21. Straightening Out Tenancies

In the ownership of rental units, your entire in­come must come from tenants. You can avoid many of the mis­takes that I made if you resolve to resist temptation. The re­sulting long-run profits will be considerably increased by insti­tuting and maintaining the right rules, and attitudes between you and the tenants. The amount you clear each year can be doubled or halved, depending on your methods. Further, your enjoyment of peaceful, pleasant ownership can be established or precluded depending on how you establish your landlord-tenant relationship.

The technique of putting the tenant-landlord relations on a good working basis is really simple if you are prepared for a few things that usually happen at this time.

Invariably the tenants talk to one another about their feel­ings and futures under the new ownership. Their attitude to­ward you at this time will be governed by the possibility of rent raises. They generally expect the rent to be raised. Often they will ask you outright what you plan in this regard.
If there is a brassy tenant among them, he will usually boast to the others that he is going to make you toe the mark. He has listed a string of repairs that he will demand. Far from fearing a rent raise, he has it all planned how much more he is going to get for his present rent. In your relations with the other tenants the first principle is to stay away from them as much as possible. But you will avoid the brassy one even more. Perhaps he has poisoned the others. But you will bear in mind that this can be a pleasant and profitable relationship only if you start out right and thereafter keep things in line.

Above all, never fear a vacancy. If a tenant tells you he is moving out, simply request the proper notice in writing, giv­ing you the legal period in which to find a new tenant. In most states, under a tenancy at will, where tenants rent by the month and pay each month's rent in advance on the first day of the month, the law requires that the tenant notify you in writing on or before the first of any month that he will vacate on the last day of that month. We will establish written lease arrange­ments soon in the building but usually find the present tenants occupying as tenants-at-will. So when Mr. Brassy phones you to say, "I'm moving out," you reply quietly that you want him to send you written notice—any letter will do. Mention that you will arrange for a new tenant to move in. He may be wait­ing for you to ask him why. Don't. If he lists all the things that "he has been suffering with" as he paid this high rent, you should agree. Tell him he is right. The apartment is worthless, and he is doing the right thing in vacating.

Your handling of Mr. Brassy will have a salutary effect on your future relations with him, (if he does not vacate, and usually he won't) and, more important, with the other tenants, whether or not he moves out.

You must get things off on the right foot!

Some years ago, I rented a small store to one Leon as a corner variety-grocery. I mentioned to him that I'd like his phone number when he got one installed, and trusted he would establish a pleasant and lasting relationship with the local neighbors. He replied that he was NOT putting in a phone. Also, he warned me that soon I would hear a rumor that he is a mean and difficult neighbor. Intrigued, I asked him for an explanation. His answer taught me a lot, because similar to my relations with tenants with whom I must deal repeatedly for years, he sold to the same neighbors week in week out. He had learned by his mistakes in other locations to start off on the right foot. He now knew that he must establish mutually work­able and liveable relations, or none.

"First, I'm not putting in a phone because I've learned, the hard way, that this invites people to phone me to 'run over with a loaf of bread—it's an emergency—won't take you a minute.' After a housewife has bought from me for a while she will send little Junior over. 'Mama says give me a pound of ham and a quart of milk and she will be in tomorrow and pay you,' and I will gently but firmly refuse, with apologies. The woman will be furious. She will tell her neighbors, 'I spend thirty dollars a week in Leon's store and he wouldn't trust me for two dollars. I'm never going to shop there again!" She will avoid me for a few weeks but she will surely come back—this time with the money in hand or not at all. When I went broke at my last store, I had a fat book of accounts 'receivable' and if I had been able to collect M of it, I would have prospered. I'm going to start out on the right basis and KEEP it on that basis."

So whenever a tenant says he is moving, we reply, "Very well, please write me the notice and I will arrange for a new tenant to move in."

Above all, never placate nor make peace offerings or induce­ments. You may rely on it, such a practice is profitless and end­less. An experience my mother had, although a little extreme, was typical of what happens when an owner fears a vacancy and, as a result, establishes a wrong relationship.

