Michigan Landlord Sept- Oct 2013

MICHIGAN

LANDLORD September/october 2013

www.rpoaonline.org

Landlord “Never Agains” Tips on Management (p. 8)

RPOA Snags National Discount with Home Depot (p. 15) “BACK-UP” OFFERS: BE CAUTIOUS LANDLORD’S QUARTERS A PLACE FOR LANDLORD

A PUBLICATION OF THE RENTAL PROPERTY OWNERS ASSOCIATION

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

NON-MEMBER

RPOA MEMBER

N O T I C E O F V I O L AT I O N S

PEACE OF MIND

NON-PAYING

In this Edition

8 FEATURES

EVICTIONS

DESTRUCTIVE

4

From the Director

5

New Members

10 Member-to-Member Discount Program

TENANTS

20 Credit Reporting Procedures 22

ONGOING POLICE CALLS

Upcoming Seminars & Events

29 Ad-o-Grams

OTHER COMPLAINING TENANTS

ARTICLES

NASTY LETTERS FROM NEIGHBORS COSTLY LIABILITY LAWSUITS INCORRECT

6

Are you certified to do that painting project?

7

IMPORTANT ITEMS TO SET AT CLOSING

8 LANDLORD “NEVER AGAINS” TIPS ON MANAGEMENT

FORMS

11 Wood TV8 Spotlights Lack of Air Conditioning in Some Rentals 13

WHAT IS HOARDING AND HOW SHOULD A LANDLORD DEAL WITH IT?

15 RPOA SNAGS NATIONAL DISCOUNT WITH

HOME DEPOT

WHERE LANDLORDS GO FOR HELP 2

24

TENANTS

FAIR HOUSING VIOLATIONS COSTLY

16

16

“BACK-UP” OFFERS: BE CAUTIOUS

24

LANDLORD’S QUARTERS A PLACE FOR LANDLORDS

Volume 49, number 5 www.rpoaonline.org MICHIGAN LANDLORD editorial goal is to provide a forum for real estate investment and rental property ownership and management ideas and news. Our articles, columns, and other features should not be construed as investment advice, nor does their appearance imply an endorsement by the Rental Property Owners Association of Kent County or the Real Estate Investors of Michigan of any specific real estate investment or management strategy. An investor’s and manager’s best course of action must be based on individual circumstances.

www.rpoaonline.org September/October 2013 MICHIGAN LANDLORD 3

WHERE LANDLORDS GO FOR HELP

RENTAL PROPERTY OWNERS ASSOCIATION

From the desk of the Director Clay Powell

The City of Grand Rapids recently decided to sell over 150 tax reverted properties to the Land Bank of Kent County because those properties were “blighted*.” The funny thing is: if you actually look at those properties, very few of them appear blighted in the way most of us would think of “blight.” In fact, many of them look like properties that many families would be happy to move right into. The Land Bank Director, Dave Allen, has stated publicly that the Land Bank needs the properties that are in broom-ready condition (i.e. in good shape other than needing a good cleaning) in order to be able to make enough profit from some sales to pay for the rehabbing of other properties in bad condition and to pay for their program in general. I don’t know about anyone else, but this formula sounds an awful lot like private real estate investment. Therein lies the RPOA’s serious concern.

Land banks were designed to address badly blighted properties and neighborhoods that could not attract investors (homeowners or rental property owners). The idea was to provide a mechanism to fix problems where there was no incentive for private investment to do so. Somewhere in the mix, communities have lost sight of this objective and, it seems, are now using land banks to prevent ALL investors from buying the properties through the lawful process of a public tax auction.

To add more insult to injury, when a land bank buys property before a public tax auction, the city and county lose the revenue that could have been earned from the sale at the auction. The profits from the sale could have been used to fund other programs or offset the need for more tax revenue. Furthermore, since the land banks get a partial free ride when it comes to property taxes, entities such as libraries that receive tax funding are short changed. In short, the sale of the “non-blighted” properties to the bank takes funding away from other public entities. (Here’s an idea: Go back to the old method of selling properties at the county tax auction. Take the profits made from the sales to fund the land bank. The land bank could then use the funds to purchase and rehab properties that are in serious blighted condition.)

Land banks need to get back to their original purpose. If communities wish to have a land bank, they should pay for the programs through tax dollars—or the banks should seek funding from private sources such as foundations or state and federal grants. By funding a land bank from profit through sales of marketable properties, land banks are competing with private investors and potential homeowners.

Land banks need to get back to their roots and serve a real public purpose. Government needs to get out of private investment. * Under Michigan law, technically, a property can be defined as “blight” if it is a tax-reverted property. This means that any property—even a million dollar mansion in excellent repair—can come under the definition of blight if it is foreclosed on for unpaid property taxes. That is simply crazy.

4

Welcome, New Members Birdsey, Montaigne

Graham, Eric and Rita

Menke, David

Sillings, Darrell & Veronica

Brown, Linette F

Hartman, Judith

Oliai, S.

Stone, Steven P

Busse, Scott

Haven’t Decided LLC

Pieronski, Connie E

Thompson, Michelle

Carter, Marshall II

Klein, Larry M

Republic Services Inc

USA-mls

Czyzyk, Jeffery S

Lammott, Diana

Rishel, Barb & Roger

Wierenga, Jim

Ebers, John

Lewis, Sarah

Rozell, Terri

Z & Z Enterprises LLC

Goodman, Jeffrey

Lutz, Michael & Amy

Russell, Angela L

September/October 2013 MICHIGAN LANDLORD 5

RENTAL PROPERTY OWNERS ASSOCIATION

Important Items to Get at Closing When buying a rental property, there are a few things that are often forgotten because they are not part of buying residential real estate for personal use.

These things can cause problems down the line after taking ownership.

Here are some of the most common things new landlords miss at closing when buying their first unit:

Security Deposits -

Are you certified to do that painting project?

