JUNE 2019

The Big Takeaways from the 2019 Legislative Session: Landlords Need to Get Prepared
Pool Rules: Good Intentions Can Create Bad Results

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Volume 20 • Issue 6

JUNE 2019

Landlord

News

3600 South Yosemite Street Suite 828, Denver, Colorado 80237

thsnews@thslawfirm.com www.thslawfirm.com

Denver Phone 303.766.8004 FAX Completed Eviction Forms To: 303.766.1181 or 303.766.1819

Colorado Springs Phone 719.550.8004 FAX Completed Eviction Forms To: 719.227.1181

**ATTENTION: Special Callout**

The Governor signed the new 10-Day

Demand Bill into Law on May 20, 2019.

All RENT, COMPLIANCE, &

NOTICES TO QUIT FOR REPEAT VIOLATION DEMANDS

posted on or after that date must include the new 10-Day cure period.

If you served one of these as a 3-day demand after May 19, 2019 you MUST RE-SERVE.

‘THS’ will NOT be filing any 3-Day

Demands served after May 19, 2019.

The only exception is Notice to Quit for Substantial Violation or Notice to Quit.

Note: Federally Subsidized Properties must still serve an “Exhibit A” Federal 10-Day

Demand in addition to the THS 10-Day

Demand.

Additionally, any fatal technical errors in the demand will require you to re-serve the demand. Send your demands to THS AFTER the demands have expired but double-check for these common technical errors:

Incorrect Address (Including wrong street ending, direction, unit number, city, and zip code)

Missing signature of preparer or date of preparation

Incomplete Return of Service including date of service

Some leaseholders not named OR additional non-leaseholders named (such as children under 18 or unauthorized occupants)

THE BIG TAKEAWAYS FROM THE 2019 LEGISLATIVE SESSION LANDLORDS

NEED TO GET PREPARED

In the 2019 legislative session, the Colorado General Assembly gave Colorado landlords a historic beating. The only good part of the session was when it ended so that the General Assembly couldn’t pass further bills detrimental to landlords. The new laws significantly impact operations and finances. The full impact of the new laws won’t be determined for quite some time. Only time will determine how tenants change their behaviors, how landlords react, and how court’s rule on many aspects of the new laws that are far from clear. No one size fits all solutions are available. Landlords will need to review existing eviction, application, and maintenance policies and make desired or necessary adjustments. We can’t possibly address all aspects of the new laws in this short article. In recent weeks, we have had the pleasure of educating thousands of clients on these issues. The full-length class was nearly three and half hours. Accordingly, much longer and individual conversation will be required. But this month we will address the most important aspects of the four new laws, and our recommendations for moving forward toward compliance.

We will start with HB-1118 (The Right to Cure Bill). This law became effective immediately upon the Governor’s signature on May 20, 2019. Since the real goal of proponents was not to postpone or delay evictions but to eliminate them, the bill should have been called the “Delay or Eliminate continued on page 2

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THE BIG TAKEAWAYS FROM THE 2019

LEGISLATIVE SESSION – LANDLORDS NEED

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Eviction Act of 2019”. This law increases the rent demand period in Colorado from 3 to 10 days. The law contains a small narrow exemption for certain single family (SF) units by creating a 5-Day Demand for Rent which we will discuss offline with our SF clients. The biggest impact of this law is to further significantly shift the economic risk of non-paying tenants onto landlords. The law accomplishes this by increasing by 233% the amount of time a non-paying tenant can occupy a rental before a landlord can commence eviction.

THS did everything it could to get this bill to be more reasonable. The average rent demand period in the U.S. is 4.89 days. In the end, this bill passed because its proponents lied about the number of evictions in Colorado. “Evictions are way up in Colorado”. “Colorado has one of the highest eviction rates in the country”. What was amazing was that they were able to get away with this despite clear and undisputed numbers. In reality, evictions are much higher in other parts of the country, and have dropped by over 22% since the high mark in 2007 despite Colorado’s population increasing by 18%. The bill’s supporters also pushed the narrative that there would be fewer evictions if tenants were given more grace (time to pay). Because most landlords already accept payment up to and even beyond eviction court dates, this narrative is false in most instances as well. As we testified, it’s not a lack of grace problem, but rather an inability to pay problem.

