This post is compliments of Amy aka “Yetisaurus” who has been an owner and manager of rental property in California since 2003. She’s an attorney by day and a landlord on nights and weekends. Her goal is to acquire more property and develop a strong passive income stream so she can retire early (and enjoy it!).
One of the most important weapons in a landlord’s armory—and one of the most neglected—is the rental agreement. It sounds simple enough. All you need is a basic piece of paper that identifies your tenant, identifies the address, and sets forth the monthly amount of rent, the due date, and the amount of the security deposit, right? Well, that’s a start.
And maybe if you’re a bit more sophisticated, you’ve found a good basic rental agreement online somewhere, or you’re using your state’s realtor forms. That means you’ve covered yourself more thoroughly, and now you’ve got additional provisions covering subleases, prohibiting commercial activity in a residential unit, and specifying the amount of time it takes for an overnight “guest” to be deemed a new resident, in need of a signed rental agreement (and possibly an extra monthly fee).
That’s a great start. But there still may be some things that are not addressed in a cookie-cutter lease that are unique to your rental property.
For example, is your rental part of an Homeowners Association (HOA)? If so, you should make sure that your rental agreement refers to the Convenants, Conditions & Restrictions (CC&Rs) and requires that the tenant follow them. That way you’ve got a writing showing that your tenant was informed of the rules, and if your tenant is a repeated HOA rule violator, you can evict your tenant for breaching the rental agreement.
Tenant HOA Rule Violations
What if your tenant violates the CC&Rs, and you, as the homeowner, get fined for it? You’ll just collect it from your tenant, right? Well, consider this scenario: your tenant pays rent on time every month, in the full rental amount, but doesn’t pay you for the fine. Can you evict your tenant for non-payment of rent? Depends on what your rental agreement says.
If your rental agreement doesn’t say what to do about the fines, then you could get stuck with a tenant for the remainder of the lease who keeps racking up HOA violations. You could probably deduct it from the security deposit at the end, provided the security deposit is big enough to cover all damage, any unpaid rent amounts, and the unpaid fines. But a tenant who racks up HOA violations will likely leave some interior damage you’ll have to take care of, too.
A better way to go is to have a provision in your rental agreement that says that rent payments are first applied to pay any HOA fines, and then applied to the regular rent. Now, if your tenant gets fined for $250 from the HOA, you can apply the first $250 of rent to cover the fine. If your tenant doesn’t pay you enough to cover the fine and all of the rent, then the unpaid portion is categorized as unpaid rent, so you can evict the tenant if necessary. (Check your own state’s laws to be safe).
The purpose of this post is not to find a way to hose your tenant. It is intended to help you protect yourself as a landlord for honest-to-goodness HOA violations by your tenant, so you don’t get stuck holding the bag.
If you have a good tenant, and an HOA that tends toward the unreasonable, then sticking up for your tenant in the face of unreasonable HOA violation letters is the only honorable (and profitable!) thing to do. You may think the easy way out is to just let the tenant pay the fine, since you’re not really required to contest any violations, but if you lose a good tenant in the process, you’ll be costing yourself way more than the amount of one measly fine.
A Real Life Example
For example, I had a pair of really great tenants in my rental condo, and the HOA there was ridiculous. The HOA President was rude and combative and drunk with power, and unfortunately, none of the more reasonable homeowners would run for the board because they couldn’t stand her. My poor tenants got a violation letter within the first month of moving in, and it listed violations for a satellite dish (which had been previously approved in writing), a window air conditioner (also previously approved in writing), having a fan inside the unit near the window where it could be seen from the street, and for having “unwanted” plants stored underneath the stairs.
The tenants promptly moved their one, small, potted ficus upstairs onto their deck, but the remainder of the violations were completely bogus, and the HOA knew it. I went to bat for the tenants, the HOA backed off, and I was able to hang on to those really great tenants for another year and a half. (NO damage at all when they moved out!) Plus, the tenants were really grateful for my effort on their behalf, so it immediately established a good working relationship between them and me.
Do you have any rental units in an HOA, and if so, did you incorporate the CC&Rs into your lease? Does your agreement specify how rent payments are to be applied if there are HOA fines owing?