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Excalibur Home Management Blog

Landlords Performing Criminal Background Checks May be Violating Fair Housing Law

Matt Nelson - Thursday, June 22, 2017

Landlords Performing Criminal Background Checks May be Violating Fair Housing Law

In 2015 the Supreme Court ruled in the case of Texas Dept of Housing & Community Affairs vs. The Inclusive Communities Project, Inc. that under the Fair Housing Act some otherwise lawful activities, while free of discriminatory intent, may have a “disparate impact” on minority groups.  Recently HUD announced that, in HUD’s opinion, denying a rental applicant on the basis of their criminal history may be a violation of fair housing law.  HUD’s observation is that more people of color have a criminal history than do white people so that the use of a criminal record to determine an applicant’s ability to fulfill a lease obligation would have a disparate impact on applicants of color.   If a landlord or property manager is going to perform a criminal background check on an applicant, and use the results of that screening result to deny the applicant, the landlord needs to be able to show that the criminal conduct that occurred in the past would have a direct impact on the applicant’s ability to honor the lease. 

Technique – Don’t conduct criminal background checks on applicants.  Generally speaking, criminals are not very bright and not financially responsible.  It is likely that the applicant you want to deny, while they may have a criminal background, it is likely they also have bad credit and/or a bad landlord reference.  There are two benefits to NOT conducting the criminal background check.  First, you reduce the chances of having to defend an accusation of housing discrimination.  Even if the landlord can prove that there was no intent to discriminate, or if the investigation determines that there was no evidence of any violation of the Fair Housing law, undergoing the investigation process is very expensive and time consuming.  Second, you reduce your liability regarding the actions or conduct of your tenant with respect to neighbors.  You have probably read or seen a news story where some tenant was attacked in their apartment and they sue the landlord because a security light was inoperative on the other side of the apartment complex.  Example - you offer a property as available for rent and you get an application.  You conduct a background check, including a criminal check, and find that the applicant was found guilty of car theft 10 years earlier.  Because it was a non-violent, non-drug related crime, and the applicant has good credit now, you rent them the property.  Months later your tenant attacks a neighbor and causes them severe injury.  It turns out your tenant has been a career criminal all along, they just never got arrested after their earlier car theft conviction.  Because your tenant is “judgment proof”, the neighbor sues YOU claiming that you were liable for their medical bills because you allowed this tenant to move in.  And during the Discovery process, your records indicate that you knew the applicant had a criminal record but you approved their application any way.  Would the plaintiff’s attorney use that information against you?

Since you have no obligation to check an applicant’s criminal background, wouldn't you have less liability not to have any knowledge regarding their criminal background?  And you would definitely have less risk of a fair housing violation.

Technique – to reduce the chance of having someone actively involved in criminal activity, during the showing of the property, and during the application process, make sure the applicant understands that you are a proactive manager and you WILL be coming by the property to conduct periodic inspections.  If the applicant is really engaged in criminal activity, the last thing they want is a landlord coming around all the time and they will look for somewhere else to live. 

Excalibur Homes is more than just another property management company.

We are an investment real estate firm that specializes in helping investors with buying, renovating,, leasing, managing, and selling single-family rental homes throughout Metro Atlanta.  

Click here to view our leasing & management services.

Looking for pricing? Click here for a custom quote.

Helpful Lease Clauses - Atlanta Property Management

Matt Nelson - Monday, May 08, 2017

The lease form that you use needs to comply with your State’s landlord/tenant law.  Some states, such as Georgia and Texas, have form leases prepared by the State Realtor Associations which comply with the law and are widely used within the State.  One of the benefits of using a lease form that is widely used is that your local judge is more likely to be familiar with that form and less likely to dispute specific clauses.  They will apply their judgments more toward how the blanks were filled in and the merits of the individual case.  If you use a specific lease form that is very landlord friendly, then you are at risk for a judge that determines the lease itself doesn’t comply with the law so now the issues will be resolved as if there is no lease and the tenant is a tenant at will.  It might also influence the judge to think that this rich landlord (you) is trying to take advantage of this poor tenant.  You will not enjoy how the rest of that hearing goes.