What should you be doing in response to HB1118? First, evaluate your current delinquency process. Determine if you can take any practical steps to reduce the number of days or to prevent leakage of further days. For example, if rent is due on the 1st and late if not paid by the 5th, you may want to change your lease, so rent is late if not paid by the 3rd. It seems like a small change, but the

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POOL RULES GOOD INTENTIONS

CAN CREATE BAD RESULTS

With warmer weather comes the opening of pools along with client questions regarding appropriate pool rules and pool signs. When it comes to Pool issues there are few absolutes and ‘pool rules’ issues for multi-housing family providers can be confusing, particularly when it comes to Fair Housing. Most, if not all, of the pool rules we see that violate the Fair Housing Act were not written to intentionally discriminate against a protected class although that became the unintended outcome. In fact, pool rules are usually written with the intention of creating a safe environment or preventing physical injury to residents. However, Fair Housing enforcement goes beyond the intent of the rule and examines the possible impact of the rule. According to HUD, as long as the effect is discriminatory, the rule will be regarded as discriminatory.

Many clients are surprised when we advise them that swimming pool rules can cause serious problems under the federal Fair Housing Act. It only seems reasonable for a property manager to impose rules that regulate or limit access to a swimming pool, but some courts have held that rules that restrict or limit an access to a pool on the basis of age violate the Fair Housing Act’s prohibition against discrimination on the basis of familial status. In this age where lawsuits seem to be filed over everything, common sense is often the casualty. It is ironic that today, rules promulgated by a multi-family housing community for the purpose of risk management can inadvertently result in litigation– not over injury or drowning but over the rule itself on the grounds that it is discriminatory.

It is okay to set behavior rules for your pool, particularly for safety reasons, but make sure the rules don’t target a specific group, such as children. For example, instead of saying “Children may not run or engage in roughhousing at the pool,” say, “No one may run or engage in roughhousing at the pool.” It’s okay to ban disruptive, dangerous behavior as long as you ban everyone from doing it. ‘Adults only’ pools or swim time are almost certainly violations, in that such rules are based on age and not swimming ability and are viewed as discriminatory. According to court rulings, rules that restrict or single out

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THE BIG TAKEAWAYS FROM THE 2019

LEGISLATIVE SESSION – LANDLORDS NEED

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difference is significant. When rent demands are served on the 4th, they expire on the 14th. When rent demands are served on the 6th, they expire on the 16th. This is a 12.5% difference.

Similarly, executing on time (serving rent demands on time with no delays) and paying attention to the calendar can really add up. If you can serve on the 4th but don’t, you can lose a couple of days on the front end and a couple of days on the back end because the notices now expire on a weekend. When 2 days turns into 4 days, now its a 25% difference in the amount of time. With a 10-Day Rent demand each and every additional day lost is significant. If after a couple of months 80% of your tenants are paying the rent after the 10th of the month, you may want to consult with us about other strategies. If you want to have that conversation now, please let us know.

The second major bill enacted this session was HB19-1106 (the “Application Fee Bill”). This bill becomes effective on August 2, 2019. The biggest impact of HB1106 is to significantly regulate the application process including how much landlords can charge. Landlords would not think so but limitations on application-related charges could potentially impact financials because of how the law defines application fees. “Rental Application Fee” means any sum of money, however denominated, that is charged or accepted by a landlord from a prospective tenant in connection with the prospective tenant’s submission of a rental application or any nonrefundable fee that precedes the onset of tenancy. “Rental Application Fee” does not include a refundable security deposit or any rent that is paid before the onset of tenancy.

What should you be doing in response to the Application Fee law? You should be conducting a detailed review of your current application process. This review should include your current rental criteria, your current application language, preparing a list of all application-related charges (meaning every penny charged up to and including when a tenant signs a lease), and preparing for a conversation with continued on page 4

POOL RULES GOOD INTENTIONS CAN

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children can be facially discriminatory.

Examples of some pool rules that courts have deemed unlawfully discriminatory include:

Children under the age of 18 are not allowed in the pool area any time unless accompanied by their parents or legal guardians (children 15 years of age can be certified Red Cross lifeguards and demonstrates why this can be a discrimination issue not a safety issue)

Adult only use of the pool after 6:30 p.m.

