Robert Darrow, @properties

Archive for the ‘Property Management’ Category

One of our regular readers wrote to ask:

Do you have any advice (guidelines) for me when you have 2 tenants that are always complaining on each other?  The biggest problem I have is that it is usually hear-say with no supporting proof.  How do I handle?  How do I get this to stop?

Ahhh, feuding tenants.

If you feel like it, watch a couple episodes of “Super Nanny” to bone up on your parenting skills.  Sometimes keeping tenants is like having two-year-olds.  Don’t you wish you could have a “time out?”

Try to keep it simple, and try to stay out of it.  You are not a referee.

1. Tell your tenants that their first recourse if there is a disturbance that is serious is to call 9-1-1.  The police should break up a loud party, a domestic argument, super-loud stereo blasting.
2. Tell the tenants that they need to work it out amongst themselves.  Tell them you are not their parent.  And tell them to get it straightened out soon before you start receiving complaints from other tenants.
3. Finally if the two steps above don’t work, tell the tenants that if the complaint is serious, to write you a letter.  With specific details.  The day, the date, the time, and a very accurate description of what the other tenant did to disturb them.    With a detailed written complaint, you can issue a “10 Day Notice.”  You will write a “10-Day Notice” and deliver it to the offending tenant.

A “10-Day Notice” is a scary looking notification that basically tells the offending tenant that they have 10 days to “knock it off.”  If there is another disturbance within the 10 day time period from when you give the 10-day notice, then you can cancel their lease and tell them to move at the end of the month.  But if the offending tenant doesn’t cause any disturbance in the 10 day period, then the notice expires.  And then you start all over again.

The “10 Day Notice” is a specific form. (Email me if you need your own copy of a 5-day/10-day notice.) Some highlights on the form for you to pay attention to:

• you will check box #2,
• date it approximately midway down
• Sign where it says “Lessor.”

On the “Proof of Service section:

• Fill in your name (or the name of the person you hire to deliver the notice)
• Date the next line
• Check the box for “By delivering a true copy…”
• And EVERY TIME you visit the property to try to give this “10 Day”, you will write in the date and time under “Attempts at Service” including the time you actually deliver the notice.
• Sign the blank line at the bottom.

You will bring TWO COPIES to the building each time.  1 copy in case the tenant is home.  Leave 1 copy with the tenant.  Take one copy with you.  They need to be the same. 

And if it turns out you will want to terminate one of the leases, you will need your copy to bring to court and show the judge to prove that you gave the notice to the tenants.

A regular reader wrote with a great question, so I thought it would be a great post on what to do when you wish to convert Month-to-Month leases into standard 12 month agreements.

My father owned a 2 story house with an attic and  basement. He lived in the attic area and rented the basement, 1st and 2nd story. He recently passed away late 2008 and I have been managing his estate since that time. The middle of last month (March) the estate was finalized and I am now the new owner of the building.

There are currently 3 renters in the apartments however my Dad did not have a lease agreement with the tenants. They have been renting month-to-month. Another fact is that 2 of the renters have dogs.

Now that I am the owner of the building I want to ensure that I am in complete compliance with all the rules and regulations (thanks for all your material) required in the Chicago area.

The first think I want to do is establish lease agreement with each one of the tenants.

Questions:

1. Since they are currently month-to-month do you foresee any issue with me issuing lease agreements since now I am the new owner? How much time to I need to give them to review?
2. I would like to indicate in the agreement that pets are no longer allowed. How long do I have to allow them to comply with this new requirement? Or would I have to grandfather the existing ones?
3. Do you have any other advise that I may need to consider?

Month to month leases run from the beginning of the month to the end.  And the terms can be changed at any time before the next term ends.  For example, today is April 8.  You could send your tenants new written leases right now, and the terms would apply on May first.  You are not required to give any more notice to change the terms of the month-to-month lease than the beginning of the month.

But if you wished to demand that the tenants move, you might be required to give 30 days notice, and you can’t cut a lease term in half.  So if you wanted the tenants to move out, you could give notice any time between now and the end of April that the tenants are required to move at the end of May.

Yes, you can tell your tenants that you don’t allow dogs.  And you could tell them that the dogs are not allowed effective May 1.  In reality, your tenants are probably not going to get rid of their dogs.  And if they did, it would take longer than the next three weeks to do so.  So you may try one of two options.