Lots of painting projects are taking place in Grand Rapids for rental and real estate rehab projects—the big questions are: Are the landlords and contractors doing the work trained and certified to do the work and are they using lead safe work practices? Federal law requires anyone doing work that disturbs lead based paint (including things like scrapping, sanding, repairs, etc. must be RRP certified and use lead safe work practices in homes built before 1978. This applies to all homes—not just those tested and found to have lead paint. The presumption is that the homes do contain lead paint. If you’re not certified or your contractor isn’t certified, you could be fined thousands of dollars and serve time in jail. The RPOA offers a course for certification at an extremely low rate.

Richard TenHoor, the RPOA RRP trainer, says the goal is to train landlords to do the work in a way that keeps kids safe.

For more information on the class and the requirements, call the RPOA office at 616-454-3385. To register for the next training class, go to http://www.rpoaonline.org/

6

Security deposits held by the seller of the property should be transferred to the new owner. Deposits are the property of the tenant—not the seller—until a legal claim (Notice of Damages) can be made against them after the tenant vacates the property. The purchase agreement should note that all security deposits will be transferred to the buyer at the closing. If you’re buying a property at a foreclosure sale that has tenants, understand that those tenants may have paid a security deposit to the previous owner and may demand its return upon terminating their tenancy. Copies of the Inventory Checklist completed by the tenant at move-in should also be transferred to the new owner. Without copies of the Checklist, it may be near impossible to prove that the existing tenant caused the damage.

Non-Refundable Fees Some landlords require a non-refundable cleaning fee or pet fee. While these fees are not required to be returned to the existing tenants, the funds might come in handy if the tenants leave the unit in a serious mess. If the seller doesn’t transfer the funds, they’ve pocketed additional cash from the deal.

Lead-Based Paint Disclosures If you’re buying a property built before 1978 with existing tenants, you should ask the seller for copies of the lead-based paint disclosures given to the tenants and signed by the tenants and the seller (landlord). If the seller does have the disclosures and they have noted on the disclosures that they have knowledge of lead hazards in the property, you should also obtain copies of

the paperwork from the inspections carried out. Copies of these inspection reports must be made available to tenants upon their request. If the seller does not have the federally required documents, you should immediately provide the disclosures to the tenants and the EPA booklet entitled “Protect Your Family from Lead in Your Home” after taking possession of the property.

Leases and Other Documents While not always possible, getting a copy of any and all existing leases can be very helpful. In fact, it is best to ask for copies of these agreements as a contingency of the purchase agreement. If all the tenants are on longterm leases, it may pose a problem if your plan is to rehab the entire building or raise the rent. You should also check to make sure the lease is a legal lease under Michigan law. Some landlords are not aware that specific language must be included in a lease or that some language is not allowed. You may need to execute new leases or provide addendums to existing leases to correct unlawful language or to provide disclosures required under law in a lease.

In short, it is highly advisable, if you’re new to investing, to use a licensed real estate professional that is experienced with rental property. Proper due diligence is really important when making an investment of your hard earned cash. Experienced buyer’s agents should help do the research (or at least know what to research) before helping you making an offer and know what items should be required contingencies or provided at closing.

September/October 2013 MICHIGAN LANDLORD 7

WHERE LANDLORDS GO FOR HELP

TIPS—from page 8 • Never again believe because I made a mistake today I can’t do better tomorrow. Keep believing in your dream. If we did not fall down, we would never learn to walk.

• Never again believe I have to go at it alone— because there are so many willing to freely give of their knowledge just because I asked for help.

• Never again go against my gut feeling.

• Never again pay workers by the hour.

• Never again pick up rent in person or allow it to be mailed—autodrafts or direct deposit only!

Landlord “Never Agains” Tips on Management:

By Jeffrey Taylor, “Mr. Landlord”

Once a landlord has been in business a while and learned a few things “the hard way” there often comes a point where he or she stops and makes the declaration, “NEVER AGAIN!” Well, the following is a list of those shared by landlords nationwide to help them avoid very costly problems in 2013.

• Never again think of this landlord thing as anything but a business and treat it like that.

• Never again think that existing rents are low because the current owner is renting to scumbag lowlifes. In case you wonder, renting to scumbag lowlifes actually commands higher rents since there are fewer options for them. Think about it, anyone will rent to someone with good credit and no criminal past. I won’t make that mistake again in thinking that after buying a place, I can clean up and rent it for more without having a complete understanding of market rents.

• Never again buy a place where rents just cover the payments.

• Never again buy a place without measuring the square footage to compare against the listed square footage.

• Never again plan to contribute my own labor for free when estimating fix-up costs because I don’t have enough cash to pay someone else to do the fix-up.

• Never again bet on appreciation or buy a property that does not make me money from the get go.

• Never again buy in an area I don’t know because the price looks good compared to what I do know.

• Never again believe anything that comes out of the mouth of a City Employee about a property I own or am about to purchase without checking it out for myself.

• Never again believe I can’t be successful at something just because EVERYONE says it won’t work.

Like being a landlord, for example.

• Never again give up the keys before having the cash and contract signed.

• Never again rent to someone who sees the house for the first time, pulls out a wad of cash, and says, “I’ll take it!” without screening them first.

• Never again “hold” an empty unit for anything longer than two weeks.

• Never again ask a resident casually, “How’s everything going at the apartment?” Ha-ha, nothing good will ever come from asking a resident THAT question!!!

• Never again rent to family/ friends.

• Never again install carpet in a rental. NEVER!!

• Never again NOT do a background check on a sweet old lady that turned out to have a felony for selling prescription drugs!! Sort of a happy ending though—she’s been with me for five years. Quiet and always paid on time.

• Never again think that simply because we have a signed lease, the place is rented for a year.

I must also utilize smart resident retention strategies.

The above tips are shared by regular contributors to the popular MrLandlord.com Q and A forum.

Reprinted from AOA News and Buyers Guide, March 2013 issue.

(continued—see TIPS, p. 9) 8

September/October 2013 MICHIGAN LANDLORD 9

RENTAL PROPERTY OWNERS ASSOCIATION

Member-to-Member Discounts: $$$aving you dollars!

Amera Mortgage Free appraisal for 1 to 4 family unit homes with closed loan application for RPOA members only. Jim Riley, 616-292-4491.

Bender Maintenance & Home Improvement 10% off hourly rate for RPOA members.