Adult only swimming between 5:30-7:30 pm

No Children in the pool area until 10:00 a.m.

Children must be potty trained to use the pool (you can devise a rule requiring non-potty trained children to use waterproof pants or diapers and not discriminate)

All of these rules could be rewritten to be more neutral and deemed non-discriminatory while still addressing issues of safety, health and access.

Frequent Fair Housing issues for apartment communities not specifically related to children or familial status discrimination concern the banning of wheelchairs and or service animals in the pool area. Obviously, items with wheels can be dangerous around pools. If you decide to ban such items, exclude wheelchairs from the ban. People who use wheelchairs need them to gain access to your pool, and if you ban wheelchairs from the pool area, you could be accused of discrimination based on disability. Instead, set a rule that says: “No bicycles, tricycles, scooters, skates, strollers, or carriages are allowed in the pool area.” It is okay to ban bicycles, scooters, and skates because they are not necessary for access to the pool, and because they create genuine safety risks. And it is okay to ban strollers and carriages because tenants with babies have other options, such as infant carriers, that they can use to bring their babies to the pool.

Pets can also be dangerous around pools. Pets may bother other tenants and cause safety and health concerns. But if you decide to ban pets, you cannot include guide, service, and companion animals in your ban, or you could be accused of discrimination based on disability. So, make sure your rule says that animals

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LEGISLATIVE SESSION – LANDLORDS NEED

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your rental screening provider. You need to also clearly set forth the fees and charges that are collected and imposed if a tenant is approved but doesn’t sign a lease. If you don’t have written rental criteria, you will need to develop it. Landlords cannot comply with this law without written rental criteria, at least not without significant potential legal exposure. Landlords will also need to review any fee, cost, or charge to the extent that is based on time or labor and not a hard or fixed cost paid to a third party during or in connection with the application process. For each such sum, a landlord must justify the amount as an “actual cost”. In short, the goal of this law is to prohibit landlords from making a profit on the application process.

We have been asked a lot of general questions about operational policies and procedures. There are no general answers. This law limits the amount of application fees that can be charged, requires disclosure of those fees, and requires receipts for application fees. Further, the law limits the information that can be considered in evaluating an application, requires specific action when applications are denied, and requires landlords to refund any unused portion of the application fee. Accordingly, we can only review specific operational policies and procedures for compliance with these legal requirements.

The third major bill enacted this session was HB19-1170 (Amendments to the Colorado Warranty of Habitability Law). This law becomes effective August 2, 2019. In greatly expanding the existing warranty of habitability, the Amended Warranty of Habitability law significantly increases the burden on landlords in dealing with warranty of habitability issues. The new law increases a landlord’s burden by requiring specific maintenance-related responses from landlords in specific time frames and requires specific communications from landlords in response to specific tenant communications within

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POOL RULES GOOD INTENTIONS CAN

CREATE BAD RESULTS continued from page 3 necessary to assist residents with disabilities are allowed in the pool area.

Put your Rules and Reasons for them in writing. Once you’ve created reasonable pool rules, post them in your community’s pool area, and include them in your community’s rules and regulations that all tenants receive. The latter is also a good place to explain the logic behind your rules. Tenants may be less likely to challenge your rules if they understand the reasoning behind them.

Instruct your staff to enforce the Pool Rules consistently. It’s very important that your staff enforces your pool rules consistently, and that they do not to make any exceptions. Exceptions can lead to trouble. When it comes to Swimming Pools and Fair Housing, consistency in enforcement of Pool Rules is a good defense. When in doubt about your Swimming Pool Rules and Fair Housing Compliance, have your rules reviewed by a THS attorney. Remember this is definitely a situation where playing it safe is a lot less expensive than having to be sorry. The maximum exposure to a property for a violation of the FHA can be anywhere from $10,000 to $50,000 in fines. A determination of a violation of the FHA can pave the way for the complainant to file a civil suit, seeking damages beyond fines. THS is always available to review your pool rules to ensure they are drafted in a way that addresses any of your concerns but also to make sure that your Swimming Pool Rules are FHA compliant.