We owned an Aunt Toby and lived in the middle floor. One day a Mrs. H. moved in to the top flat. She paid her first month's rent, $38.00, when she moved in, and one month later she knocked on our door, handed mother the rent and notified us she was vacating at the end of the month. Mother inquired why. Mrs. H. explained that there being no French doors be­tween the living room and dining room, she could not keep house as she wished and had heard of another flat where she would be happy. Mother asked if she would be satisfied if the doors were installed. Yes. Mother promised to have them in­stalled for her and she left, withdrawing the notice. I protested vehemently, but was told that the $100 or so it would cost to put the doors in was a lighter loss than having the flat redone and perhaps losing several months' rent during the vacancy. She made the common mistake of thinking that another tenant would probably want the same thing anyway, and it was best to install it since we would be forced to do so eventually. Then she threw in that argument that we should shun like the plague. "It improves the property, you'll have a better building for it." Of course, the next month Mrs. H. gave notice again. No dish cabinets in the kitchen, this time. Cost, $80. Then another radi­ator, and so on for five months.

At the end of six months, Mrs. H. vacated anyway. Inciden­tally, she claimed she had tripped on a step and sued for dam­ages, settling with our insurance company for a sum far greater than she had paid in rent during her stay.

You won't find many Mr. Brassys but if you should be so unlucky, you can benefit in your relations with the other ten­ants through your firmness with him. To submit would be to set an example that would require you to evict all tenants and start over again if the building is to show its proper return.

Immediately after taking title, you should send a short letter to each tenant, informing him formally that you are the new owner and, in effect, 'giving him his orders.' Here is a good ex­ample of the type of letter to use.

Dear Mr. (Tenant):

You are hereby advised that I have purchased the building at 38 Elm St. Will you kindly fill out the enclosed form for my records and return it to me within three days? In due course, you will receive our standard lease for your signature.

Rent for your apartment should be mailed so as to reach this office on or before the first of each month, and addressed to:
Yours very truly,
John New-Owner

Sometimes I enclose a few self-addressed envelopes to start the tenant off right, with the suggestion that she should obtain some more and address them accordingly. We enclose an appli­cation that we regularly use for new tenants, so that we may have a clear record of who the tenant is, where he works, and other pertinent information. In a few days, we send him two copies of the lease, for him to sign (both) and return for our signature. This process will be thoroughly covered in a later chapter showing how to get all tenancies on a firm lease basis. We are here concerned more with those methods peculiar to the new owner taking over.

In the matter of the time of rent payment, you have a good opportunity to implant the right attitude about your ownership. If you receive the rent as much as one day late, a short note should be sent, thus:

Dear Mr. Tenant:

Your rent did not reach this office on the first day of the month as required by law. Since I have precise obligations at the bank that must be paid on the exact due date, it is necessary that the rents reach me on time, so that I do not default.

Kindly see to it that the rent is mailed so as to reach me not later than the first of each month in the future so that I will not be required to write you again in this matter.

Yours very truly,

It is not uncommon for even non-brassy tenants to jump on a new owner with a long list of complaints. These are answered in the same manner as shown for Mr. Brassy. We agree that the place is worthless and urge, "You're quite right, Mr. Tenant. Best thing for you would be to move out, and we'll get someone in who likes the flat just as it is. No, I do not intend to improve it any. When you send me the written notice, I will make ar­rangements for a new tenant." Do not get into the natural has­sle about "Why have you lived there for fifteen years with your old landlord and not insisted on these things?" You won't get anywhere with this. Just suggest he move out. One thing I can unequivocally promise you. If he moves, he was going to move anyway. And you can and will re-rent if he moves out, to a tenant that is not demanding. But to give in is to guarantee that you will lose out on this matter, whichever way it turns out whether he moves or stays.
Your position is firm. The right relationship—or none. There will sometimes be a few repairs that are in the cate­gory of things you fairly should attend to. They are generally:

Defective plumbing (we will have more on plugged drains later). Electric fixtures that do not work. Leaky roof.

Inadequate heat (where furnished).