With whatever lease form you use there are several lease clauses that can make your arrangement with the tenant easier to administer and enforce.  Remember that the lease is a civil contract and enforced in a civil court.  If your lease permits the landlord to show the property to prospective tenants and buyers during the last ___ days of the lease, but the current tenant refuses to grant you access to the property for showings, then your current tenant is in violation of the lease.  This doesn’t give the landlord the right to come to the property with the lease in hand and force their way in to show the property.   This is called “criminal trespass” and the landlord is likely to find themselves in handcuffs.  When the tenant failed to comply with the lease, the landlord now has the right to terminate the lease and evict the tenant.  But the tenant is already moving in a few weeks.  So there is not a practical way to solve the problem - unless you make sure that you add a clause like the “Failure to Grant Access” clause which would read something like “ Tenant agrees to pay $________________ for each incident where Tenant denies Landlord access to the Premises (“Denial of Access Fee”) as described elsewhere herein.”   In order to make this enforceable our lease form includes a general clause to cover that certain lease violations financially harm the landlord and so there are “damages” to which the landlord is entitled.

“Liquidated Damages. It is acknowledged by Landlord and Tenant with respect to any reference in the Lease to liquidated damages, that the actual damages of the party being paid such damages are hard to calculate and that the liquidated damages referenced in the Lease are a reasonable pre-estimate of the party’s actual damages and not a penalty.”

Other helpful clauses include “Early Termination by Tenant” and "Early Termination by Landlord”.  In the case of a tenant terminating early, it is going to happen.  People get job transfers and divorces.  If you have a good credit tenant, and they want to maintain their credit and comply with the lease, your clause could compel them to 1) Give ___ days notice 2) Pay penalties of $_____ (to landlord) and $____ (to property manager if applicable) to cover the costs of re-renting the property and 3) otherwise comply with all of the requirements in the lease for a departing tenant.  If your tenant moves before the lease has expired, then they have “skipped” and you would process their charges and deposit accordingly.   The “Early Termination by Owner” clause will provide the landlord with an option to force a tenant to move with ___ days notice and a payment of $___  in the event you want to sell the house.

Other helpful clauses includes:

Notice Not to Renew – make clear that even on month to month agreements the tenant must provide at least ___ days notice to vacate.

Re-Key fee – if the tenant does not return all the keys, garage remotes, HOA pool access cards, etc. when they vacate.

Smoking – no smoking within the premises or a $___ fee will be charged to remove the odor.

Holdover Rate – the daily rate you will charge if a tenant is not out by the required date.  Make sure this amount is higher than it would cost the tenant for a motel room and truck rental.  Otherwise if your tenant’s next home delivery is delayed, such as a delayed closing for a purchase or the next rental house is not ready yet, they may stay in the property knowing it will take you many weeks to evict them and it is cheaper to stay than move to a motel.  This could ruin your sale or next lease.  So make sure that the motel option is cheaper to your departing tenant.

Unauthorized Pet Charge.

Lease Renewal Clause – if you are a “buy and hold”  investor, consider a lease renewal clause that calls for an automatic one year lease renewal if notice to vacate has not been provided.  A common problem that many landlords experience is the non-responsive tenant.  Make sure your lease is set up to automatically do certain things even when the tenant does not respond.  And a great way to keep your turnkey expenses down is to renew the lease in annual increments automatically.

We use several other clauses and addendums to make the management more effective for us and more profitable for our clients.  As you identify your “pain points” you can modify your lease form to address and minimize those problems.  Just make sure your clauses comply with your State law.

Excalibur Homes is not just another property management company. We are an investment real estate firm that specializes in helping investors with buying, renovating,, leasing, managing, and selling single-family rental homes throughout Metro Atlanta.  

Click here to view our leasing & management services. Looking for pricing? Click here for a custom quote.

Is Leasing Permitted? HOA Issues in Georgia

Matt Nelson - Monday, January 16, 2017

Is Leasing Permitted? HOA Issues in Georgia

If you are shopping for a rental house to buy, it is important that you know if the house is subject to an HOA and whether the HOA permits leasing.  The majority of houses built in Metro Atlanta since the mid 1990s are located in subdivisions that have an HOA.  The last thing you need is to buy a house to rent out just to discover that renting is not permitted.

In 1994 Georgia adopted the Property Owner’s Association (POA) Act.  One of the important aspects of this Act is that, if an HOA decides to become subject to this Act, any of the covenants passed by the HOA are enforceable against ALL of the property owners within the community.  This would include any restrictions or limitations of property owners to lease their property.  However if the HOA is not subject to the POA Act, then O.C.G.A. 44-5-60 (d)4 is likely to apply.  This law basically says that changes in the HOA covenants only apply to those property owners that voted in favor of those covenants.

