Get Staff to Report Signs of Resident-Related Trouble

Your site employees are in a perfect position to keep you up-to-date on what’s going on at your site. And the information they give you about residents can be critical in helping you run your site. They can alert you to lease violations and unauthorized residents, and they can help you build cases against troublesome residents.

In this issue, we’ve discussed how staff members may observe signs of hoarding and how their vigilance may be able to allow you to address issues at the earliest stage possible (see Take 4 Steps When Dealing with a Tenant Hoarder). Site staff also may alert you to unauthorized occupants or abandoned apartments.

Unauthorized occupants can cause a host of problems at your site. If an unauthorized occupant does something wrong at your site, such as damaging a unit, you’ll have a hard time holding him liable for his action since you have no lease agreement with him. And oftentimes unauthorized occupants bring additional income to the household that may have tax credit compliance implications for your site.

You shouldn’t assume that your site staff know what information to report. To avoid any confusion, we’ll tell you what your employees should—and shouldn’t—report, and give you a Model Memo: Guidelines on Reporting Resident Information, below, that you can distribute to your employees.

Information Employees Should Report

Here’s the information you should ask your employees to report to you:

Lengthy resident absence from apartment. If a resident hasn’t been seen at the building for, say, longer than six months, this could be a sign that the resident is no longer using the apartment and may not respond to notices for late rent or inspections. If they’ve abandoned their unit, you need to try to re-rent it as soon as possible.

Each day you wait, you lose money; and the resident may never come back. But you don’t want to make an impulsive decision to go in, clean up, and list the unit for rent. If you change the locks too soon, the resident may return and sue you for an illegal “lockout.”

Being aware of potentially abandoned units will allow you and your staff to gather evidence that the resident has “abandoned” the unit. Under most state laws, if residents abandon their rental unit, you can change the locks. And if the resident returns and wants to get back in, you won’t be found guilty of an illegal lockout.

Unauthorized move-ins. If an unauthorized occupant is actually a contributing household member, you may consider legitimizing the unauthorized occupant’s status by going through the process of adding the person as a new household member. Doing so shows your state housing agency that you’re being vigilant about tax credit compliance and could keep you from violating the available unit rule if your site is a mixed-use LIHTC site.

The addition of new members to an existing low-income household requires income certification for the new member of the household, including third-party verification. The treatment will depend on whether the building is a mixed-use or 100 percent LIHTC building.

For mixed-use sites, the new tenant’s income is added to the income disclosed on the existing household’s most recent tenant income certification. The household continues to be income-qualified, and the income of the new member is taken into consideration with the income of the existing household for purposes of the Available Unit Rule under Internal Revenue Code (IRC) §42(g)(2)(D).

If the site consists of 100 percent LIHTC units, then the new tenant’s income is added to the income disclosed on the existing household’s original income certification. Here, since the owner will always rent the next available unit to an income-qualified household as a low-income unit, the available unit rule won’t be violated if the household’s income exceeds 140 percent of the income limit or 170 percent in deep rent-skewed projects.

Heavy traffic to or from apartment. This may indicate that the resident is illegally using the apartment for business purposes, or the resident might be engaged in illegal activity such as drug dealing or prostitution. Have your employees tell you if they notice police activity at an apartment.

Residents who use their units to operate a business can cause all kinds of troubles for your site. For example, businesses like daycare centers, catering and food preparation operations, and professionals who see clients in person—such as attorneys, accountants, or therapists—have the potential to:

• Congest parking areas and increase traffic;
• Necessitate frequent deliveries;
• Cause noise, odors, and pests where food preparation is involved;
• Create fire hazards;
• Overuse water and other utilities that the owner may have to pay for;
• Disproportionately fill Dumpsters;
• Violate zoning laws;
• Increase the site’s security risks from strangers coming and going through hallways;
• Cause greater wear and tear on the unit; and
• Increase insurance premiums or claims, in some cases.

In addition, businesses run out of apartments could have negative consequences to your site’s insurance coverage. Most insurance policies—both property and liability—require that the premises be used only for residential purposes. As a result, the insurer won’t pay for losses attributable to fires, explosions, and other accidents resulting from residents’ business activity. For example, if a unit used as a bakery catches fire, your insurance may not cover the loss.

Also, having employees alert you early on to an apartment suspected of illegal activity also will help you gather proof that the apartment is habitually used for illegal purposes. Suppose you suspect that a resident is using an apartment for the illegal sale of drugs. A successful eviction case, in this instance, would depend on showing that the apartment was being habitually used in connection with the sale of drugs. A case built on an occupant being sentenced and jailed for criminal possession of a controlled substance would not be enough to successfully evict a resident based on illegal activity.

Nuisance behavior. If a resident is engaging in disruptive behavior that interferes with other residents (say, making loud noises, or verbally harassing other residents), this may be grounds to evict the resident for what’s called “nuisance behavior.” You’re likely to learn about the problem eventually from resident complaints. But it’s good to get first-hand accounts from your employees because these may help you in court if you seek the resident’s eviction. You may also be able to evict for nuisance behavior if the resident physically damages the building by littering or by marking it with graffiti.

Renovations and/or appliances that violate lease. Your lease may also bar residents from making certain renovations in their apartments or from installing certain appliances (for example, washing machines). Be sure to give employees examples of what types of renovations and/or appliances your lease bars so they’ll know what to report. Again, if an employee reports to you that a resident is violating the lease, you may want to get him to correct the violation, and seek his eviction if he refuses.

Pets. If your lease bars residents from having pets, your employees must immediately tell you about any pets they see. In many places, if you don’t start a court case within a certain time of the owner or building employee learning about the pet, you could lose the right to enforce the no-pet clause, and the resident will be allowed to keep the pet.

Suspected move-out. If your employees suspect that a resident has moved out of an apartment (for example, they see the resident’s furniture being loaded onto a moving truck), you’ll want to know. The resident may have abandoned the apartment, leaving you free to re-rent it. Or the resident may be trying to install an illegal subtenant in the apartment, without your permission.

Excessive clutter or other signs of hoarding. If your staff notice excess clutter or noxious odors in hallways and common areas that seem to be emanating from a particular apartment, make sure they let you know. As discussed in this issue, hoarding problems only get worse if left unattended.

Information Employees Should Not Report

You should also specifically instruct your employees not to report certain information. A clear policy of discouraging your employees from giving you information that you could use for a discriminatory purpose can help you avoid liability if a resident claims discrimination.

The Fair Housing Act prohibits discrimination in housing because of race, color, national origin, religion, sex, familial status, and disability. Directly or indirectly exhibiting a preference or limitation on any of these bases or other categories protected by state or local laws could give rise to a discrimination claim.

So tell your employees not to give you information about residents’ personal lives and relationships; residents’ race, religion, or ethnicity; and anything else that a resident tells an employee in confidence (unless it relates to illegal activity or lease violations).