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IMPORTANT THS JUNE DATES June 11th BASIC FAIR HOUSING WEBINAR 9:00 am – Noon Online June 19th WEBINAR WEDNESDAY 9:00 – 10:00 am Online June 20th AAMD JUNE AWARDS 3:30pm – 8:00 pm Stampede – 2430 S. Havana St July 2nd NO EL PASO COUNTY COURT July 4th All COURTS CLOSED THS CLOSED INDEPENDENCE DAY HOLIDAY

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specific time frames. Under most circumstances, a landlord must respond to a tenant’s initial warranty of habitability communication within twenty-four hours. The General Assembly wrongly assumed that all landlords work on weekends and holidays or have the resources and capability to respond to messages during such hours.

What should you be doing in response to the Warranty of Habitability law? With this bill, the first and most important action is both obvious and critical. All landlords need to designate in their lease where warranty of habitability-related communications are to be sent. The law specifically provides that “a tenant who gives a landlord electronic notice of a condition shall send such notice only to the e-mail address, phone number, or electronic portal specified by the landlord in the rental agreement for communications. In the absence of such a provision in the rental agreement, the tenant shall communicate with the landlord in a manner that the landlord has previously used to communicate with the tenant.”

As noted, the warranty of habitability law has very specific communication requirements within specific time frames. If tenants can fire off a warranty of habitability communication via text to the assistant managers mobile, to the maintenance tech’s email, or to the community’s regular maintenance portal, a landlord has zero chance of complying with the law. Landlords can only successfully comply with this law by having a very focused and exclusive communication channel. If a warranty of habitability issue goes to litigation, you will be required to produce all documentation. If such communications are spread across multiple emails and mobile phones (texts), this will be a daunting and time-consuming task.

We recommended separating the warranty of

habitability channel from your regular maintenance

communication for two reasons. First, if warranty of

habitability claims are sent in the regular maintenance communication channel, you bear the legal

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responsibility for identifying and fishing them out of what is probably already a busy communication pipe. Second, if you have a separate warranty of habitability channel in addition to your regular maintenance communication pipe, you can’t be in breach of the warranty of habitability if the tenant sends a warranty of habitability request via the regular maintenance channel.

The fourth major bill enacted this session was HB19-1328 (Bed Bugs in Residential Premises). This law establishes duties for Colorado landlords and tenants when dealing with bed bugs. The law is likely to significantly impact the rental of units infected by bed bugs because of mandatory disclosures. Specifically, if asked by a prospective tenant, a landlord must disclose whether the unit contained bed bugs within the last eight months. Additionally, if asked by a prospective tenant, a landlord must disclose the last date (if any) that a unit was inspected and found to be free of bed bugs.

What should you be doing in response to the bed bug law? You will need to figure out how to track all treatments so that you can comply with the disclosure requirements. Landlords should make disclosures in writing for their protection. The bed bug law validates the fraud theory that tenants were already using to sue landlords. Specifically, tenants were alleging fraud when a landlord knew of bed bug issues but failed to disclose prior to leasing. The new law clearly imposes liability for failing to disclose either intentionally (fraudulently) or by omission. Because a tenant could easily allege after the fact that they asked about bed bugs but were told nothing, landlords are going to have to consider making disclosures regardless of whether a tenant asks. Because a disclosure could kill a lease, the disclosures probably are going to need to be made up front.

When you are constantly at the Capitol, speak to countless legislators and lobbyists, and attend countless hearings, you quickly conclude that most legislators are voting to pass laws on subjects they know little to anything about. continued on page 6

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LEGISLATIVE SESSION – LANDLORDS NEED

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Based on our direct involvement this 2019 legislative session, we quickly concluded that many legislators have no idea how business works, and even fewer, if any, know how the rental industry works. If they did, the application bill would have been a couple of sentences requiring landlords to disclose up front their application-related fees. Instead, it is now a complex set of regulations that are likely to encourage unproductive litigation and that interferes with Coloradoans’ freedom to contract.

