by Greg O’Berry
In multifamily, inconsistent practices deliver consistently sub-optimal results. Lack of clear direction, varied application of community policies and incongruent actions by onsite associates hamper operational success and tarnish the resident experience.
The negative impact of inconsistencies may be felt most when it comes to evictions. Rather than following stated company policies regarding timelines for eviction procedures, onsite teams often extend the process based on promises from residents to make good on pending payments. Operators hold out hope that delinquent renters will pay, and providing a few extra days often sounds worth it if it means avoiding the cost and administrative burden of the eviction process.
Whether the initiation of the eviction process is postponed intentionally or inadvertently, those grace periods and delays can be costly. Without timely and consistently executed collections and eviction processes in place, property managers could face revenue loss that reduces property value and may have legal repercussions. Fortunately, by adhering to corporate policies and timelines, and a few best practices around eviction procedures, property managers can turn the eviction filing process into an understood consequence that reinforces the importance of timely rent payment.
Exceptions Expose Operators to Legal Risk
Legal issues often arise as a result of inconsistent practices. Property management companies expose themselves to discrimination claims when they make case-by-case decisions, which can be viewed as inequal treatment and Fair Housing violations.
By setting a consistent date when late fees begin and establishing a consistent time frame when delinquent accounts are sent to attorneys, operators can avoid being accused of favoritism or discrimination and negate the validity of delinquent renter claims. Not all delinquent renters have the same payment history, but the management company’s application of its eviction procedures needs to be homogeneous from one renter to the next.
Property managers who prefer to work with delinquent residents on a form of payment plan need to ensure that the parameters of those plans and the terms offered are consistent from resident to resident, as well.
Choose Policy Enforcement Over Payment Plans
Even with structured payment plan policies, operators need to be aware that most payment plans only work when a resident is capable of paying down their deferred balance while simultaneously making their full monthly rent payments. Renters who are delinquent for financial reasons will likely struggle to meet those increased monthly obligations moving forward and may use any form of extension as an opportunity to prolong their delinquency and delay an inevitable eviction.
Management companies can acquire a reputation among renters for being lenient, which may ultimately encourage late payments or even attract renters with inconsistent payment histories. Also, by accepting partial payments without a binding payment plan, operators inadvertently push back the date at which they can file for eviction. A track record of issuing payment extensions can create a challenging transition to more structured and rigid payment policies. Managers who are known to operate loosely will certainly incur more resident complaints when they tighten their payment timelines and become consistent in their policy enforcement. But those conversations are opportunities to come to a resolution and communicate the urgency of making payments.
Value Revenue over Occupancy
Some property management companies will deliberately avoid evictions over the false fear that an asset will devalue based on lower occupancy rates. The reality is value underwriting uses historical revenue data, including delinquency rates, not just occupancy rates. Operators incur more revenue loss from high delinquencies than they do through temporary vacancies caused by eviction. Through consistent eviction practices, operators can quickly turn and lease a home to more reliable renters and improve revenue capture in the process.
The key to revenue capture is filing the notice to quit as early as allowed. If eviction is the inevitable result, the process is initiated promptly, possession is expedited and the period of non-payment is limited. In the best-case scenario, the notice creates a pressure point that leads to payment by the current resident and solidifies the payment expectation moving forward.
Also, the earlier the notice is sent, the sooner errors or incomplete paperwork can be identified and addressed. If legal counsel has to request additional documentation or corrections, it is better to start that back-and-forth process as soon as possible, rather than allowing that information exchange to take place later and push an already belated process further down the road. Better yet, operators who adopt tools to ensure accurate, complete and consistent filing practices employing automated tools can push their cases to the front of the line.
It may be a trite saying, but consistency is key. Property managers who strictly adhere to their eviction policies and timelines, and listen to what the data says in terms of initiating evictions and payment extensions, avoid entanglements and ultimately reap the benefits.