5 Things That Get Landlords in Trouble in Michigan

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5 Things That Get Landlords in Trouble in Michigan

Buying a house and renting it out sounds simple. Really--it is—but the government, as usual, steps in and mucks things up. The following are five things that the RPOA frequently finds rental property owners and managers get confused about.

1. Section 8—do you or don’t you have to “accept” Section 8 or participate in the Section 8 voucher program. The Feds say Section 8 is voluntary for the landlord—but, unfortunately, local law trumps the Federal law according to several Federal court rulings regard Section 8 fair housing issues. Many municipalities have local laws regarding fair housing. Most larger communities have fair housing laws that include a protected class known as “lawful source of income.” Under these laws, landlords are prevented from using the source of the prospective tenant’s income as a reason to deny them a rental. Lawful source of income is further defined as including public housing subsidies and specifically Section 8. Ergo, denying a rental to someone solely on the basis Section 8 is not allowed. So, how do you handle this situation? Never tell someone you don’t accept or participate in the Section 8 program. Establish the legal criteria you wish to use to screen applicants and apply it to everyone equally—including those with Section 8 vouchers. Select the first tenant that passes your criteria.

2. Bed Bugs—who’s responsible? Depends on whether or not your rental is subject to local ordinances that stipulate who takes care of rodents and pest. If your community uses the International Property Maintenance Code (IPMC) the responsibility goes like this: If it is a single family home, the landlord must provide a rodent and pest free unit to a new tenant and the tenant is responsible for rodents and pests thereafter—including the cost of extermination. When a multi-unit building is involved, the landlord is responsible for providing a rodent/pest free unit upon move-in and the responsibility thereafter is a shared by the tenant and landlord. Tenants are required to maintain the units in a clean manner and to alert the landlord if rodents or pest are found…in either case.  In the absence of local laws, State laws require the landlord to maintain the unit in a habitable condition--regardless of who is responsible. (On December 8, 2016, a bill was passed out of the Michigan House that would make the responsibility for who pays for the cost of bed bug extermination up to a judge. The RPOA is opposing this bill.)

3. Transfer of Certificate of Occupancy/Compliance—does it or doesn’t it transfer to the buyer. The long and short of it is this: it depends on the community and local code. In Grand Rapids, Michigan, if a new certificate has been issued within 90 days of the closing date, the certificate and the remaining time left on the certificate transfers to the new owner. However, the new owner must still register the property in their own name. In other communities the cert may transfer or it may not. It really pays to add this to your checklist of things to look out for prior to close as it can make a huge difference in rehab plans.

4. Renting out rooms…can you or can’t you do it? What about renting “per head?” In Grand Rapids, the zoning code does not allow the rental of individual rooms except in “boarding houses.” The owner of the property must live in a boarding house in order for it to qualify. Can you charge rent “per head?” Yes, you can; however, doing so puts your rental unit at risk as a lease agreement should stipulate that each individual and everyone together is responsible for everything on the lease (legally called severally and jointly responsible). Furthermore, courts don’t like evicting individuals—for practical reasons—and may deny an eviction that doesn’t include everyone. Check with your locality before using either approach as part of your investment analysis.

5. Security Deposits—not returning them within the legal time frame. If you need to return the security deposit—or a part thereof—to your previous tenant, you must do so within 30 days after the termination of occupancy by the tenant and also send them a Notice of Damages. If not, the previous tenant could sue you for violation of the Landlord-Tenant Relationship Act. If the previous tenant either verbally or in writing disagrees with how you handled the security deposit, you must sue the previous tenant to keep the deposit or any amount thereof within 45 days of termination. (The only time you do not have to send a Notice of Damages is for past due rent—however, the 45 day rule still applies if the previous tenant disagrees.) It’s best to get in the practice of always sending the Notice of Damages and any security deposit to be returned within 30 days. And, don’t wait around to start your small claims case if they disagree with you—unless you work out a deal in writing that satisfies you and your previous tenant. (Note: As crazy as it sounds, there is nothing to prevent the previous tenant from suing over the security deposit—even if they have agreed in writing to its disposition. The law leans heavily in favor of tenants.)

As always...best investing to all...and to all a good night.