1. Notify the tenants that you don’t allow pets anymore.  Their current pet is "grandfathered" in the lease.  But they are NOT permitted to get another pet, or any more pets.
2. Notify the tenants that you don’t allow pets anymore, and you want them to get rid of their pet in 30/60/90 days.  But there’s a chance the tenant won’t want to give up their pet, and they might move out.  That’s a risk.

You should deliver the new written leases as soon as you can.  Do so whether the new lease is a month-to-month or a 1-year lease.  And include a letter that tells the tenants that their current leases are terminated.  And that if they do not return the new written leases, their current leases either (a) terminate at the end of May or (2) the rent goes up by some ridiculous amount of money.  You choose one or the other. It doesn’t matter which.

The City of Chicago Residential Landlord and Tenant Ordinance (RLTO) requires the City Comptroller to set the rate of interest to be paid on security deposits held by landlords. The rate is calculated annually based on a formula tied to actual market rates.

The new rate for 2010 of 0.073% applies to all residential rental agreements in which the lease term begins from January 1, 2010 to December 31, 2010. The amount of interest paid on security deposits is determined by the rate in effect on the date the lease term commences.  Owner-occupied buildings of six or fewer units are not required to pay interest on security deposits.

City code requires that a general summary of the RLTO and a separate summary on security deposits, including the required rate of interest, be attached to each lease.  Revised summaries containing the new rate of interest are being printed and will soon be available from CAR. Copies of the revised summary will be sent to each CAR office as soon as they are printed. These revised summaries should be attached to each lease executed during 2010.

Your Guide’s mind reels knowing that there’s an entire city bureaucracy devoted to making sure Landlord don’t screw their tenants out of their 66 cents (on a typical $900 security deposit.)

It’s budget season for condo and Home Owner Associations.  And it’s nearly snow season as well.  One of the great conundrums facing condo and Home Owner Associations is how to budget for snow removal.

Some companies offer snow removal services for a fixed cost.  But Your Guide’s advice is that those fixed cost contracts usually cost more than their worth.

But how does an association know how much to budget for snow removal costs?  Here’s a handy guide courtesy of Tom Skilling at the Chicago Tribune and WGN TV.

On average, Chicago receives at least a half-inch of snow 17 times per snow season.  Snow storms in the range of 1 to 3 inches occur about 7 times;  4 to 6 inches, once; more than 10 inches, about once every other year.

A note of caution:  The number of storms that might occur in any given snow season varies greatly from year to year.  The extreme winter of 1978-1979 put down 10 snows in excess of 4 inches and a season total of about 89.7 inches.

At the association where Your Guide lives, we tell our snow removal contractor not to come out until snow reaches 2 inches.  Over 1/2 inch but less than 2 inches, the contractor puts down salt.  The salt application costs our community around $850.  A snowfall from 2 inches to 5 inches costs about $2,300.  Bigger snowfalls cost more.

In reality, our snow costs should come in at $25,000.  We have a budget for $35,000.  That’s $10,000 in extra play in case the weather is exceptionally bad in a given year.  Last year was insane, and we even blew the budget.  But there’s no way you can adequately prepare for a wild winter like last year’s.  In the case of a crazy storm season, you simply have to ask the residents if they’d like the Association to cut back a bit?  Or pay to cover the extra expenses?  Either way works depending on the desires of the residents.

Now you can do the math:

• How much will your contractor charge for a light snow or a salt application?
• How much for a snow removal in the 2 to 5 inch range?
• How much for a snow removal in the 5 to 11 inch range?
• How much for more than a foot of snow?

Multiplied by:

• 17 x the low cost (or zero if you can live without pushing this snowfall)
• 7 x the price for 2-5 inches
• 2 x the price for 6-11 inches (for good measure)
• 2 x the price for a foot or more (for good measure)
• Add 30% so you have a fudge factor.

Piece of cake!

Other snow related articles:

http://www.yourwindycityguide.com/?p=1816

http://www.yourwindycityguide.com/?p=1759

Your guide received condominium documents over the weekend for a buyer who just went under contract for a very cool loft in Chicago’s South Loop neighborhood. 

When you buy a condo, you are entitled to a giant stack of documents that you get to look through as part of the discovery process – learning everything there is to know about the association, the building, the finances – pretty much everything about the building.

In this building, the financial disclosure revealed a 13th month assessment that the association uses to build up its reserves. 