Property maintenance, general repairs; prepare property to rent at acquisition; inspection compliance for Section 8, City of Grand Rapids. General Contractor, Certified Lead Renovator, RPOA Member.

616-975-0126.

DINA AND SONS LAWN CARE AND HANDYMAN SERVICE LLC Professional landscaping and handyman services. Reasonable rates, dependable.

Landscaping includes all yard work.

Handyman ser vices include basic plumbing, electrical; drywall, painting, window and door repair. 10% discount on labor. Call Dina, CEO, 616-262-9220, Mitchell, 616-710-9080.

Grand Rapids Carpet & Furniture Cleaners RPOA Member Carpet Cleaning Special: For every 3 rooms cleaned, receive 4th room FREE. Call Dave, 616-453-5368.

Hungerford, Aldrin, Nichols & Carter, PC Free initial consultation on tax, accounting, and consulting services to RPOA members. Contact Kyle Sischo at 616-949-3200.

Indoor Climate Solutions Offering all RPOA members Grand Rapids heating inspection stickers for $40.00 each and 5% discount on repair or replacement of any HVAC equipment.

Over 40 years experience servicing and installing furnaces, boilers, air conditioning. 616-891-HEAT (4328)

10

WHERE LANDLORDS GO FOR HELP

Check out the discounts being made to RPOA members only:

JB Harrison Insurance Agency Independent agents representing several companies (Auto-Owners, AAA, Citizens, Hastings, Hartford, Pioneer State Mutual, Progressive). We do the shopping for you. Group discounts available for RPOA members. Call Mike Murphy at 616-8680050 for details.

Jeff Lamborne Agency We represent several companies. We shop them for you. Group discounts available. Call Jeff Lamborne for details. 616-447-0274.

Koetsier Realty LLC Up to $500 off listing services to RPOA members. Call Tom, 616-550-4447.

Pawlowski & Reens, PLC, Attorneys at Law Discounted fees and free limited phone consultation on any legal issue. 616-4587800. republic Waste removal services Exclusive RPOA discount! $11/month for 96 gal. cart. Call Jeff Nienhuis at 616-3085760.

RMS LLC Towing of abandoned and improperly parked cars on your property. Offering to RPOA members at no cost. Free signage for RPOA members if required by State of Michigan laws. Call 616--475-9836 or email impounds@rmsonline.us.

RPOA is now a member of Prosource Wholesale Floorcovering!

Come to Prosource at 1575 Gezon Parkway, Suite A in Wyoming, and receive 50% off carpet, pad and sheet vinyl and 30% off all hard surface. Show us your membership card! Call Peggy, 616-257-3200.

Sun Rentals Pay cash and receive 15% off any rental, any time. 616-454-7982.

USA-mls Advertise your properties on over 40 of the most popular Real Estate sites. RPOA Members $30 per month, unlimited listings. Free custom website with listings displayed, plus many more benefits. USAmls.com. Call 1-800-206-0080. www.firstfinancialresource.biz Bullet proof protection, irrevocable asset protection trusts, 15% discount to RPOA members 3 trust package. John H. Aggeler, Financier, 616-299-0757 or financier1945@gmail.com. $30K to $30M investment property loans, cash for land contracts/receivables.

Wood TV8

Spotlights Lack of Air Conditioning in Some Rentals

Wood TV8 put forth the question to tenants of whether or not they believe landlords should have to provide air conditioning and keep rental unit temperatures from exceeding a maximum limit. They also asked the RPOA what position they take on this issue. The RPOA responded by noting that air conditioning is an expensive alternative for some tenants and, from an installation and maintenance perspective, a costly amenity to provide everyone. Clay Powell, RPOA Director, noted that a sensitive balance has to be struck between providing affordable housing and offering what many see as a comfort item that is rarely needed in West Michigan.

For more on the story, go to http://www.woodtv.com/dpp/news/local/grand_rapids/should-grhave-air-conditioning-code.

West Michigan Pro Clean WMPC is ready to handle your cleaning needs by offering move-in/move-out, carpet, post-construction, and general commercial cleaning. RPOA members receive a 20% discount on their first cleaning. Call 616-299-1757 or email wmp rocl ean @ yahoo.c o m fo r FREE estimate.

Associate members who would like to participate in the discount program should call Kathy Rozenek at 616454-3385.

Patronize one of our Associate members participating in the Business to Member Discount Program!

Rylee’s Ace Hardware 10% discount on cash purchases. Some restrictions apply. Offer valid at Grand Rapids & Walker locations.

September/October 2013 MICHIGAN LANDLORD 11

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

CARS • FURNITURE • ORIENTAL & AREA RUGS

STEAM ONE Carpet & Upholstery Cleaners Carpet Area Rugs

No. 1 Your e for Sourc ar pet er C Clean

Furniture Koolaid stains removed

*6 Rooms for the Price of 5*

(616) 682-1944 or (616) 304-2603 Serving all of Greater Grand Rapids

FULLY INSURED • FREE ESTIMATES • FAST DRYING

David H. Bigelow RPOA Member

Bus: 616-453-5368 Cell: 616-822-4710

Grand Rapids Carpet & Furniture Cleaners since 1944 We use

RPOA members receive a 25% Discount

12

What is Hoarding and How Should a Landlord Deal With It?

By Bruce Kahn, CCIM, CPM

Thinking I would start with a definition of hoarding, I went the Merriam-Webster dictionary — “to collect and hide a large amount of valuable items.”

Obviously, Merriam-Webster never owned rental housing.

Undaunted in my search, I went to Wikipedia and found what I was looking for. Hoarding, also know as pathological collecting, is a pattern of behavior that is characterized by excessive acquisition of and inability or unwillingness to discard large quantities of objects that cover the living areas of the home and cause significant distress or impairment. Further research found that this had not yet become an accepted “medical” diagnosis. Fortunately for landlords, hoarders are not a protected class and they have the right to require the hoarder to clean their units or face eviction. The question begs to be asked whether this is a modern day phenomenon. While interesting, it does not address what a landlord should do if a tenant is discovered to be a hoarder.

I have dealt with this situation on multiple occasions.

