CREJ - Property Management Quarterly - February 2015
I am a fan of football, especially of the Broncos, so please allow me to use some football jargon/metaphors as I address tackling the extraordinary. As property managers, when we are faced with an unusual or infrequent situation, we need to use x’s and o’s in order to achieve victory. Strategizing for an unfamiliar task requires time and thought. Property managers must determine what is at the heart of the issue that needs to be resolved. From there, property managers must research and have succinct communication with the asset manager and landlord, as well as constant tenant communication. It is also imperative that property managers hire the right team of players to undertake the problem at hand. I would like to share two challenges I’ve dealt with that resulted in extraordinary solutions.
The first involved a tenant who was not in compliance with his lease. The tenant’s lease stated that tenant improvements were accepted “as is, where is.” If improvements were to be completed, the tenant must first receive landlord approval in writing, the lease said. However, in my weekly visit to the property, I met with this new tenant and observed that construction was taking place without notice or approval. Immediately, I created a game plan. The first step was to hand deliver and mail a letter to the tenant, placing him on notice that he was not in compliance with the lease, citing the various lease clauses. The letter stipulated that construction must halt immediately until the tenant met a variety of provisions. First, the tenant must provide: • Plans and scope of work to be approved by landlord and or its agent; • Proper contractor licensing and contractor business information; • Certificates of insurance for the general contractor and all subcontractors as defined in the property management agreement, which includes general liability, auto and worker’s comp; and • A construction schedule that adheres to the building rules and regulations. The tenant also must submit and post a copy of the permit (if applicable) and stipulate that final/unconditional lien waivers will be required by all contractors. The final permit must be signed off by the jurisdiction, and the plans must be in fire-life-safety compliance. The tenant also must address heating, ventilating and air conditioning as well as plumbing concerns, specifically in the suite or common areas. There also must be proper floor protection of the common areas and elevators, as well as compliance with building construction rules and regulations. Prior to construction re-commencing, the suite and common areas must be inspected for existing damage versus new damage, which would be the tenant’s responsibility. Additionally, as the property manager, I did the following: • Notified the landlord and provided a copy of the letter submitted to the tenant; • Posted notarized notices of nonresponsibility at the building and suite entrances; • Contacted the building tenants regarding the construction work, time frame and noise levels; • Made sure the tenant met its agreed-upon responsibilities; and • Made sure that any and all potential risks were mitigated on behalf of the landlord. As long as the tenant submits the requirements stipulated above, it’s like Manning throwing a beautiful 40-yard pass that gets the offense into the red zone.
Leases usually outline all of the steps property managers must follow to collect annual payment reimbursement from tenants. However, even if the property manager follows all of the rules, occasionally you still can have problems. For example, once when I was collecting this payment, I followed all the lease provisions regarding the timeline for request and the standard mailing requirements. The lease stated that the request for payment was time sensitive. Several months later, when following up with the tenant regarding the outstanding receivable, the tenant indicated that the landlord would not receive the payment because the tenant never received the letter. The letter was not returned to management, which indicated that there had not been a problem pertaining to incorrect postage or mailing. However, given that the letter was sent via the U.S. Post Office, we had no record that it was received or lost by the tenant once delivered. Another property we managed that had a lease with the same timeline and standard mailing requirements did receive a similar letter, and we received that reimbursement in a timely manner. The only difference was the outgoing letters were mailed within days of one another. After receiving the letter that the tenant was denying payment, I informed the landlord of the situation and re-read the lease to be reminded of the landlord’s versus tenant’s rights. I discussed the landlord’s position and arguments with the tenant. I was persistent on multiple levels, writing letters and calling people who could possibly assist with the situation, and tried to make sure no stone was left unturned. The landlord and I sought counsel and, as a last resort, filed a claim. While re-supporting the lease facts, I discovered that the lease language could be argued and supported with precedents. Months later, the authorities ruled in the landlord’s favor. The ruling stated that not only was the entire payment due, but also interest was to be paid. By documenting (yes, this was a three-inch file), having accurate records, and continuously communicating and speaking confidently to the facts of this issue, this ordinary event became very extraordinary. My final moral of this story is: Always send a letter return-receipt requested, even if the lease doesn’t call for it. This was a touchdown with a two-point conversion! Consistently in our property management world we find ourselves at the one-yard line, and we’ve got 99 yards to go to score. The determination, strength, attitude, fortitude, grit, resolve and creative play calling needed to achieve the win is well worth it. It’s easy to lose heart, but huddle up, engage your team and keep moving forward.