Have You Thought Through Your Compliance Enforcement Policy?

Residents commit all types of lease violations.  Many owners and management companies have not evaluated their lease compliance enforcement policies.  We know this because we ask this question frequently.  Yes, an experienced manager or management company generally knows what action to take when a resident violates a given lease provision.   However, few have methodically evaluated and developed compliance enforcement policies.  Failing to have written compliance enforcement policies can result in significant and costly problems including fair housing and costly litigation expenses.

Compliance enforcement policies need to be tailored to individual goals and needs.  One size does not fit all.  The property goals, type, history, location, market conditions, and resident demographics might be some considerations among many others.  An A property that charges premium rents may want to consider strict enforcement of any violations that impact the property’s reputation or ability to charge high rents.  A property with abundant parking might be more lax in enforcing parking violations.

When a resident violates his lease, you have many enforcement options.  Unfortunately, a commonly exercised option is to do nothing.  When the resident violates again, you regret that you didn’t do something the first time.  You can have a meeting with the resident and verbally warn the resident.  Verbal warnings may be appropriate in some situations, especially for first time minor violations.  If handled correctly, verbal warnings can be used as an opportunity to build rapport with the resident.  Verbal warnings may also have more of a personal or friendly resident relation touch.

You can write the resident a lease violation letter, also known as a warning letter.  Warning letters are also appropriate for particular situations depending on your overall compliance enforcement policies.  Verbal warnings or warning letters are never appropriate for serious or repeat violations.  The major drawback of warning letters is that they do not properly set the stage to evict a resident.  If a resident is continuously violating their lease, you can’t fax us a warning letter to start an eviction.

Warning letters also do not serve as the predicate notice to be able to service a notice to quit for a repeated violation.  To evict a resident for non-compliance, you must serve a 3-day demand for compliance or possession.  To evict a resident based for a repeated violation, you must first serve a 3-day demand for compliance or possession and then a notice to quit for a repeated violation.  The number of times a client has wished they had served a 3 day demand for compliance or possession, so they could serve a notice to quit (“just get out, you have no more rights to cure”) is countless.  If your policy is two strikes and your out, you can only enforce your two strikes policy by always serving a 3 day demand for compliance or possession for violations.

Failure to have a well thought out compliance enforcement policy can result in fair housing problems.  Ronnie resident constantly complains and is never satisfied.  Ronnie has a loud party.  You know have a legitimate reason to get rid of Ronnie.  Because Ronnie is a member of a protected class, Ronnie files a fair housing discrimination complaint.  After reviewing the complaint, we call to discuss the case.  “What’s your compliance enforcement policy”?  “I don’t know”.  “Have you served other residents who committed similar violations with eviction notices?”  “I don’t know”.

You might not know, but you’re about to find out.  The Colorado Civil Rights Division issues a request for you to produce all compliance notices and related information.  If other non-protected class members had loud parties, but were not served with eviction notices, you have a problem.  Whether intentional or not, failure to consistently enforce lease compliance issues is circumstantial evidence of discriminatory intent.  When it comes to fair housing, discretion is your enemy.  Onsite teams need specific policies to guide their actions.  Onsite teams should never be exercising discretion regarding lease compliance matters.

Failure to have a well thought out compliance enforcement policy can result in significant monetary problems.  The community requires renter’s insurance.  You discover Ronnie Resident doesn’t have renter’s insurance.  Rather than serve Ronnie with a demand for compliance or possession, the onsite team relies on a lease provision and fines Ronnie.  Everyone who read March’s Landlord News knows fines and penalties are not enforceable.  A fire significantly damages Ronnie’s unit, and asbestos remediation is necessary.  Ronnie’s belongings must be cleaned or destroyed pursuant to regulation.

Ronnie has no insurance or money to pay the significant costs to have his property cleaned.  You inform Ronnie that he is holding up the asbestos remediation, and that he has seven days to sign off on his property, or get it cleaned.  Ronnie hires an attorney who threatens to sue you if you toss Ronnie’s property.  With the simple solution of the insurance paying for Ronnie’s loss off the table, Ronnie’s issue can potential cost the community thousands or maybe even tens of thousands of dollars in litigation costs, increased remediation costs, and lost rent due to remediation delays.  Residents are required to have renter’s insurance for a reason.  If the community consistently served eviction notices when residents failed to comply with renter’s insurance requirements, Ronnie either would have had renter’s insurance at the time of the fire, or would no longer been living at the community.

Well thought out and written compliance enforcement policies have many advantages.  Written policies facilitate team training and accountable.  Written policies eliminate discretion.  When discretion is eliminated, potential costly fair housing complaints are eliminated as well.  Not only were similarly situated residents served with a notice, but also we have a written policy to this effect.  Compliance policies significantly reduce costly lawsuits and settlements.  Developing a plan is not difficult or time consuming.  Sit down with your team and review common scenarios.  How are violations being enforced?  Are violations being consistently enforced?  If you don’t think this is a problem, ask your team a simple question.  What is the community’s enforcement policy?  You will be surprised by the answers.

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