It crosses all stratas of income and can just as easily occur in a $2,500 unit or a $550 unit. Typically, hoarders are discovered during a maintenance inspection or from complaints from other tenants about strange odors coming from the hoarder’s unit.

An important thing to remember when dealing with a hoarder is more than likely the person suffers from some form of imbalance. As frustrating and absurd as it may seem, the items being hoarded represent something of great importance, for whatever reason, to the individual you are dealing with.

Please note the words “unwillingness or inability” to discard objects.

Simply put, you will have very little, if any, success trying to persuade a hoarder that they should discard their treasured stash. Consequently, an owner or landlord has only two choices.

1. The first and most obvious would be to send the tenant a notice to comply or vacate. [AOA’s form, Cure the Violation or Move Out]. Sometimes this may cause a tenant to clean their unit. However, more often than not, it quickly returns to the way it was.

Usually this path ends up in an eviction of the tenant, which creates further economic loss for the landlord.

I always try to convince tenants to leave on their own and agree not to pursue them if they leave the unit in a clean condition. This saves months of lost rent and legal fees.

2. Some may consider this unorthodox, however, if I do discover a hoarder and what they are hoarding (continued—see hoarding, p. 14)

September/October 2013 MICHIGAN LANDLORD 13

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

Start Earning Your Rebate!

RPOA Snags National Discount with Home Depot RPOA members can start receiving a 2% rebate on all purchases made through Home Depot!

HOARDING — from page 13 does not create a health, safety or issue for other tenants—or themselves—I have allowed them to remain in the unit. Typically, we will have to do a very expensive turnover when they depart. It often makes more economic sense to keep them in place.

The positive of this path is that hoarders seldom move. What would they do with their priceless possessions?

The only caution is the “health and safety” of the other tenants. In some extreme cases, hoarders may be collecting something that would have an impact on the health and well-being of other tenants.

Another very important item is to make sure their hoard is not placed near a water heater, furnace or anything else that may create a fire or flood.

Surprisingly hoarders, when met outside of their units, appear to be normal. They can be cleanly dressed and functioning. With this in mind, as in all issues regarding real estate, the answer of what to do when faced with the issue remains. It all depends. Weigh out the appropriate path to take.

This rebate is on top of any other discount or sale price, including contractor rates. It’s simple to get started. Use the form inserted into this issue of the Michigan Landlord to sign up, and fax it to the RPOA office at 616-454-6163. After we process the form, a person from Home Depot will contact you to obtain additional account information.

To ensure that you are credited for all purchases, a Home Depot account number, debit card or credit card number (or all three) will be attached to your rebate account. Every time you use one of these payment methods, you will earn a 2% rebate. Rebate checks are mailed every six months.

If you have any questions, contact a staff member at the RPOA office at 616-454-3385.

Bruce Kahn, CCIM, CPM is the Managing Director of The Foundation Group Real Estate, a full brokerage, consulting and property management company.

Reprinted with permission of UPDATE, the official publication of the Rental Housing Association.

Reprinted from AOA News and Buyers Guide, March 2013 issue.

14

September/October 2013 MICHIGAN LANDLORD 15

WHERE LANDLORDS GO FOR HELP

RENTAL PROPERTY OWNERS ASSOCIATION

“Back-Up” Offers: Be Cautious!

By Dale Alberstone, Esq.

Hello everybody. Let’s discuss “back-up” offers this month as they often occur in connection with the sale of apartment buildings, as well as other types of real property.

Real estate purchase contracts frequently contain a provision that the seller may receive back-up offers even though the seller has an accepted offer with the buyer and may even be in escrow. Under real estate

law, it is perfectly legal for the seller to include such a provision in the agreement and perfectly proper for the seller to thereafter receive back-up offers from prospective purchasers.

What is not lawful, however, is for the seller to cancel his existing contract in order to accept a higher offer from a new prospective purchaser, even if the offer is substantially higher. Not only would that constitute a breach of contract by the seller, it would also constitute a breach of the seller’s implied covenant of good faith and fair dealing.

The law implies in every contract a covenant of good faith and fair dealing. Broadly stated, that covenant provides that neither party do anything which would deprive the other of the benefit of the agreement.

Here is an example of the application of the implied covenant of good faith and fair dealing in a real estate context: Suppose that a seller who is under a $2,000,000 contract with an existing buyer desires to cancel the transaction so that he may accept a new buyer’s backup offer of $2,500,000. Also suppose that the lender requires, as most lenders do, that its appraiser inspect the interior common areas of the seller’s “security” building as a condition to loan approval. Further, suppose that without that interior inspection, the lender would not make the loan. Finally, suppose that the seller refuses to allow the appraiser access to the common areas because the seller anticipates that the lender would not then make the loan and, therefore, the buyer will not be able to consummate the transaction. Under that scenario, the seller would be in breach of the implied covenant of good faith and fair dealing.

Since the motive behind the seller’s lack of cooperation was to re-sell the property to the prospective purchaser making the back-up offer, the seller, when refusing

16

common area access (and therefore causing the buyer ‘s loan application to be declined), would be liable to the buyer for damages for breach of the implied covenant.

Similar laws apply to prospective purchasers who submit back-up offers. It is perfectly proper for a prospective purchaser to make a back-up offer to the seller even though the prospective purchaser may know of the existence of the seller’s contract with the buyer.

However, in submitting such an offer, the prospective purchaser needs to exercise caution, lest he be liable to the initial buyer for inducing the seller to breach the contract. That would be particularly true if the prospective purchaser submitted the back-up offer with the intent to induce the seller not to sell the property to the buyer, but to instead sell it to the prospective purchaser.

There are three types of legal theories under which the prospective purchaser may be liable to the buyer.

They are:

1. Inducing a breach of contract:

If the prospective purchaser has knowledge of the buyer’s contract and intends to induce its breach by submitting the back-up offer, the prospective purchaser may be liable to the buyer for any damages that the buyer suffers because of the seller’s breach. Of course, the court would require proof that the prospective purchaser had an expectation that his submission of the back-up offer would in fact induce the seller to breach the contract.

