What happened to the good old days? I am old enough to remember being told by real estate professionals about a time when business was conducted on a handshake. One title officer, now retired, told me of a time when two gentlemen entered her office and told her that one was selling his property to the other individual. She asked them for the document with the agreed terms on it. They responded, there was no document, they shook hands on it. She actually prepared a closing statement and title was transferred.
Today, many of our leases look more like novels than rental documents. The times have changed and so has the amount of paperwork landlords must generate. Probably the most overlooked and also the most important process in the leasing of a rental property is the Move-In and Move-Out process.
Each year, I review hundreds of leases. If I had a dollar for every time I find that an owner either did not complete the move-in sheet along with having the tenant’s signature, date and all other information, I would be well on my way to early retirement. This process is important for two reasons.
It gives the landlord or property manager an opportunity to show a new tenant where things are located on the property and how to operate the heat and other mechanical devices in their rental unit. It also provides the landlord or manager a last look to make sure that the smoke detectors and other items in the unit are in good working order. A tenant should be shown how to turn off the water if there is an emergency and where the electrical controls are.
Most importantly, however, this is when the tenant and landlord do their inspection of the unit on the move-in sheet. There should be a property specific sheet included in the lease document that covers all the items in the unit including carpets, stove refrigerator, dishwasher and any other electrical item in the unit. [AOA members may download this form FREE online at www.aoausa.com.] It should also include a room by room inventory of walls, ceilings, bathrooms, tubs, showers and any other item in the unit.
The sheet should show if there is a burn, spot, hole, missing item or anything else that may not be normal. If the unit has all new items, it should be noted on the sheet that the item is new “ carpets, stove or paint. It is mandatory that both the landlord and tenant sign and date this document. The tenant needs to receive a copy and a copy needs to be attached to the lease held by the landlord.
This is the very best time to explain to the tenant that other than normal wear and tear, it will be expected that the property be in the same condition when vacated and what the consequences will be if it is not. Typically, when we receive notice that a tenant will be moving, in writing as required by the lease terms, we schedule the move-out inspection. When they move out, you will either be very happy you did what is suggested above or very upset if you did not.
The Move-Out process occurs when the tenant meets with the landlord or manager after they removed their personal items. Just like in the beginning, the tenant and landlord will inspect all the items included on the Move-In sheet. If things are not right, the landlord needs to note what will be required to correct the situation. (Spots or burns on carpets, refrigerator or stove is dirty, walls have been painted a strange color, etc.) The tenant must then sign and date this sheet. Typically, we will give tenants some time to correct what needs to be done, if there is time for them to do so prior to the end of the last month they paid rent for. This is why I recommend that a Move-Out inspection take place at least a week prior to the end of the month in which the tenant has paid their last rent.
As you probably noted at the beginning of this article, I am upset when I see an incomplete Move-In document. Why, one might ask? The answer is that without it being filled out, signed and dated by the tenant, the landlord has absolutely no right to pursue the tenant for any destruction that occurred during their residency. Put simply, they could spray the place with pink paint and yellow dots and the landlord will have no standing in court if they try to pursue the tenant for the damages.
With a sheet that has been appropriately filled out, the landlord is free to do the required work and deduct the same from the tenant’s security deposit. If more work is required than the deposit will cover, the landlord is free to pursue the additional monies owed.
I hope I have sufficiently stated why this often overlooked process is so very important. My one last bit of advice is to create a rate charge sheet that ties into the Move-In / Move-Out inspection sheet. Over the years, we have had tenants move out leaving couches, dirty stoves, painted walls and almost anything one can imagine. We will do what is necessary to get the apartment rent ready and charge the tenants for the items they were responsible for. All too often, the tenant will challenge the fees and even though we show up with photos, itemized invoices from independent contractors and an appropriately executed Move-Out sheet, the court may decide they feel the amount charged was inappropriate and all too often, will find in favor of the tenant. As we all know, this directly affects our bottom line income. A charge sheet, signed by the tenant at the time they move in has very effectively eliminated this from occurring.
Bruce Kahn, CCIM, CPM is the designated broker and Managing Director of the Foundation Group Real Estate Services, a full service property management and brokerage company. Reprinted with permission of UPDATE.