Legislators certainly don’t understand that in the end all increased costs are eventually borne by tenants. For example, HB1118 (10-Day Rent Demand) may hurt landlords in the short run, but in the long run landlords will enact counter measures to reduce risk and recover the triple amount of lost rental days now built into the eviction process. Likely reactive measures include tightening credit standards, raising rent and security deposits, and giving less leniency to tenants. We testified that these likely counter measures will likely hurt those tenants already struggling now, i.e. credit challenged tenants. But our pleas fell on deaf ears.

If the status quo appears not to be working, legislators assume that a new law is needed. Legislators do not consider other obvious explanations for why the status quo doesn’t work as intended. For example, many legislators supported the drastic changes to the Warranty of Habitability Act because of a single landlord’s failure to provide heat by timely getting a boiler fixed. These legislators sincerely but incorrectly believed that the tenants had no legal rights or remedies under current warranty of habitability law. When I asked them to give me one, just one example, of a warranty of habitability situation not covered by current law, they couldn’t do it. The legislators appeared completely dumbfounded when I told them that any one of the attorneys at THS could have recovered significant damages for the tenants using current warranty of habitability law. In other words, it wasn’t a lack of legal protections but rather a lack of an attorney.

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The warranty of habitability bill also

illustrates another huge problem with the legislative session and the process as a whole. To a large extent, legislators are unwilling to meet in good faith and discuss the issues with those who know the most about the subject and therefore could provide the most valuable input. The original warranty of habitability bill took a year to draft, with all sides participating in countless hours of mediated meetings. This is why it has been such a good law. Having a single meeting and telling your opponents that your wish list is not negotiable is not acting in good faith nor in the best interests of Coloradans. Similarly, neither the House nor Senate sponsor of the 10-Day Rent Demand would meet with us.

Unbelievably but not surprisingly, the legislators who said they are “pro-tenant” refused to listen to proposals that clearly would benefit all tenants. Specifically, sponsors and supporters of the 10-Day Rent Demand refused to give tenants who had been evicted a clean slate if they settled the eviction with their landlord. They refused to listen to this proposal because it revealed their true intentions to eventually prohibit the eviction of non-paying tenants. They also didn’t want to hear it because it runs directly contrary to their false narrative that THS is “pro-poverty” and “anti-fair housing”. For the record, THS is not pro-poverty and is pro-fair housing. No one educates more landlords on their legal responsibilities to not discriminate and to comply with fair housing laws than THS. I’m very proud to unabashedly say that THS is the number one fair housing educator in Colorado.

These same legislators also will not listen to common sense advice about where to spend critical resources. Anyone that knows anything about the rental industry here in Colorado, knows that less than one percent of bad landlords are responsible for literally ninety-nine percent of the problems.

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Making legal resources available to those tenants dealing with these unethical and unscrupulous landlords would go a long way to solving the problem without the need for one new law. As discussed above, the tenants in the failed boiler case haven’t been compensated so far due to a lack of legal representation. Not due to a lack of legal protections and remedies. However, instead of using critical and limited dollars to help tenants in cases like the failed boiler, local and state elected officials would rather continue to waste millions of dollars by providing every tenant an attorney in routine non-payment eviction cases where there is almost always no defense.

The industry could do itself a big favor by doing a much better job of self-policing. Action should be and needs to be taken against the miniscule number of landlords that engage in the practices that result in onerous knee jerk legislation. Their selfish actions significantly impact all legitimate landlords. Finally, unless all landlords get a lot smarter politically, a lot more united politically, a lot more willing to contribute to more moderate political candidates, and a lot more politically engaged, the industry is likely to see more of the same in the years to come.

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LONG MAY IT WAVE

In the United States, Flag Day is celebrated on June 14. What we know fondly as the “Stars and Stripes” was adopted by the Second Continental Congress as the official American flag on June 14, 1777, in the midst of the Revolutionary War. Colonial troops fought under many different flags with various symbols and slogans: rattlesnakes, pine trees, and eagles; “Don’t Tread on Me,” “Liberty or Death,” and “Conquer or Die,” to name a few.

The first official national flag had 13 white stars on a blue field and 13 alternating red and white stripes—both representing the 13 original colonies. Now there are 50 stars, one for each state in the Union, but the 13 stripes remain. Flag Day was first celebrated in 1877, on the flag’s 100th birthday.

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JUNE 16TH