While direct proof of a party’s state of mind may be difficult to accomplish, our courts have endorsed a maxim of jurisprudence which assists in establishing a person’s intent. Paraphrasing it: “A person is presumed to intend the natural and probable consequences of his acts.” Pierce v. Nash, (126 C.A.2d 606,6 13).

2. Interference with the contractual relationship:

This second theory is slightly broader in that it protects against intentional acts not necessarily resulting in a breach of the contract. If the prospective purchaser (continued — see BACK-UP, p. 18)

September/October 2013 MICHIGAN LANDLORD 17

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

before been involved. For example, it is lawful for a prospective purchaser to submit his own higher offer to a seller even though he knows that the first proposed buyer has submitted an offer which the seller is about ready to accept. (In that circumstance, of course, the prospective purchaser’s offer would not be a “back-up” offer because there was no already-existing contract.)

back-up — from page 17 commits intentional and unjustified acts designed to interfere with or disrupt the buyer’s contract with the seller, the prospective purchaser may be liable to the buyer for damages which the buyer suffers as a result of actual interference with or disruption of the relationship.

3. Interference with prospective economic advantage:

This third theory is still broader in that it protects against intentional acts designed to harm an economic relationship which is likely to produce an economic benefit to the buyer even though no contract had yet been formed.

It requires that the buyer have an economic relationship with the seller concerning the probability of a future economic benefit, the prospective purchaser had knowledge of that relationship, the prospective purchaser committed an intentional and unjustified act designed to disrupt the relationship and the relationship was actually disrupted, causing the buyer damages.

This type of liability arises where the buyer does not yet have a contract but instead has an economic relationship with the seller which would give rise to the probability of a future economic advantage.

While the first two theories of liability are rather straightforward and relatively easy to understand, this third theory is rather nebulous. Generally, it applies to parties who have an on-going business relationship with one another. It would not apply to a seller who is negotiating with a buyer with whom he has never

18

The foregoing article was authored on January 2, 2013, and is intended as a general overview of the law and may not apply to the reader’s particular case. Readers are cautioned to consult an advisor of their own selection with respect to any particular situation.

Reprinted from AOA News and Buyers Guide, March 2013 issue.

A real estate licensee who receives a back-up offer on behalf of a prospective buyer or presents a back-up offer to the seller also should be careful that he/she does not receive or submit the offer with the intent to cause the seller to breach the contract or with the intent to disrupt the contractual relationship between the seller and buyer.

The real estate licensee may have similar exposure for damages to the buyer under the theories discussed above.

Indeed, real estate agents are well aware that they cannot interfere with existing contracts, particularly with respect to listing agreements. A common practice of licensees to avoid exposure for contractual interference is seen in their “direct mail” solicitations. Often, the fine print will say, “If your property is presently listed with another broker, please disregard this mailing.”

Concluding remarks

Back-up offers are generally lawful and play a significant role in the sale of real estate. But prospective purchasers, sellers and real estate agents need to be particularly circumspect about presenting or receiving back-up proposals once a contract has been entered into between the buyer and the seller.

If the back-up offer interferes with the sale of the property to the buyer, the buyer may pursue causes of action (i.e. litigation) against the prospective purchaser or licensee for inducing breach of contract or interference with contractual relations. The buyer may also have causes of action against the seller for breach of the implied covenant of good faith and fair dealing as well as ordinary breach of the contract.

Attorneys wishing to further brief themselves on the three different theories of liability should review Shamblin vs. Berge, 166 C.A.3d 118. That case presents an excellent discussion of the differing elements and nuances among the three theories in a real estate context.

(continued — see BACK-UP, p. 19)

September/October 2013 MICHIGAN LANDLORD 19

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

procedures & prices RPOA & REI Decision Report request

Please follow the procedures below when requesting decision reports from the RPOA: ❑❑ When possible, please use the RPOA Decision Report Request Form and fax it to the RPOA office at 616-454-6163 OR send us an e-mail with the same information to: contactrpoa@rpoaonline.org. (DO NOT fax applications to us.) ❑❑ You must have the following minimum information to run a report: • First and last name of prospective tenant(s).

• Current address of the prospective tenant, including street with number, city, state and zip code.

• Social Security Number.

• Date of Birth • Your RPOA member #, name of membership, and an indication on how you would like the completed reports handled, i.e. faxed back to you (if so, provide the fax number), or you will call the office for the report, or you will pick up the report in person. ❑❑ WAIT AT LEAST THREE (3) HOURS before contacting the RPOA office for your reports. Though we can sometimes get reports done quicker, there are many things out of our control that can interfere with this process, including but not limited to credit reporting agency computer problems.

• Contact us for your decision report results promptly. For reasons of confidentiality we shred all reports after 3 days.

Other guidelines for decision reports: • You cannot run a decision report on yourself.

• You can only run a decision report on another family member if you are doing a business transaction with that person that is related to real estate or rental property.

• You cannot run a decision report for another business person, real estate agent or landlord. Your credit reporting privileges through RPOA extend only to your personal business.

• You can only run a decision report for a legitimate business transaction where credit is required. These transactions include owner financed real estate, leasing, collections and land contracts.

• You must follow all the rules and regulations of the Federal Fair Credit Reporting Act. A copy of this Act is available at the RPOA. • You must give a person denied housing or financing because of information contained in a credit report a notice to that effect.

Examples of notices that you can use and what needs to be included in the notice can be found in the RPOA office; or log on to the RPOA website (www.rpoaonline.org) and go to Tenant Screening.

report Prices (as of June 1, 2012) Single: $14.00 Double: $20.00 Criminal Report: $6.00 each

20

July/August 2013 MICHIGAN LANDLORD 21

Upcoming Seminars and Events

! s u n i o J

Real Estate Investors (REI) Friday Morning Breakfast Roundtable Held every Friday, 8–9 a.m.

Cheshire Grill / 2162 Plainfield NE, Grand Rapids, MI

HELPING REAL ESTATE INVESTORS BECOME MORE SUCCESSFUL

REGISTER BY CALLING 800.701.7762 OR EMAIL CONTACTRPOA@RPOAONLINE.ORG

Sept. 5, 2013 • 6:00 p.m. to 8:00 p.m.