While the listings in the MLS will indicate whether the house is in a community with an HOA, neither the listing agent nor the owner may know whether leasing is permitted and under what circumstances.  Often the HOA Board or their management company can tell you incorrectly also.  The answer is in the Docs – the HOA covenants as recorded.  You can visit, create a user name and password, and search the deed records for most of the counties in Georgia including the recorded covenants of the HOA.

Often HOAs are not subject to the POA Act when the HOA is first created by the neighborhood’s developer.  Once the management of the HOA reverts from the developer to the homeowners, it is common that the homeowners will then file an amendment to the covenants making the HOA subject to the POA Act so that any covenants are applicable to all property owners.  So you would need to look for any amendments to the HOA’s covenants in addition to the original documents.

Upon examining the HOA covenants, if the HOA is subject to the POA Act, and if there are any restrictions to leasing, you need to understand that the HOA has the power to enforce those restrictions.  Depending on how the covenants are drafted, the HOA may have the power to compel your tenant to pay the rent to the HOA or the HOA may evict your tenant if the lease was not properly authorized by the HOA.

Do your research before making the purchase.  Since these covenants are recorded documents, trying to use the excuse “I didn’t know” later is not likely to help.  This is just one more step in performing your due diligence.  Invest wisely and profitably.

Excalibur Homes is an investment real estate firm who specializes in the management of single-family rental homes. Click here to view our Leasing & Management Services.

Calculating Your Expected Yield For Rental Houses

Matt Nelson - Wednesday, December 07, 2016

Calculating your expected yield for rental houses

With all other forms of investment real estate, except rental houses, the value of the property is a function of the market Cap Rate applied to the Net Operating Income.  A quick review: “Cap Rate” is short for capitalization rate.  The Net Operating Income (NOI) is the total gross income minus the amount lost due to vacancy and delinquency, minus the amount of all the operating expense but NOT including any reduction for debt service (mortgage principal and interest payments).  Divide the net operating income of the property by its price and you have the Cap Rate (%).  When sellers price their investment properties they determine what the market is willing to pay as a Cap rate and apply that toward their net operating income.  So buyers can apply their desired Cap Rate requirements toward all the NOIs of properties for sale to determine which properties best meet their investment expectations. 

But this doesn’t work with rental houses.  One day, when the rental house investor wants to sell, the most likely buyer is an owner-occupant.  And the owner-occupant buyer doesn’t care what the house rented for and what the Cap Rate is.  They are buying for other reasons related to neighborhood amenities, quality of the local schools, commute time, and many other factors.  This is why it is important that investors who buy rental houses need to look at the Internal Rate of Return (IRR) rather than the Cap Rate or gross yield for a rental house.  A lower quality property may offer a higher monthly cash flow but that house may not appreciate much.  A higher quality property may not generate as much cash flow but may appreciate in value a great deal.  The Internal Rate of Return calculation will take all factors, including anticipated appreciation, into consideration.  Review HOW to “Quantify” the Quality of different Rental Houses (Blog 11/04/15).  It may take a little longer to calculate IRRs versus Cap Rates but this is the only way to make a true “apples to apples” comparison of different investment opportunities.  There are several Excel templates you can find and download on line to help you calculate IRRs quickly.  We use a proprietary template which includes our estimates for vacancy, delinquency, and maintenance and repair costs based on our experience in the Atlanta market.  As with any projection, just make sure your assumptions are realistic.

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HUD's New Rule Regarding Landlords and Vicarious Liability

Matt Nelson - Tuesday, September 27, 2016


Vicarious liability refers to a situation where someone is held responsible for the actions or omissions of another person. In a workplace context, an employer can be liable for the acts or omissions of its employees, provided it can be shown that they took place in the course of their employment.  This week HUD passed a new rule that could hold landlords and property managers in violation of fair housing law if that landlord, or their representatives, (property managers, agents, vendors, inspectors, etc.) harass any tenants in such a way that the tenants feel unsafe or uncomfortable living at the property.  This new rule goes on to hold the landlord responsible for the actions and behavior of the landlord’s tenants.  If your tenants behave badly, and make other residents feel unsafe or uncomfortable, and the landlord does nothing to remedy the situation, HUD may find that landlord in violation of fair housing law.