13th month assessments were devised as a rather clever way to build up a bunch of money in savings rather quickly and without too much pain on the part of the members.  Often times, 13th month assessments are enacted for only one year, or perhaps two.  Usually just for a few years at most.

The way they work is the association bills the home owners for one extra month worth of assessments at some point during the year.  Many times right at the beginning of the year.  Equally as often at the end of the year.  Since the first or the last month of the year usually coincide with the Holiday Shopping Season, I’ve seen a few associations bill the extra month in June.

In my example, we discovered that the 13th month assessment is due on November 1.  This cleverly is one day after we are scheduled to close.

Two problems:

Our contract has a paragraph where the seller of the condo swears that there are no special assessments.  And that if there ARE any special assessments, details who is supposed to pay for it.  In our contract, the seller indicated that there is NOT a special assessment, and the rest of the paragraph is scratched out.

So on the very first month of his ownership, my buyer (theoretically) gets whacked with a special assessment.  Of course, as a practical matter, we’re going to require the seller to pay the assessment since it has been planned for all year long, and the seller failed to disclose it.

My second problem is that this budget trick makes the assessments look better than they are.  In our example, the advertising and the MLS say our assessments are $270 per month.  But if the association uses a 13th month assessment year after year, the TRUE assessments are 10% higher – or a little more than $300.  When comparing this unit to others in the neighborhood, typically, the one bedrooms have assessments in the $250 per month range.

In fact, in THIS buyer’s instance, I searched out condos with assessments LOWER than $300 per month.  And the budget trick allowed the marketing to reflect the false (lower) figure.

It’s the duty of the manager as well as the board of an association to accurately show the true condition of the association, both physically and financially.  The 13th month assessment scheme does mask the true financial picture for the association, and in that regard, Your Guide is not a fan.

Your guides are privileged to belong to a great travel club (actually, several) where we host people from all over the world, and are able to take advantage of others’ hospitality as well.

(For your enjoyment, check out Hospitality Club and Home Around the World)

We just dropped off Phillippe and Eric from Guadeloupe. Sainte Rose, French West Indies, Caribbean, to be exact.  Phillippe and Eric spent a couple days with us over the weekend, and will return to Chicago on October 1 for a few extra days in Chicago. 

The guys are currently the caretakers for a lovely guest house in the jungle on the island – opposite side from the beaches. They restored this gorgeous plantation built in the 1940′s into a Bed & Breakfast along with Rum Distillery.   Along with the guest house, there are a couple cottages, and a larger apartment on the property for guests.  Vacations as well as long term rentals are available.

We didn’t have the chance to really get into what this kind of gig pays.  But when they’re back, you can bet we’ll be getting nosy all up in their business to see what’s what.

Of course, this begs the question:  What in the world are we doing in Chicago when the simple life in the Caribbean beckons?  I think we have the necessary real estate and marketing experience to make a solid run at Property Management in the Caribbean, don’t you?

I think we’re going to need some instruction on Rum Distilling.  But you can probably gather that we’re willing to learn…

A co-worker of mine wrote today to ask:

A high-rise does not allow a washer and dryer to be installed.  But my client still wants to put one in.  She doesn’t care that they aren’t allowed, and is adamant about putting one in.

Do you have any insight into this?

Have you had a client put one in?

What are the fines if they get caught?

Also, in a high rise, does she need the building engineer to shut off water to the unit or can she do it on her own in a utility closet? The building is an old school building on Sheridan Road.

This is just about the worst idea possible for a resident in a high rise.  This ranks up there with setting up a charcoal barbeque in your bathtub (an actual event in Mr. Steve’s property management past.)

There is no more possible potential for damage than from water.  Perhaps fire.  But those are #1 and #2.  If anything were to ever go wrong (and with a washing machine something will eventually go wrong) the potential liability is staggering.

But first, let’s answer the question about whether a machine can be installed.  When permitted, yes, a laundry hookup is possible.  Find a wall with a closet that has a water supply and drain pipe nearby, and a contractor can tap into the supply and drain and hook up a laundry connection.  This costs around $4,000 in a typical Chicago high-rise.

Why do some buildings prohibit them?

Because either the water supply, or the drain, is inadequate.

Here’s the interesting part for our client above:  even if hers is the only machine in the building, if the drain pipes are not large enough in diameter, suds and soapy water will not drain fast enough, and will back up into her unit, the units below her, the units near the ground floor, and possibly the units above her.