Any other similar breakdown that is not just an aesthetic matter but more a structural defect of the building.

When you get notified, as a new owner, of any of the above, you will NOT promise to correct the condition—only to check into it. If you get the hurry-up pressure from the tenant, do not let HIS excitement stir you. We do not jump at command. We will look into it when we get ready. Nothing in his urgency must be permitted to make us get excited. Usually the repair has been needed for months before you took over anyway. I have had a tenant excitedly call me and shout that the water is gushing and flooding the place. When I hurried over, expect­ing to see the furniture floating about, the faucet was dribbling.

Perhaps you may get the impression from the above that the ownership and tenant dealings are fraught with haggling and unpleasant argument. I have set out only the incidents out of my experience that best seem to exemplify the points I wish to make. It should be remembered that a dozen or so glaringly bad experiences are not significant in the whole picture. I owned up to 146 units at one time over a period of thirty-one years. I have picked out some incidents from these and from the thousands of tenant-contacts that my students and friends have had. On the whole, you will have years and years of the most cordial dealings with tenants, particularly in Aunt Tobys and similar units. It seems best to point out the horrible examples, so that you will keep the errors of your dealings to a minimum, but they are very rare considering the 145 good tenants versus the troublesome one. And I soon got rid of him. Generally, I had not rented the flat to Mr. Brassy originally. I acquired him with the building when I bought. Perhaps his attitude was one of the reasons the seller sold to me, so I am sometimes indebted to the bad tenant for making it possible for me to buy. I will soon either straighten him out or kick him out.

The wisdom of old Mrs. McGee, learned by intuition and experience, should be our guide in tenant relationships, par­ticularly where we are on an at-will basis. Remember it well. All that she learned is embodied in the five words.

"They stay to suit themselves. And if they don't be suited, they goes."
She made a street cleaner's $30 per week into a million dol­lars with that rule. It's good enough for me.

THE TEN COMMANDMENTS OF BUILDING OWNERSHIP

There are just a few general and specific bits of advice about holding which can be incorporated in ten simple rules. These are offered with the realization that temperaments vary. Some owners "improve" the buildings without end, and thus improve themselves into pennilessness. Some owners just "can't stand" the appearance of that back hall. This is not the routine "New-Owneritis." It is a permanent condition. These owners should never have gone into this business.

Then there are those who fail to discount the exaggerations of tenants. In this regard we must accept the fact that we as landlords, automatically induce a state of mind (and sometimes of dishonesty) that banks and insurance companies accept as normal. The bank is quite accustomed to the fact that when it sends out a statement to a depositor erroneously showing his balance to be much larger than it really is, the depositor rarely phones to call attention to the error.

Insurance companies are equally, if not more, accustomed to the same attitude among claimants. Typically, an insurance adjuster, who handles the claims of a cleaning and dyeing chain, said, "It's remarkable, if not amazing. Folks who have been coming into the store with $30 suits and hold menial jobs at $50 or $60 per week will file a claim for a lost overcoat. Almost without exception the overcoat cost $200 and was “only
worn twice.” We've never yet had a claim for an overcoat under $100. And most of them from slum areas. Nor are the claims of the middle class any different."

The nearest thing to an analysis of this is that people seem to lay aside their normal scruples and morals when dealing with banks and insurance companies. It is much the same metamor­phosis that takes place when a normally courteous considerate person walks through a department store, opens the door for a lady who happens to be passing out at the same moment, and behaves courteously to all about him. No sooner does he get behind the wheel of his car than he turns into a snarling beast. The selfsame woman for whom he opened the door may be occupying the car next in line. Now he blasts his horn at her, forces her to stall, et cetera.

To some extent the same lack of simple courtesy, and some­times honesty, obtains in the claims of tenants to their land­lords. If you are a person who tries to confine your statements to the simple truth, you are probably one who assumes this to be true in others. This can cause extensive loss and aggravation. You must develop a tolerant attitude. When a tenant complains about lack of heat, it is never "the heat didn't come on this morning. Will you look into it when you can, please?"

