Graham Wood is senior editor for REALTOR® Magazine. He can be reached at email@example.com.
4 Issues to Watch for Property Managers
Laws concerning service animals, rent control, marijuana, and criminal background checks are constantly evolving. Here’s what you need to know right now.
May 18, 2017
Correction: In an earlier version, quotes by Tyler Craddock of the National Association of Residential Property Managers were mistakenly attributed to an NAR staffer. The story has been corrected.
It's a changing landscape for landlords and tenants. Property management and policy experts speaking at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., offered attendees of the Property Management Forum guidance on handling four hot-button issues.
Can You Negotiate Service Animal Requests?
The need to accommodate service animals, once a relatively rare issue for property managers, has become increasingly common. Under guidelines from the Department of Housing and Urban Development and the Americans With Disabilities Act, property managers must make a reasonable accommodation for tenants who request a service or comfort animal, regardless of their building’s pet policy.
But what if a tenant's request is problematic for the unit? “When someone comes to you with a [doctor’s] note that says, ‘I’m entitled to 40 cats,’ you can negotiate [that],” said Tyler Craddock, government affairs director of the National Association of Residential Property Managers. “You can have that conversation, saying, ‘This is a one-bedroom efficiency unit, and I don’t think we can accommodate 40 cats there. Is there another way we can accommodate this?’”
Paul Dizmang, chair of the Property Management Forum, advised attendees to call their local or state HUD office if they have questions.
Fraudulent service animal requests are becoming an increasing concern, Dizmang said. “In five minutes, you can go online and get a doctor’s note to certify a service animal."
Disability rights groups around the country are starting to look at cases where tenants obtain online certification for a service animal, which is trained to perform a specific task, when the need is not legitimate, said Megan Booth, senior policy representative at the National Association of REALTORS®. She added that NAR is working with the National Fair Housing Alliance to get more specific HUD and ADA guidance on this issue.
Combating Rent Control
“Rents are high in many areas, and citizens are going to their state legislatures and asking for answers,” said Beth Wanless, senior manager of government affairs with the Institute of Real Estate Management. “Many lawmakers say rent control is a good solution. It’s actually a terrible idea.”
Wanless explained that rent control does not incentivize developers to build new projects because rent caps lower their profits. The effect, she said, is fewer and lower-quality affordable housing units. “Legislators think rent control will allow for more affordable housing for vulnerable citizens, but it actually creates a black market,” she said. Property managers also have less incentive to maintain rent-controlled properties because they won’t make enough money to pay for routine building maintenance and repairs, she added.
NAR and IREM oppose rent-control policies.
Marijuana Policies for Residential, Commercial Properties
The majority of the debate around marijuana laws and real estate has focused on residential property. Property managers who oversee apartment complexes should be advised that in the 28 states that have legalized medical marijuana use—eight of which have also approved recreational use—they cannot deny a tenant with a medical need the right to use pot on their properties, Booth said. However, they can regulate the smoking of marijuana. Lease agreements should explicitly state the methods of marijuana use—whether it’s through smoking, oils, edibles, or other means—that are acceptable on the premises.
But 17 states also allow the growing of marijuana on private property, which could raise risks for not only residential property managers but also those who manage industrial and retail properties. “If you cover utilities as part of your lease agreement, be aware that a single marijuana plant can take a gallon of water a day and 17 hours of light,” Booth said. “That can get expensive.”
When it comes to grow houses, which are typically housed in industrial warehouses, and retail pot dispensaries in shopping centers, property managers should be cognizant that even though their state may allow such operations, federal law still classifies marijuana as an illegal substance. That means the properties are vulnerable to federal raids and seizures, Booth said. She also cautioned that pot dispensary owners, who legally must deal only in cash, will have to pay rent in cash—and that could raise alarms about money laundering from federal officials.
How Far Can You Go With Criminal Background Checks?
Craddock warned attendees that if their leasing policies disallow tenants who have committed a felony, it could have a disparate impact on a certain group of people—which is a violation of fair housing law. Unfortunately, he noted, HUD guidelines on this issue are vague, and the agency will likely tell property managers to follow guidance set forth by courts in their area. “Our members just want to know what they need to do to follow the law,” Craddock added.
HUD does say that property managers cannot consider arrest records when considering tenant applications, and only convictions related to threats to property or other tenants are relevant when choosing who to rent to, Booth said. “You have to look at the nature of the crime, the severity, the age of the [prospective tenant] at the time of the crime, and how much time has passed since conviction,” she said. She suggested that property managers consider only the last seven years of a prospective tenant’s criminal history.
She also advised looking at work history and doing a credit check on prospective tenants before conducting a criminal background check. “If there’s nothing there, it [may indicate] they’ve spent time in prison recently,” Booth said. When denying tenants based on their criminal background, she added, property managers should be honest about that and give them an opportunity to explain their situation.