Sept. 12, 2013 • 6:00 p.m. to 8:00 p.m.

Sept. 24, 2013 • 9:00 a.m. to 12:00 p.m.

Oct. 15, 2013 • 6:00 p.m. to 8:00 p.m.

Managing Your Bottom Line - CE, PHP

Marketing & Screening for Paying Tenants - CE, PHP

Foundations of Buying, Leasing and Selling Rental Property - CE

Garnishments & Collecting on Judgments

Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Clay Powell, Licensed Real Estate Salesperson & RPOA Director

Con-Ed Approved Class for Realtors. Earn 3 hours credit!

Presented by Clay Powell, Licensed Real Estate Salesperson & RPOA Director

Clay presents a thorough look into getting your apartments rented by using different marketing strategies. This course covers the essentials needed to find and attract the best possible tenants.

The participants will learn a wide variety of marketing strategies and methods for screening tenants to obtain the greatest profit.

The class will provide a complete overview of the entire rental business—from buying a property through management and selling. Some of the points to be covered in the course include:

Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Duane Culver, Certified Public Accountant Getting into real estate investment can be easy…keeping the financial records necessary to manage expenses, cash flow, rent collection and tax preparation for that investment can be challenging. Duane will teach the fundamentals of financial recordkeeping, cash vs. accrual, and a lot more.

Sept. 10, 2013 • 10:00 a.m. to 12:00 p.m.

Home Inspections - ce, php Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Steve Brinks, Professional Housing Inspector Recognizing what to look for in terms of damage and cosmetic issues—and knowing the difference—is knowledge every investor needs. Most of us are not professional contractors and need help determining what kinds of repairs are needed or when a property is beyond repair. Steve teaches you how to analyze a property from top to bottom.

Sept. 11, 2013 • 8:00 a.m. to 5:00 p.m. 8-Hour Class

Renovation, Repair & Painting 8 Hour CE; 8 Hour Construction Credit Limit: 4. Call RPOA for pricing.

Richard TenHoor, Certified Lead Safe Work Practices Trainer, Landlord and RPOA Member, will teach lead-safe work practices in a comprehensive session. Not knowing how to work in a leadsafe manner can expose your rental business to liability. The EPA now requires all landlords to use lead-safe work practices and be certified under the new RRP rules.

September 25, 2013. Limit 4. Call RPOA for pricing.

October 9, 2013. Limit 4. Call RPOA for pricing.

October 24, 2013. Limit 4. Call RPOA for pricing.

November 14, 2013. Limit 12. Call RPOA for pricing.

December 12, 2013. Limit 6. Call RPOA for pricing.

Sept. 19, 2013 • 1:30 p.m. to 5:30 p.m.

Retiring from your real estate career in style: Exit strategies for the real estate industry The Rental Property Owners Association (RPOA) is proud to host Mark Andresky, Certified Exit Planner, Real Estate Broker and Investor, who will share proven strategies to turn your real estate investments and business into a reliable stream of income that will last a lifetime. It’s never too early or too late to think about how you’re going to build wealth and plan for retirement. Real estate professionals can benefit immensely by understanding how their clients can best benefit from different real estate investment and exit strategies. Starting early and developing the right plan can produce the results you or your clients need to retire in style!

The course will include, but not be limited to: • Determining when and how much you’ll need to retire • Maximizing your wealth from your real estate business and investments • Reinvesting real estate profits to increase wealth

• Proper due diligence before buying or turning your existing home into a rental property.

• Federal, state and local regulations regarding rental property ownrship and management.

• Methods for effective management, including tenant screening, dealing with problem tenants, evictions and more.

• Setting rental rates and effectively advertising rental property.

• Proper forms to use for leasing.

• What to do before selling a rental property.

Oct. 1, 2013 • 10:00 a.m. to 12:00 p.m.

Protecting Your Assets - CE, PHP Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Bill Reens, Attorney at Law As a landlord, do you know if you’re protected from vandalism, damage from burst pipes, or injuries resulting from environmental sources such as mold? Will your personal assets be protected from claims and creditors in a financial crisis? If you would like to know the answers to these questions, or have other questions about your legal rights and responsibilities as a landlord, this course is for you! Join Bill as he explains how to best protect your valuable assets from claims, lawsuits, and other un-doings.

• Choosing the best transition option(s)

Oct. 10, 2013 • 1:30 p.m. to 5:30 p.m.

• Reducing or eliminating taxes and expenses

Creating Wealth with Seller Finance - CE

• Avoiding costly mistakes and leaving money on the table • Protecting your assets and minimizing risk • Passing on your wealth and leaving a legacy • Building a roadmap to success & security.

Cost: $49 / $69

Con-Ed Approved Class for Realtors. Earn 2 Hours!

Con-Ed credit is NOT available to webinar viewing.

Now that you have a money judgment, how can you collect the cash that is owed you? Dan O’Hara, experienced landlord and RPOA member, explains how to successfully do garnishments and collect on judgments.

Oct. 17, 2013 • 6:00 p.m. to 8:00 p.m.

Tax Strategies for Maximum Profit - CE, PHP Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Duane Culver, CPA & Investor Duane discusses the insight and techniques needed to reduce and potentially eliminate real estate investment taxes.

Oct. 22, 2013 • 10:00 a.m. to 12:00 p.m.

Self-Directed IRA’s - CE Con-Ed Approved Class for Realtors. Earn 2 hours!

Presented by Mark Andresky, CExP, ABI, CBI Learn how to use self-directed IRA’s to finance real estate deals while increasing profits and avoiding taxes.

Oct. 29, 2013 • 6:00 p.m. to 8:00 p.m.

Evictions Made Simple - CE, PHP Con-Ed Approved Class for Realtors. Earn 2 hours legal!

Presented by Clay Powell, Licensed Real Estate Salesperson & RPOA Director Ready to pull your hair out with a difficult or non-paying tenant? Clay will show you how to quickly (and legally) evict troublesome tenants.

Con-Ed Approved Class for Realtors. Earn 4 hours credit.

Presented by Mark Andresky, real estate broker and investor If you’re in real estate—whether a licensed real estate professional, real estate investor or landlord—understanding seller financing is huge. Mark Andresky, real estate broker and investor, will share his wealth of knowledge on putting together land contracts, leases with options, and more.

