With the summer season rapidly approaching, now is the perfect time to examine the top 5 best practices and considerations East End landlords (both short-term and long-term) should be aware of in order to maximize the rental income derived from their real estate.
1) Exercise Caution when Renting a Mortgaged Real Estate
Landlords should be extremely cautious when renting mortgaged real estate, being sure to have at least 6 months’ expenses on reserve at all times. Removing a non-paying tenant from rented real estate may take several months and, in the event of a tenant’s default in rent, landlords without such a reserve often end up in foreclosure.
2) Written Lease Agreement
A written lease agreement is the foundation of the landlord/tenant relationship. Not only does a lease agreement establish the expectations and obligations of the parties involved, a lease agreement also provides the rights and liabilities of the parties in the event of a break down in the relationship. A lease agreement is not a one-size fits all document and should be specifically tailored by an experienced attorney to address the landlord’s individual needs (e.g. provisions providing for the collection of attorney’s fees in the event of an eviction proceeding).
3) Compliance with Local Laws
It is imperative that landlords be aware of the town and village laws governing rental real estate in their area. Noncompliance carries steep civil penalties which will negatively affect a landlord’s rate of return. For example, the Town of Southold prohibits “transient rental properties” (e.g. rentals for a period of less than 14 nights). A first time violation of Southold’s prohibition carries a civil penalty somewhere between $1,500 and $8,000.
4) “Self Help” Eviction Unavailable
The only permissible way a landlord may remove a tenant is through an eviction proceeding. No “self-help” evictions are permitted (e.g. personally removing a tenant, barring their entry, discontinuing utilities). A landlord who engages in a “self-help” eviction is liable for treble (3x) damages. Such damages would create a drag on a landlord’s expected rental income.
5) The Eviction Process Takes Time
Landlords may utilize a special proceeding to recover possession of their rented real estate. A special proceeding is an expedited lawsuit that provides quicker relief than a typical “plenary action.” However, each step of the process takes time and corners may not be cut.
Before the commencement of an eviction proceeding, the appropriate predicate notice must be served (e.g. 30 Day Notice of Termination, 10 Day Notice to Quit). Failure to serve the proper predicate notice will result in a dismissal of the eviction proceeding. Landlords would be wise to consult with an experienced attorney as a dismissal of the eviction proceeding will require a new notice be sent and will result in significant delay in the ultimate eviction of the non-paying tenant.
A special proceeding is then commenced by filing a petition with the court of appropriate jurisdiction. If successful, a Landlord will receive a judgment of possession, warrant of eviction, and money judgment for amounts owed (if applicable). Depending on numerous factors, such as the tenant’s cooperation and the court’s resources, it may take up to 4 months (and in some cases even more) to receive the judgments and warrant of eviction. The judgment of possession and warrant of eviction are then provided to the Sheriff’s office, who will effectuate the eviction (which may take a couple of months).
While a non-paying tenant is never good, a properly drafted lease agreement and a preemptive consultation with an experienced attorney at the first sign of trouble may save significant time in the long-run and thereby increase a landlord’s profit.