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Types of Tenancy Agreements in Property Management

The rental or lease agreement establishes the terms that enable the tenant rightful use of the property. In property management, it is important to understand the different types of leases or tenancy agreements. There are mainly two types of tenancy agreements:

Lease with a Fixed Term

The lease with a fixed term is the most common tenancy agreement. Such a lease will state the duration the tenant is allowed to use the property, and the time when the lease expires. The tenant may continue to use the property on renewal of such a lease. Typically, fixed termed lease is for a year or two years duration, but longer durations are also possible. Sometimes the fixed term lease can be for certain number of months to suit the needs of property management.

For instance, the lease might be for 14 months instead of the usual 12, so that the termination date coincides with termination date of other tenants. This is quite useful in property management, since all tenants will have a common termination date, on which the lease can be renewed or the tenant can vacate the property. Another consideration for property managers is to take advantage of the peak demand period for rentals. In such instances, the termination date of the lease will be during such a peak period, where it will be easy to obtain a new tenant.

Period-to-Period Lease

In this type of tenancy agreement, the lease initially is for a definite period, and is automatically renewed if it is not terminated by the tenant or the property owner. The duration can be for a period for a week, month, or year; however, such leases are usually for month-to-month. The automatic renewing can go on indefinitely, until the tenant or property owner formally terminates the lease.

Month-to-month rental agreements are usually favored by many tenants as it is quite flexible and they do not have to worry about breaking the lease before the termination date, as it can prove to be costly. However, this type of lease works in favor of property manager or property owner as well. If the tenant is causing problems, then a notice of nonrenewal can be served, which is much easier than giving reasons and terminating a lease in the middle.

Some other types of tenancy agreements are:

Tenancy at Will

In tenancy at will, the lease will be in force until the tenant or property owner terminates the agreement. The lease can be terminated whenever either party serves a notice. However, a reasonable period is usually mutually predetermined for serving such a notice. In tenancy at will, the notice can served at any time, whereas in period-to-period agreement there is a fixed duration for giving the notice.

Holdover Tenancy

This is not actually a type of lease agreement, but occurs due to circumstances. This happens when the tenant continues to live on the property after the lease agreement has expired, and has not renewed the lease. This type of tenancy is quite similar to trespassing, the only difference being the person had previously held the right to use the property.

When is a property management company needed?

Hiring a property management company is a big decision for a property owner, and various aspects have to be evaluated before reaching a decision. Some property owners prefer to keep a resident manager, while some take the bold step of managing the whole property on their own. Here are certain important factors that should be reviewed to see if hiring a property management company would be anoutstanding and poignant decision.

Huge Property or Many Rental Units

When the property is huge or there are many rental units, it is wise to manage the show professionally by hiring a property management company. The sheer size of operations is too much for a single individual to handle.

Location of Rental Property

If the property owner is staying far from the property then it is advisable to hire a property management company, even if the area of property is small or there are few rental units. Many issues can crop up that cannot be handled from afar, unless there is a resident manager on the premises.

Interest and Time

Many property owners view their properties only as a lucrative investment and have no interest in managing the day-to-day requirements of running the show. Some property owners might be interested to have a hands-on approach but may not have the time, since they might be involved in improving their business, finding new properties, arranging renovations, and so on. Hence, if interest or time is lacking, it is best to hire a property management company.

Cost and ROI

Property management companies charge fees for their services and it is usually a percentage of the collected rent revenue. These fees can cut into the profit or ROI, and the property owner has to evaluate the returns carefully and compare it with the importance of the services offered. Secondly, the overall market situation and economy has to be considered. If the market is up and there are fantastic chances of lesser vacancies, then the property owner can seriously consider hiring a property management company. Even when markets are down, a shrewdand/or solid property management company might be able to improve the situation and still appeal to more tenants.

Expertise and Experience

Property management companies have much better expertise and experience in handling the various issues and legalities of managing rental properties. A small legal mistake can prove quite costly in the end and might open up the risk of costly lawsuits and huge settlements. Property owners have to comply with many complicated rules, and it is important to know various legal requirements. If the owner is not sure about these rules and regulations, it is best to hire a professional company that has marvelous knowledge in this area.

Not Wanting to be an Employer

Even if the property owner has hired a resident manager, the owner is still an employer and will have different responsibilities such as payroll and managing various legal requirements. Whereas a property management company is an independent contractor, where the property owner has minimum responsibilities.

How to Deal with Difficult Tenants

How to Deal with Difficult Tenants

One of the challenging tasks in property management is dealing with difficult tenants. Being difficult can mean many things, such as being unreasonable and belligerent, not paying the rent on time, creating disturbances, fighting with other tenants, and so on. Difficult tenants not only waste a lot of time of the property manager, but also create a negative atmosphere on the premises. Here are a few tips for handling difficult tenants.

Making Everything Clear

In property management, it is always wise to keep everything in black and white and show what is expected from the tenants, and what tenants can expect from the management. All these expectations can be clearly stated in the agreement, so that the tenant has a clear picture. These points can include garbage removal practices, expected level of cleanliness, laundry schedules, procedure for reporting issues, minimum maintenance required from the tenant, common maintenance procedures followed by property management, policies for late payment of rent, expected noise levels, and minimum etiquette expected towards other tenants.

With certain tenants, it may not be enough to mention these expectations in the agreement. In such cases, the property manager should take the initiative and educate such tenants whenever the opportunity arises.

Being Professional and Maintaining Good Relations

The property manager should always have a professional attitude, which means neither being defensive nor being aggressive. Arguing with an angry tenant will only make matters worse, and being submissive will not be productive as well. It is important to speak calmly but firmly and communicate effectively. At the same time, it is also important to maintain good cordial relations with all tenants.