All events are held at the RPOA office unless otherwise noted.

Cost: $25 Gold members, $35 Silver members and non-members unless otherwise noted.

22 20

CE = CERTIFIED COURSE FOR REAL ESTATE CONTINUING EDUCATION PHP = PROFESSIONAL HOUSEING PROVIDER CREDIT

July/August 2013 MICHIGAN LANDLORD 23

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

Landlord’s Quarters— A Place for Landlords Whether you are a commercial landlord or a residential landlord, lease assignment by the tenant is certainly something you have considered and likely something you have attempted to address in the lease.

The following provides a refresher on the basics of assignments and lease provision options limiting or conditioning assignments.

Assignment Basics In the landlord‑tenant relationship, the landlord owns the real property (he/she is the “fee owner”), and the tenant, in renting, owns a real property interest (the leasehold interest). As long as the tenant complies with the provisions of the lease, the tenant has the right to exclusive possession of the real property. Without any lease provision specifying otherwise, the tenant is free to essentially sell its own property interest—by assigning the lease to a third party.

Assignment vs. Sublease

Commercial and residential landlords should understand “assignments” and how and why you might limit them.

It is important to note the difference between the assignment of a lease and a sublease. With a lease assignment, the lessee gives up its entire interest in the lease (or its entire interest in part of the leased premises while retaining its interest in the remaining premises). Unless a lease provision requires otherwise, all parties anticipate no further relationship with the assignor. The assignee essentially “steps into the shoes” of the assignor (the original lessee).

In comparison, in a sublease, the original lessee retains a reversionary interest (e.g., a period of time in which the lease reverts to the original lessee). There

is no change in the relationship between the landlord and the original tenant. Also, there is no relationship created between the landlord and the subtenant. The original tenant remains liable to the landlord for any breach of the lease, whether by the original tenant or the subtenant, and the subtenant is not entitled to any damages caused by the landlord’s improper acts.

(Note: If the original lessee does not actually retain a “reversionary interest” in the premises, a court may, under the common law view (unless changed by statute), hold that the transaction creates an assignment rather than a sublease.)

Limits on Assignment Tenant perspective. A tenant/lessee may want the ability to assign its lease in case: (a) it can no longer afford the space (e.g., to protect against business failure); (b) it outgrows its space (e.g., to provide for business success); or (c) it seeks to sell its business (e.g., to provide for the ability to assign the lease to

(continued — see LANDLORD QUARTERS, p. 26)

September/October 2013 MICHIGAN LANDLORD 25

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

Lease provisions limiting or conditioning assignment Landlords and tenants can negotiate for the rights, limits, and conditions to assign the lease. The lease may provide that: • The lessee has no right to give assignments under any circumstances (including deeming a change in management to be an assignment).

• The lessee has no right to assign the lease except in specified, limited situations (such as: assignment to an affiliated party; or assignment provided the same use is continued by the new lessee).

• The lessee may assign the lease, but only with the lessor’s consent. (Note: courts in most states will allow a lessor to arbitrarily withhold consent, but a few states require a refusal to consent be based on reasonable grounds, and at least one (California) requires by statute that the lessor permit assignments under certain conditions.) In an effort to avoid a reasonableness requirement, the lease can specify that the lessor may withhold consent arbitrarily and capriciously.

LANDLORD QUARTERS — from page 25 the business buyer). The greater the size of the space leased or the longer the term of the lease, the more important the right to assign may be to the lessee.

Landlord perspective. Meanwhile, a landlord/lessor may want to limit or condition any lease assignment in order to maintain control over the quality, composition, and financial capability of his or her tenants. For example, the lessor may want to ensure a certain “tenant mix” in the commercial building/complex.

• The lessee may assign the lease, but only with the lessor’s consent, which cannot be unreasonably withheld.

Whichever limitation is placed on assignment, a lessor, to protect its interests, should also ensure the lease requires certain prerequisites be met before an assignment is effective:

LANDLORD QUARTERS — from page 26 • An original, executed copy of the assignment must be delivered to the lessor within a specified period of time.

• The assignee sign an assumption agreement whereby the assignee agrees to assume and perform all of the obligations imposed on the tenant by the lease. Also, a copy of the assumption agreement be provided to the landlord within a specified period of time.

Other lease clauses that can affect assignment Other lease clauses, which do not “speak” to assignment or the particular tenant, can affect the ability of the lessee to assign. Examples of common such provisions include: use restrictions; restrictions on alterations and improvements; restrictions on signs; requirement of continuous occupancy and operation throughout the lease term; and required use of a particular trade name.

(Note: Lease provisions that prohibit or restrict assignment of rights are unenforceable under the U.S. Bankruptcy Code. Therefore, it is possible that a lease that was not terminated prior to bankruptcy may be assigned by the tenant.)

Source: Meislik & Meislik Ruminations, Ira Meislik, “Assigning a Lease‑Does the landlord really own the property?” (April 1, 2012); http://www.retailrealestatelaw. com/archives/838.

• The original lessee remains liable for all obligations under the lease until the end of the original term.

Source: 1 Real Estate Leasing Practice Manual, §§ 31:1 to 31:29, Alvin L. Arnold and Jeanne O’Neill (April 2013).

• The lessee, at the time of the assignment, fulfills all its obligations under the lease (and possibly under any other agreements it may have with the lessor).

Reprinted from Landlord Tenant Law Bulletin, July 2013 issue.

(continued — see LANDLORD QUARTERS, p. 27)

Advertise in Michigan Landlord!

(616) 532-3626 or (888) 821-8846 Gerritsappliances.com

Full service plumbing and drain cleaning

BEST

Plumbing and Drain Cleaning

616.212.7907 24 hour service available Licensed and insured Free estimates

Contact RPOA Ad Salesperson, Tom Koetsier at 616-550-4447 to reserve your ad space today!

26

September/October 2013 MICHIGAN LANDLORD 27

RENTAL PROPERTY OWNERS ASSOCIATION

WHERE LANDLORDS GO FOR HELP

TEAM UP. TAKE YOUR BUSINESS

TO THE NEXT LEVEL.

