John Davis tells anyone who will listen that managing real estate is “no joke.” The 37-year-old research engineer for IBM owns a two-family house in Brooklyn, New York, and he cautions would-be landlords to educate themselves on the eviction process before renting out.
Davis’ first tenant was ideal, but the second tenant proved far more challenging. “The family made good tenants. They kept the apartment clean and took care of the property, but their rent was always late,” he explains. “When I decided not to renew their lease, two family members moved out with no problem. Unfortunately, the remaining family member, who had recently lost her job, said it would take an eviction to force her to leave.” So for the next six months, Davis was embroiled in a property owner’s worst nightmare–removing an unwanted tenant. He lost thousands of dollars in rental income, paid several thousand dollars in attorney fees, and sacrificed vacation days to attend court. He estimates that his total eviction-related costs amounted to $10,000.
There are many reasons a landlord may want to remove a tenant, including nonpayment of rent or violations of the rental agreement. However, owners must keep in mind that an eviction is a legal process. “A property owner cannot simply lock a tenant out of an apartment or remove her belongings from the premises,” explains New York real estate attorney Sam Leibowitz. “Each state has laws that cover how an eviction must be handled, and a violation of these laws can result in legal actions against the landlord.” Individual state laws regarding the landlord-tenant relationship are governed by the Uniform Residential Landlord and Tenant Act.
The lease you provide your tenant should detail, among ot
her things, what guidelines he or she is expected to adhere to (e.g., when rent is due, if pets are allowed). In broad terms, a landlord must do the following in order to evict a tenant in violation of their lease:Terminate the tenancy. The tenant must receive written notice in accordance with state laws. Termination notices may request that the tenant pay rent or vacate; cure the problem or vacate; vacate immediately due to repeated problems; or vacate at the end of the lease agreement, as in Davis’ case. If, after receiving a termination notice, the tenant does not vacate or resolve the issue in dispute, the landlord can file a lawsuit to evict.
File a lawsuit. Once a lawsuit has been filed, a court date is set. A landlord may win a judgment by default if the tenant fails to appear in court. But more
often than not, “a tenant will fight the eviction and this results in delays,” explains Leibowitz. “It’s not uncommon for the court to give a tenant a month or two to leave the apartment.”Davis’ first court date was in October 2004. The tenant agreed to move out in 30 days, but then did not comply. The next court date was in December. The tenant was ordered to vacate by Feb. 1, 2005, but then filed a motion, which gave her additional time to reside in the apartment. The third court date was Feb. 8. This time the tenant was ordered to vacate the property in 10 days. When the deadline arrived, she was still in the apartment. Davis then exercised his final option–to have the marshal remove the tenant and her belongings from the property. By the time the marshal arrived on March 2, the tenant had left.
HOW TO PROTECT YOURSELF
It’s important for people who buy real estate as investment properties to understand the financial risks associated with owning rental property. Leibowitz says evicting a tenant can easily wipe out your profit margin for the year. In hindsight, Davis doesn’t think there was much he could have done to prevent what happened. He ran extensive background and credit checks on the tenants and verified employment. Everything appeared fine at the time.
In an effort to better manage risk in the future, Davis has doubled the security deposit required for his rental unit, and he will be more vigilant in heading off developing problems. He also advises other property owners to find an experienced lawyer who handles evictions before renting out. This way, if a problem arises, they’ll be prepared to act immediately.