The best way of showing that the property management cares for the tenants is to listen to all complains attentively. The next step would be to respond and fix issues in a timely manner. Additionally, also have a system in place for the tenant to report late fixing of issues and the inconveniences they had to endure. This will help tenants to air out their problems and grievances, without causing any major disturbances.

Updating the Screening Process

The problem of difficult tenants can be avoided largely by having an efficient screening process for prospective tenants. Property managers should patiently carry out background checks, check out feedback from previous property owners, investigate credit worthiness, and check, to see if the individual or any member of the family has a criminal record. A clever questionnaire can be designed to reveal behavioral aspects of people, and their attitudes. Employ all the latest technological advances and tools available to create an efficient screening process.

Having Full Knowledge of Laws

The property manager should have full knowledge about the laws governing tenancy and tenant rights. It is important to understand tenant’s rights, and know all the procedures and protocols that will come into play in the event of certain situations and incidents. The most important aspect is to know the rules regarding rental delinquency and non-payment of dues. A difficult tenant can very easily turn into a bad tenant, and the property manager should know all the legalities for evicting such a tenant. 

How to Find the Right Tenants as a Property Manager

Renting to complete strangers is a very risky proposition; however, when you are having a huge property, you cannot limit your tenant prospects to known contacts, friends, and family. It is therefore very important in property management to know how to find the right tenants. Here are certain strategies to weed out the bad ones.

Background Checks

One of the most important duties of the property manager is to conduct a thorough background check on all prospective clients even when other information seems to be in order. According to a recent psychological study, it was found that most people lie about their background and try to hide things. Start with investigating criminal history of the prospective tenant.

Even though breaking the traffic rules is a crime, the property manager has to be concerned about serious crimes. These include drug dealing, robbery, and list of violent crimes. It is also very important to see if the name of the person is listed in the sexual predator or sexual offender lists. It is also possible to find out many things about people by checking their online presence on social networking sites.

Rental History

Checking rental history of the prospect from past property owners is important; however, this will not always be an accurate pointer. Some property owners or managers have been known to provide a false positive report, simply to get rid of a tenant who has been defaulting on rent payments. Secondly, first-time tenants like students or people from other cities will not have any rental history, and therefore it is best to check their financial background and creditworthiness.

Credit History and Financial Background

Even though it is not easy to maintain a perfect credit history in these hard economic times, property managers should set clear parameters for checking creditworthiness of a person. Ask for credit reports and credit scores, since these are fantastic indicators about the finances of a person. Finances can also be gauged by checking employment history and seeing whether the person holds a bank account. Checking with the individual’s current employer can reveal financial aspects about the person. Tax returns from previous years will also provide useful information about the financial background of the person.

Questionnaire

A cleverly designed questionnaire can reveal many interesting things about a person and it is possible to see if the person is lying. If the prospective tenant leaves certain questions unanswered, it should definitely sound the warning bell in those aspects. Here are some important questions that should be included in the questionnaire:

§    Do you have a good credit score?
§    Where are you employed?
§    Do you have a rental history?
§    Do you have pets?
§    Have you ever been arrested?
§    How many individuals are going to live on the property?
§    Are they family members?
§    Are you willing to sign a lease?
§    Do you have a bank account?
§    When are you planning to move in?
§    Do you have any disabilities?
§    Have you ever been evicted from a building?

If the prospective tenant does not know how to answer one or some of these questions or if you receive a form back that has one or many of these questions unanswered, that often is a warning sign. If they refuse to answer some of these questions, a red siren should be going off in your head. Silence does not personify honesty in this case.

How to Acquire Positive Reviews in Property Management

How to Acquire Positive Reviews in Property Management

One of the major tasks of property management is effectively marketing the property to lower the vacancy rate. The property manager can use many online tools and social media to improve the visibility of the property. However, many prospective tenants like to read reviews of existing tenants, before they make a decision. This means the website should have a sizeable amount of positive reviews from tenants, which ultimately comes down to keeping tenants happy. Additionally, satisfied tenants should also be prompted to write an online review and share their experiences with others.

Soaking Up Positive Reviews

Prompting tenants to provide reviews can be a little tricky, since you do not want the property website filled with negative reviews. Most people think of writing a review, when they are not satisfied by the service or product. Hence, the property manager should first make sure the tenant is happy, and then request a review. For instance, if the manager has recently solved some issue for a tenant or completed some repairs in a timely manner, then such times are ideal for asking a review.

Timing Matters

However, make sure the tenant feels the issue was taken care of promptly. It is better to have a chat with the tenant and gauge their reactions, and ask them if they were satisfied with the service. If the tenant seems happy and in a positive mood, then it is the ideal time to request a review.

Most people do not have the time or the inclination to provide a review, which could be because of their busy schedule. Therefore, it is very important to make the task of giving a review extremely easy and fast for the tenant. The best way to handle this would be to send an email after providing a service or resolving an issue. The email can contain a few questions that require only a few clicks to answer.

Certain Details

Sometimes a tenant may be displeased about something, which is actually not directly related to the property or the management. For instance, there might be some construction work going on near the property, and the tenant is not happy with the noise. Even though this is not actually the fault of the property, the tenant might voice this in a review, which might seem a negative comment about the property to a reader. In such a case, the tenant has to be reminded to provide the full story, and include the part about the noise not being on the property and not being anything the property manager can do anything about.

Property Managers can Post Information & Comments Too

Even if a tenant has made a negative comment in a review, then the property manager can take steps to resolve the issue immediately. The tenant can be asked to offer a detailed account of the problem, and attempts should be made to fix it as soon as possible. Once the problem is fixed, the property manager should ask the tenant to provide a comment about the service. The property management should also post comments in the review page, so that readers are aware that the management is playing an active role in resolving issues.

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