A Special Offer for KARHA, MARA and RPOA MEMBERS

Ad-o-Grams

$35 for 30 days print and online!*

Appliance sale Refrigerators, ranges, washers & dryers. Nice selection, all guaranteed, and delivery service.

Modern Appliance, 809 College NE, 616-4567039.

Kalamazoo Gazette, Muskegon Chronicle and/or Grand Rapids Press.

Fill your vacancies with Mlive Media Group print and online solutions!

Carpet cleaning RPOA members receive 25% discount. Premium carpet care at affordable prices. Call RPOA member Dave Bigelow at 616-822-4710 or Grand Rapids Carpet and Furniture Cleaners at 616-453-5368.

*Includes a 5 line print ad for a single rental unit as well as appearing with expanded text and up to 8 photos on mlive.com

eviction clean-up and dumpster rentals Never have stolen tags again! Clean-ups starting at $35. Or rent one of our 10-, 15-, or 20-yard dumpsters for your remodel or clean-ups. Starting at $175 including dump fees! Call Executive containers at 616-862-5246.

Properties with more than 10 units are not eligible for this offer.

• • • • • •

Buyer representation Listing services Property tax appeals Free 1 hour consultation HUD registered broker Mentoring and consulting programs

• Short sales and foreclosures • Exit strategies and creative investing • Rehabs and flips • Land contracts and lease options • Partnership opportunities

Work with someone who does what you want to do.

We are landlords. We are investors.

RPOA MEMBERS RECEIVE $500 OFF LISTING COMMISSIONS

Grand Valley Health Plan ranks

#4

in the Nation!

• Consumer Experience • Prevention • Treatment According to the U.S. News & World Report/NCQA America’s Best Health Plans 2008 rankings.

“America’s Best Health Plans” is a trademark of U.S. News & World Report.

www.koetsierrealty.com Tom Koetsier 616-550-4447 tkoetsier@grar.com

28

Allison Koetsier 616-633-9445 avkoetsier@sbcglobal.net

Grand Valley Health Plan is proud to be the only commercial health plan in Michigan to rank in the top 10 honor roll in the nation.

Kulesza’s Electrical Services Specializing in all types of residential, including service upgrades. Free estimates in the greater Grand Rapids area. 616-318-8661.

M&M PLUMBING & DRAIN CLEANING Free estimates, toilets, faucets, garbage disposals, drain and water line repairs, replace, etc. Drain cleaning with guarantee. All work done by owner/ licensed plumber. Landlord discounts, licensed and insured. Call 616-560-0799.

SOS Home rehab llc Repair/remodeling for management companies/ homeowners. Inspections to evictions to movein ready apartments. Certified in HVAC, lead and mold. Call Shane Sarver, 616-446-4899; email: ssarver@soshomerehab.com. Licensed, insured, efficient.

Log onto www.ncqa.org for a complete list of rankings.

July/August 2013 MICHIGAN LANDLORD 29

RENTAL PROPERTY OWNERS ASSOCIATION

BOARD OF DIRECTORS President: Ann Siebelink-Finkler (616) 437-2164 E-mail: annfinkler@gmail.com Vice-President: Bert Heyboer (616) 719-0819 E-mail: bertheyboer@gmail.com Secretary: Tom Koetsier (616) 550-4447 E-mail: tkoetsier@grar.com 1459 Michigan St. NE / Grand Rapids, MI 49503 Phone:

(616) 454-3385 / Fax: (616) 454-6163

E-mail:

contactrpoa@rpoaonline.org

Web Sites:

http://www.rpoaonline.org

www.MIrentalguide.com

Office Hours:

Mon 8:30 AM-5:30 PM

Tue–Thu 9:00 AM-5:30 PM

Fri 9:00 AM-5:00 PM

The Rental Property Owners Association/Real Estate Investors (REI) is a nonprofit business association whose mission is to support and facilitate its members’ success in real estate investment and management.

3 Full Days!

10th RPOA Annual FREE Conference & Expo February 27-March 1, 2014

Treasurer: Mark Andresky (616) 855-1979 E-mail: mark@performanceba.com

Other Board Members:

Pre-Conference Full day seminar with Jeffrey Taylor, Mr. Landlord!

Take Total Control

Steve DeKoster (616) 776-0572 E-mail: sdeko@aol.com Mark DeVries (616) 291-2923 E-mail: mark@northernmtg.com Phil Mol (616) 458-8200 E-mail: philmol@grar.com

Four other national speakers: John Hyre

David Phillips (616) 745-6683 E-mail: davidrphillips@charter.net

Tax Free Investing

Kim Post (616) 891-0500 E-mail: kim@postandassociates.net

Shaun McCloskey Short Sales & Wholesaling

Mark Troy (616) 452-4200 Email: mtroy@compass101.com

Chris McClatchey

Russ VandenToorn (616) 965-2300 E-mail: russ@rentupm.com Brian Zeemering (616) 608-0940 Email: bzeemering@gmail.com

Creative Finance for Real Estate Investment

Andrew Cordle Maximizing Cash Flow for Rentals

RPOA Staff: (616) 454-3385 Clay Powell, Director Ava Grover Kathy Rozenek Heather Vandenbos

RPOA Director & Newsletter Editor: Clay Powell (616) 454-3385 E-mail: clayp@rpoaonline.org

Ad Sales:

Tom Koetsier (616) 550-4447 E-mail: tkoetsier@grar.com

Newsletter typesetter: Michelle VanGeest (616) 949-7813 E-mail: m.vangeest@att.net

RPOA Attorney: 30

George Pawlowski (616) 458-7800

Breakout Sessions!

Over 35 Exhibitors!

Keep your eyes open for registration information!

prsrt std U.S. Postage PAID

Grand Rapids, MI 49503

Permit No. 553

THE PUBLICATION OF THE RENTAL PROPERTY OWNERS ASSOCIATION 1459 MICHIGAN STREET NE, GRAND RAPIDS, MI 49503 PHONE: 616.454.3385 FAX: 616.454.6163 CHANGE SERVICE REQUESTED