Deciding to Evict a Tenant: Art or Science?

I recently had a client who allowed a commercial tenant to fall behind close to $100,000.00 on rent obligations before contacting my office to file an action for possession (eviction).  It was a classic albeit perhaps extreme case where the tenant's business had taken a bad turn, there was some money coming in on a sporadic basis and the tenant made repeated promises that it was going "to make things right."  (Unfortunately, proving the adage that "no good deed goes unpunished," the tenant has turned the eviction in to a federal case -- literally -- which is still ongoing, but that is a story for another time.) 

For many landlords, commercial and residential, deciding when to evict a tenant is more art than science. The existing tenant is the "devil you know," so to speak, and, like my recent client, many landlords are reluctant to let go.  Moreover, the people on the front lines for the landlord have a feel for the tenant, the current situation and whether the tenant can get up to speed.  However, there often comes a time when the cord must be cut.  The question is when?  A tough call, no question, since there is cost involved in finding a new tenant.

I encourage landlords to develop a hard/fast rule and live by it, e.g., file for eviction once tenant becomes "x" months late.  Take the "art" out of the equation and focus on the "science."  When setting the line before eviction, a landlord should figure out: how long the eviction process usually takes; and, the average length of time for finding a replacement tenant.  The higher that number is in terms of months, the shorter the line should be.

REMEMBER: a space occupied by a non-paying tenant is the same thing as vacant space!  The damage to the value of the property is the same.


NJ Assembly May Vote on Sub-Metering Bill

Bill #A1628, which would advance water conservation by allowing sub-metering of water and sewer service in rental housing across the state and has been long supported by the NJAA, has been posted for a vote in the New Jersey General Assembly for Monday, January 11, 2010.  In brief, the Bill would allow for installation of sub-meters and billing of tenants for water and/or sewerage service used by their unit.  Among other requirements, the use of sub-metering would have to be disclosed in the tenant's lease in a "clear and conspicuous" manner" and "in plain language" and the bills sent to the tenant would have to include certain specified information.  As it presently reads, the Bill is fair and comprehensive.  A copy of #A1628 in its present form can be found here. 

The NJ Legislature is currently in what is commonly known as its "lame-duck" session and the Assembly has a number of bills posted for consideration on 1/11/10 so it remains to be seen what, if any, action will take place on #A1628 on 1/11/10.  Yes, there would be an initial cost outlay.  However, passage of this Bill would be a positive thing for apartment owners and managers in the long run, as it would enable them to better monitor, control and recoup costs for water and sewer.  Let's hope that the Assembly gets to it and passes it and then it would be on to the New Jersey Senate.

Clarity in Construction Contracts Can Save Money

I ran across another post at Best Practices Construction Law blog that rings true for me.  It concerns the benefit of clear/concise legal writing but also touches on need for attention to detail and the benefit of having legal counsel review construction contracts before the job starts. (An "ounce of prevention is worth a pound of cure" is a truism that has stood the test of time and applies squarely to construction contracts.)  Matt touches on a couple of guidelines for drafting construction contracts and I agree with them all. One I would add: clearly define the draw schedule and documentation for same.  In addition, although not substantive in nature, here are a few pieces of information which every contractor should require in its contracts and which are very useful if/when lien claim or litigation has to be filed in NJ:

  • Identify fully the contracting party on the other side and its interest in the property.
  • Identify current/best address for the contracting party.  No PO boxes, if at all possible.
  • Identify as best as possible the location of the property, including lot and block if available.

The above information provides a great start for research that may be necessary before filing a timely Construction Lien Claim against a commercial property in New Jersey.


Property Managers Can Profit from Technology

Ran across some interesting survey results at The Property Management Blog from what seems like a relatively small sample.  The results should come as no surprise but it is still nice to see confirmation that successful companies leverage technology to increase market share and efficiency; this is especially true of industry-specific, integrated software.

What I found interesting was the percentage of respondents who do not use technology to track on-line leads and the findings questioning the effectiveness of social media.  By way of comparison on this last point, check out Eric BrownAccording to Multifamily Pro, Eric has done great things with Urbane Apartments in the Detroit/SE Michigan area using only social media since 2004.  So, maybe there is something to social media after all.

Here's another post from The Property Management Blog on the same issue; namely, using technology to increase value.