Rental property tenants are unpredictable.  I have had to deal with everything from the desperate tenant whose business was failing and decided to grow marijuana as an alternative business to the tenant who tries to make repairs and makes the problem considerably worse. 

We can’t prevent what is unexpected and sometimes can’t prevent the expected, but we can do a great deal to assure that when it happens we will be in a better legal position to deal with it.

The Importance of the Rental Property Agreement

A comprehensive rental agreement is extremely important.  It should include at the minimum:

• The start and end dates of the term of the lease
• The means of lease extension and lease termination
• The circumstances under which the property owner may enter the property
• Responsibility for repairs and maintenance
• Penalties for non-payment of rent
• Renovations or alterations to the property allowed or not allowed to be made by the tenant
• Ownership and removal of renovations at the end of the lease or if the tenant must be evicted
• Notice for termination or eviction of the tenant
• Numbers and names of persons, or companies on the lease
• What business is to be conducted at the property, excluding all others
• Deposits and their application or circumstances for refunding
• Insurance coverage and requirements
• The stated condition of all contents at the time of the lease and their required condition at termination.
• Lease amount, payment terms, conditions for modification of rent

Forms and Documentation are Key

The lease form should be properly composed by an attorney or modified from a standard form provided from a reputable source, such as an Association of Realtors®, or Commercial rental organization.  Separate forms might deal with property condition, insurance requirements, building rules and regulations, parking issues, and neighborhood issues (such as noise late at night).  Commercial properties in or near residential neighborhoods must take neighbors into consideration or face problems the property owner will have to deal with for many years.  Neighbors have a long memory.

Any problem that does arise should be documented with the date it occurred, what happened to cause the problem and who was called about the problem or sent a letter.  Also note what happened to resolve the complaint, if it could be resolved.  Do not let a problem linger or ignore it as it has a tendency to grow.  A tenant may later claim the owner did not seem to have a concern with the issue over some period of time and only now is complaining about it.  Contact an attorney for advice early on for any serious issue.  Following appropriate legal procedure can shorten the time to resolve the matter. 

Some Hot Tips for Contracts

• Never permit the tenant to modify, remodel, repair, redecorate or change anything without the owner’s express written consent, and print this statement in boldface type in the contract.

• Make sure that there is a clause in the contract to allow the owner or the owner’s representative to enter the property at least once a month even if it is to check the smoke detectors.  if I had done this I would have seen those marijuana plants!

• Be wary of the tenant who pays in cash.  In the contract insist on a check drawn from the tenant’s bank.  This will facilitate collecting on a court order to recover funds, since you will know the bank and the account number of the tenant.

• Be sure the owner’s insurance policy on the property is properly written to cover the property with the tenant and the tenant’s business.  Also, require the tenant to obtain, and maintain adequate contents insurance on their property.  Both the owner and tenant should have adequate liability coverage in case someone is injured or assaulted at the property.

If You Have to Go to Court

On several occasions I have found myself in court trying to collect on back rent or property damage.  Because I was prepared with a solid contract and documentation I am glad to report I was able to collect every time, with the exception of the marijuana grower who skipped town.  I saved myself considerable legal expense and money, if not aggravation.  Tenant evictions can be lengthy in California.  Even with proper procedures owners should plan on

possibly a six month ordeal.  In one case regarding a client’s property, I showed up with the sheriff who had to usher the tenant off the property.  He was in the act of moving and loading the moving van.  I felt compelled to warn the moving company to collect via cash or a cashier’s check to avoid getting a bum check from this deadbeat.

Zoning, trip-and-Falls, Security Issues

In one case a commercial tenant failed to check zoning before signing the lease and discovered the space they rented would not allow a fitness center.  Tenants or their guests have suffered injuries or assaults called “acts of third parties” and sued the owner.  In one case, the employee of the tenant parked in a handicapped space during a rain storm.  He stepped out of the car on crutches only to fall and suffer further injury.  The downspout from the roof gutter drained directly into the parking space!  Owners and their property managers must be vigilant to eliminate hazardous conditions and provide well lighted and secure premises.

Agent Representation

If a real estate agent or property management company is acting on behalf of the property owner, a detailed written agreement should be used covering the agent’s responsibilities.  The property management company might also request to be named as an additional insured under the property owner’s liability insurance.

“Experience is the worst teacher; it gives the test before presenting the lesson.”

                                                            --Vernon Law