirement nest egg.
Colorado has been impacted as much as any state, and in this article, we will seek to help explain some of the changes that have come to life, how RES is navigating them to protect our client’s financial interests.
Here are the two biggest changes right now:
1.) Evictions. You’re aware of the eviction moratorium, but here’s where we now stand. The CDC Eviction Moratorium has ended but Colorado Executive Order 129, which is an extension of previous executive orders preventing eviction for non-payment of rent, is in effect until at least October 4th, 2021 (and is expected to be extended.) The current state of affairs with regards to non-payment of rent is as follows:
-We may post a 10 day notice for non-payment of rent, however, we will have to stop the process and re-post a 30-day notice if the tenant attempts to obtain rental assistance.
-We are required to post the “DOLA Resources” documentation with either a 10 or 30-day notice for non-payment of rent; so given that requirement and that it spells out to tenants how they can request rental assistance, we are only posting 30-day notices, under the assumption all tenants are likely to pursue rental assistance.
-If the tenant files for rental assistance, our ability to file an eviction at that point is also halted, pending the outcome of the application for assistance. -If a tenant does not give RES proof they’ve attempted to secure rental assistance, RES may file the eviction at the expiration of the 30-day notice.
-A significant change is that we may not now turn away funds from a tenant even if we’ve filed the eviction. Previously, we could elect to not accept funds from a tenant (even payment in full) once the eviction had been filed. The law now is that we must accept funds up until a possession judgment is actually entered by the court.
Obviously, all of this increases the workload for RES, attorneys, etc. in the event of non-payment of rent.
2.) Late fees. RES has never been particularly concerned with late fees; they’ve always acted as an important deterrent to tenants paying late. This is because our late fee has historically been 10% of the FULL rental amount, starting on the 4th. This policy has always helped our clients get paid sooner rather than later. Well, now the law has significantly changed to the following:
-A late fee can only be $50 or 5% (the greater of) unpaid rent (the balance owed, not the full monthly rental amount).
-Late fees cannot be enforced until 7 calendar days after the rent is in default, so the 9th of the month would be the earliest permissible under the new law.
-By the 8th of the month when late fees will now be able to be calculated, RES will have already posted the requisite 30-day notices for any unpaid rent (we expect the number of notices we need to post to dramatically climb, now that the penalties for paying late are insignificant).
-Our RES standard lease is being modified to reflect these new changes, with rent being due on the 1st and “late” on the 2nd, with the default late fee settings to take effect on the 9th.
Other newer/notable legislative changes:
-All income types must now be considered when evaluating a rental application. We are literally required to consider unemployment insurance payments that run out next week, as proof of income. Previously, clients could preclude Section 8 or other Housing Assistance program recipients for applying to rent a property. This is no longer the case. The full text of the bill is here. There are some exclusions based on the number of homes owned by the landlord.
-Denver property owners with two or more units will soon be required to possess a “rental license.” This will include the costs of hiring a certified home inspector to inspect the property and then applying for a license through the City, $50-$500, with licenses being renewed every four years, with a new inspection before renewal. RES will spearhead this process for our clients with Denver properties.
-New language is required on evictions summons (RES ensures our language is always up to date on all legal documents.)
How this affects our clients:
The effect of these changes is that being a landlord is increasingly challenging – and really, in many circumstances, patently unjust. Having a professional property management company, such as RES, in your corner is important now more than ever. We have a direct line to eviction attorneys and we are attuned to the ever-changing laws affecting your investment properties. We are taking action now to curb the effects of these changes to our clients. Leases are being modified, processes are being changed internally, tenant screening is more rigid than ever before, and internal training on these changes has become a top priority.
The bottom line is that as long as we are allowed to use credit scoring to determine eligibility for renting a property, we will have an opportunity to put qualified tenants in every property we manage. If credit scoring is torn down, I think society will collapse. So let’s hope it doesn’t go that far.
We opened our doors as a residential property management company on June 1st, 2008. We’ve never had to raise our prices, but our hand is forced at this point. Our prices are increasing – slightly – to cover some of the new expenses we are facing. The resources we must expend to keep on top of all these legislative changes, the increasing cost of labor, the shortage of labor, the increasing costs of fuel, and everything else, have meant some rearranging on our fee structure internally.
We will soon be rolling out updated pricing for our current and new clients, and we can assure our clients – new and old – that we will continue to offer the most competitive fees and an unmatched suite of services in the property management industry.
Thank you for your continued support, and we will never stop advocating for our clients and providing the most competent property management services possible.