It is always a variant of this: "We haven't had a bit of heat in four days I I've caught a bad cold, and I think my child is getting pneumonia!" et cetera. You know full well that this tenant would not have endured even one day of lack of heat without calling you. The point is, let the tenant get excited. You stay calm. These ten rules are an effort to gather the most common do's anddon'ts into a simple code:

1. Never fear a vacancy. Get rid of the bad ones quickly. To submit to a threat is no solution to anything. To accept a hard luck story instead of rent solves nothing. If he's that kind, you will be called unpleasant things later anyway when your kind­ ness must be cut off.
   
2. Get a good tenant or none. It is far better to leave the flat vacant  another month or two, than compromise your require­ments. To take the unsuitable applicant because you dislikehaving a vacancy simply exchanges one headache for another.
   
3. Do not make any improvement or installation that is not needed to keep the building in good shape for the class of ten­ ant you will get. Avoid overzealousness to improve, spend, or repair. Second only to the pitfall of no. 1, this is the major cause of owners not getting rich.
   
   
4. Give good attention to repairs. See the need with your own eyes. Talk to other owners or contractors. Learn the best meas­ures for that type of repair. Except where you have a reliable mechanic, such as a carpenter, or it is a small repair, never give the job out on an hourly or cost-plus basis. The contractor may have to put a flat price on the job that is higher,  perhaps, than the hourly basis would cost, but it is better. You must know that the entire job, finished and workmanlike and properly guaran­teed by a reliable outfit, will cost a definite amount. Visit the job often while in progress and learn about it. Examine it upon completion, and if possible test it before paying the bill. It is common practice for a roof job to be paid for after the next heavy rainstorm.
   
   
5. Treat the tenants fairly. Supply the services and repairs to which they are entitled, and to the extent that the letting rea­sonably calls for. But
   
   
6. Never let the tenant's urgency become yours. Lack of heat, a roof leak, a burst pipe or other "life-and-death" emergencies must not get you excited any more than the phone company gets excited when you report your phone out of order. Nor for that matter does the hospital get excited when a call comes in that someone is dying.
   
   If there is a burst pipe, you will call the water department at once, asking for emergency shut-off. If there's smoke you will call the fire department. But you will invariably take the proper steps without hurry or panic. If a refrigerator does not work, you must not be stampeded by the threat that all the tenant's food will spoil. If the tenant had her way you would have a new $500 refrigerator delivered in ten minutes. But that is not your obligation. If you furnish a mechanical thing for her use, it is to be expected that there will be breakdowns. She must expect them. You will make the repair or service in due course — unhurried.
   
   
7. Never get involved in inter-tenant feuds. It is best to refuse to listen.
   
   
8. Never try to improve the standard of living of anybody.
   
   
9. Keep away from the buildings except for minimum inspec­tions. You  will be buttonholed if seen about the premises, and there never was an apartment of any class where a tenant couldn't find something he wants you to correct.
   
   Train the tenants to send the rent to you, preferably by mail, even if you must supply stamped envelopes. You can easily obtain a permit for the self-addressed type which you can give them generously and thus pay only a few pennies more than regular postage on those you receive.
   
   
10. Never sue anybody. You will avoid practically all need for it by following the practices learned here. At most you may want to file a small-claims action for rent occasionally, as a measure to teach a skipping deadbeat a lesson, and show the others in the town that you will not permit abuses, but that is about all. You do not need to employ a lawyer for the small-claims action. Talk to the clerk of your local court and he will guide you in bringing your suit. If you checked the tenant before accepting him, you will usually receive the money be­ fore the date for court appearance. If not, and he contacts you with a cash offer of settlement before the trial, you should take it if it is at all within reason. You have better things to do with your time than chase him for $1 a week.

And here's an 11th commandment that I learned from the same Mrs. McGee who gave us the rule in the first chapter. When a tenant is slow in paying the rent and offers promises instead of money, remember what she said. It needs no expla­nation. "If they can't pay one month, they can't pay two."

Are You Ready To Move Onto The Next Lesson? Click Here….