OR - Renting to Residential Program for Adults with Disabilities?

Question

Hi all - I posted this question in an old thread but I don't think it's getting as much traction as a new post. Here's my situation:

I am a first time investor, about to rent out my current home (3BR/2bath) in a A-/B+ neighborhood of Gresham, a suburb east of Portland.

A company reached out to me about renting out our property. They run an Adult 24-Hour Residential Program for adults with disabilities. Tidbits of what we know:

• It sounds like 3 program participants would stay here (potentially alone without supervision, Worth mentioning I don't know the participants yet as they have not yet been selected).
• The participants have a highly structured day where they would leave early in the mornings. The business states that they're focused on keeping these participants very active and doing things, so they wouldn't be there much of the day.
• The business also said that the house is kept very clean, as the state can do a surprise inspection at any time. In fact, the company will have to do modifications to the house after being selected, so the house could be empty for a few months (potential improvements made to the house at no cost to me?).

My questions:

• Does insurance change for me in this situation? If so, what do you suggest I get?
• Would I end up dealing directly with the state or whomever is giving funding? Or do I just directly deal with the business?
• How do I handle application fees ($50 per person) based on only having the business apply, vs 3 residents (who probably wouldn't have much of a credit or rental history anyways)?
• Is it reasonable to increase the monthly rent based on leasing to a company instead of an individual? If so, what would you recommend?
• Advantages/disadvantages about a longer-term lease in this situation?

Thanks all - this was something I was not prepared for, so happy to have your insight.

John Mocker · Answer

Patrick

I would definitely check with your Insurance Carrier.  I suspect that you will need to rewrite your policy to a commercial policy (BOP or Package).  The next suggestion is to find an attorney who is knowlegable on this industry.  There are Zoning, ADA, Safety, etc.. laws that may impact you.  Also, you need an atty that is able to help you draft the lease agreement.  In that agreement you want to consider clauses that push back on the company renting as much liability as you can.  Examples that the atty may suggest are:

-  Hold Harmless and Indemnification clauses

-  making you an additional insured

-  Waiver of subrogation

-  Making the Tenants Insurance Primary & Non-Contributory

-  Requiring their carrier give you 30 day notice of cancellation

You will probably want to spell out what coverage they must have such as

- Workers comp

- Professional Liability

- General Liability

- no exclusion of Molestation

You may also want to find out what agents insure Group homes, Nursing homes, etc.  They may not be necessary to get coverage for your building but may offer knowledge on what to require of the Tenant.

Good Luck with the project

Jay Hinrichs · Answer

Also check with city on permitting.. I was looking at building a few group homes on corner lots I own.. and figured I can get more money for them than just a standard sale. but was stymied by permitting.  this was lake Oswego..

Christopher Gee · Answer

So this is becoming less specific to the residential program and more of a newbie landlord question:

• If I accepted this application at the same time as another renters application, and the other renter meets all of my requirements, can I simply state that someone else met my minimum requirements first?
• And at this point, I've done a lot of research and due diligence regarding the residential program app. While it certainly seems like an interesting opportunity, it's just a can of worms I'm not able to open (more fully) at the moment (like the possibility of zoning, insurance, etc). Enough of a reason to decline them?
• Lastly - if I decline them based on someone else meeting requirements first, am I going to need to refund their application fee?

Thanks all!

Patrick M Nichols · Answer

It depends on who the parties to the agreement will be. If it’s a corporation (non-profit, for-profit, or government agency), then no protected class implicated. However, if the negotiations contemplate a standard residential lease with the disabled individuals being represented under a power of attorney, then they are a protected class. There are multiple scenarios to consider without more specific facts.

I think so long as you apply objective criteria (e.g., first to apply, first to tender a deposit, etc.), then you are fulfilling your legal duty to not discriminate.

Jay Hinrichs · Answer

to me and I am no expert here at how to handle renters or applications.. but I don't think commercial prupose like this is a protected class.

Christopher Gee · Answer

@Patrick M Nichols, @John Mocker, @Jay Hinrichs - thanks for all of your feedback. Some of the things you mentioned I was already running down, and some are new (zoning - eek!). Digging into all of it and will get back to y'all here.

As a first time landlord, I have another question. How does the timing of an applications figure in the scenario of "first renter that meets my rental criteria" to not discriminate? They were one of the first applicants, so I'm curious on how to handle this.

Patrick M Nichols · Answer

I think this is a great opportunity to make money and help make your community a better place at the same time. It is difficult to say though based on the limited information provided what precautions you should take.

1. Insurance - you should ask your insurance company about any special requirements they might have. You might need to get an errors and omissions policy to fully cover yourself. Keep in mind that the company or even your state may have additional requirements.

2. Parties - this depends on the deal itself and it is a key fact you'll need from the prospective tenant. Often times with assisted living the party you are dealing with is a state contractor, however I have seen situations where the contractor is merely acting on behalf of the disabled person and you sign with the disabled person directly. If that is the case, ensure that the agency has a valid power of attorney before you negotiate with them.

3. Applications - again this depends on who you are dealing with on paper. If you are dealing with a company rather than an individual, I would do some due diligence as to their reputation, how long they have been in business, and what professional licenses they hold. Typically companies will need to hold some kind of state license and you could put a call into the state agency that oversees them. Since their license is their lifeblood, then they often keep their nose clean but you should always confirm that for yourself.

4. Rent - you should be careful here as you could have a problem with housing discrimination. You may want to speak with an attorney that has a background in disability or housing rights to make sure that any increase in rent has a legitimate basis and is not simply a discriminatory tactic.

5. Advantages to a long term lease are fairly self-evident. The disadvantage is that you will not necessarily be able to reprice the rent as easily to market rates, so if you are in an appreciating area there could be drawbacks. However, the mere promise of having a long-term tenant probably outweighs that disadvantage. Another disadvantage is that they may require a higher degree of maintenance than a non-disabled tenant, but that's not necessarily the case.

I actually think you have a real opportunity to be a good neighbor and get a solid return on your investment. Good luck!

OR - Renting to Residential Program for Adults with Disabilities?

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