This is a certainty!  Not a hypothetical event.

What if our client above is still willing to take her chances?

• First, if the association finds out about the machine, they will order it removed.
• Second, if not removed, they will fine her.
• Third, if our client refuses to pay the fines, she’ll get sent to collections.  And the costs for collection attorneys will get added to her grand total.
• Fourth, if she still refuses to pay the fines, the collection attorney will file suit to collect the fines and costs.
• At her court date, a judge can grant possession to the association, who then can evict the owner.
• After the owner is out, the association can pay a contractor to remove the machines.
• And finally the association can rent out the unit to pay the back fines, back assessments, collection costs, court costs, repair costs, and the costs associated with renting the unit.

What if the machine actually floods the units below?  This is where it gets ugly.

• It’s likely that a rubber supply line will eventually rupture.
• Or that soapy water will burst forth from nearby residents sinks, tubs and drains.
• This will ruin the walls, floors, carpeting, belongings and mechanical systems of those units.
• And if the hose bursts while you are out, water will continue to flood units below the one with the washing machine installed beneath it.
• Your insurance carrier requires that residents follow the policies and rules for the building.
• The building has not approved the installation of the washing machine, and will actually offer to testify that your installation completely violates the policies for the building against you.
• Your insurance carrier will deny your insurance claim, and the claims of all the residents whose units had damage done by your machine.
• The association will sue for damage to everything that is common that the water ruined.
• Every single neighbor that is affected will sue for damages to their unit and their belongings.

I have seen water damage estimates in high rises in excess of $1-million.  Pretty much your entire net worth is at risk just for the convenience of not riding the elevator to do your laundry. 

Not really worth it; wouldn’t you agree?

Chicago real estate firm @properties today announced the acquisition of Chicago property management company Venterra Management Corp. The move paves the way for @properties, the city’s largest independent real estate broker, to expand into property management and condominium association management in and around Chicago.

Venterra, which was active in Chicago property management for more than 30 years, will be renamed @properties Property Management. The company currently manages approximately 800 condominium units and several hundred thousand square feet of commercial real estate on Chicago’s north and south sides.

@properties co-founders Michael Golden and Thaddeus Wong say they will look to quickly expand the company’s management portfolio targeting condominium and apartment communities of 30 units or more, shopping centers, neighborhood strip centers, and office and industrial properties in the city of Chicago and surrounding suburbs.

“Expanding into property management and condominium association management is a natural move for us. We know we can create value for our clients by leveraging our brand, our network and our industry-leading marketing and technology,” said Wong.

“Commercial and residential property owners, asset managers and condominium associations will benefit from our team’s experience and from the high standard of service that has always defined @properties. Our goal is to set the bar, to be the premier Chicago property management and condominium association management company,” said Golden.

Golden and Wong announced that they have hired Steve West as managing director of @properties Property Management. West, a former @properties sales agent, most recently worked as a property management professional in Chicago. Golden and Wong also named Michael Rourke vice president of commercial management. Previously, Rourke was vice president and director of retail services for Venterra.

The existing staff has experience in residential and commercial property management, condominium association management, finance and accounting, reserve analysis, construction management, on-site operations, architecture and structural engineering.

The company will offer a full menu of services including: property staffing, financial reporting, assessment collections, budget preparation, property maintenance, emergency services, condo board relations, vendor and subcontractor management, management of association-owned rental apartments, and tenant/owner communications.

The formation of @properties Property Management is the latest in a series of moves by @properties to offer expanded services to a growing client base. Last year the company launched @properties Relocation, a corporate relocation division, as well as @properties Commercial, a commercial brokerage and investment-sales division. In April 2009, the company announced the creation of @properties Institutional Services Group, a boutique division set up to serve institutional clients that own or invest in distressed real estate and Chicago real estate foreclosures.

“@properties Property Management dovetails well with our Institutional Services Group. We now have the ability to offer an investor, asset manager or financial institution a single point of contact for stabilizing, managing and selling distressed and bank-owned real estate in Chicago,” said Golden. “Our development-marketing experience also puts us in a unique position to help condominium communities make a smooth transition from a developer-run association to an owner-run association.”

“Today, our clients aren’t just looking to sell or acquire an asset. They’re looking for complete solutions to complex real estate problems, and frequently that involves a property management component,” said Wong.