More specifically the rule deals with these two circumstances:

Hostile Environment Harassment occurs when a person becomes the victim of “sufficiently severe or pervasive” conduct that takes away from their ability to use and enjoy the housing (e.g., hostile neighbors).

Quid Pro Quo Harassment occurs when a person (e.g., property management staff) makes an unwelcome request or demand, and it makes a resident’s compliance a condition related to their housing.

Landlords have always had some degree of vicarious liability regarding the actions and conduct of their employees, agents, and vendors.  This NEW liability is related to the landlord’s liability regarding the conduct of their tenants.  In the past disputes between tenants and their neighbors that were not clear violations of the lease were often resolved by the police.  Landlords do not have police powers.  Among the many other duties and obligations that fall to the landlord, apparently HUD expects the landlord to now play the role of “peacemaker”.  So landlords need to be prepared to deal with these tenant related disputes or be prepared to respond to a fair housing investigation.  Consider modifying your lease to address this and provide you with a way to terminate the lease if your tenant is involved in a dispute that can not otherwise be reasonably resolved.

Excalibur Homes is an Atlanta property management company. 

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Landlord Insurance: Consider Before Filing a Claim

Matt Nelson - Thursday, August 11, 2016

Insurance – Consider Before Filing a Claim

A lot of things have changed over the years in the insurance business.  One of them is the impact of making a claim on your landlord insurance policy.  

There was a time when the owner’s could submit possible claims thinking, “if you are unsure whether something is covered or not, just turn in a claim and the insurance company will go out there and have a look”.   Unfortunately several years of underwriting losses have caused insurance companies to enforce much stronger underwriting guidelines and action than in the good ole days.  In fact, making 3 claims on the same policy will probably get you a non-renewal notice in the state of Georgia.  And it doesn’t really matter how small or large the claims were, or even if they resulted in a payout.  The insurance company will tell you that less than 1% of homeowners will make 3 claims in 3 years, and statistically that group is much more likely to continue to make claims in the future.  And that those homeowners are responsible for pushing up the rates for the ones who “never” make a claim.  Historically the average homeowner goes about 18 years in between claims.  Bottom Line - talk to your agent before making a claim.  They can help you determine if your policy covers the loss (it probably does) and if the damage is even likely to exceed your deductible.    It would be a shame to lose a large “claim free discount” for a small payout, AND have one claim on your record.   Your insurance agent may work for the insurance company but you are their customer.  Speak to your agent first before filing a claim on something that may be relatively small or not covered by the policy.

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Dealing with a Foreclosed Rental Property - Atlanta Property Management

Zane Langdon - Wednesday, March 30, 2016

Dealing with a Foreclosed Rental Property 

As a property manager, or a landlord, having a rental home foreclosed upon can be a real nightmare.  The Protecting Tenants at Foreclosure Act expired 12/31/14.  So we are back to the old rules.  If a foreclosure takes place today then the lease is no longer valid (the mortgage is a superior claim to the property than any lease).  Typically the mortgage company that “bought” the property at the foreclosure sale is going to evict any current resident, or offer a “cash for keys” deal, in order to make the property vacant so the lender can sell it to recover some or all of the debt.  If the current resident is a tenant, this tenant may be losing their HOME due to no fault of their own.

Issues For the Landlord – when your payments are in arrears, and you know you are at risk for losing the property to foreclosure, you need to deal with this issue and your tenant.  If your loan is in arrears, and you re-rent the property to a new tenant without disclosing the problem, you run the risk of the tenant filing a fraud complaint against you – you knew of a likely foreclosure and didn’t disclose it which lead to the loss of the tenant’s home.  Whether you re-rent a property where the loan is in default, or fail to inform a current tenant of a pending foreclosure, the owner/landlord is at risk for a tenant suing for having lost their home due to the landlord’s actions by permitting the foreclosure.  A lawsuit where one of the parties lost their home, and potentially much more thru the eviction process, can be very ugly and very expensive. 

Issues for the Property Manager – The first challenge is finding out that the loan is in default.  We have seen several properties foreclosed upon between 2008 and today and it was a very rare circumstance where the owner informed us that their loan was in arrears and likely to be foreclosed.  Normally we find out from the tenant.  Often the lender will send a letter to the property address announcing that the loan is in default and scheduled for a foreclosure in the coming months.  That is when the tenant calls us in a panic about what to do since they are about to lose their home.  However, until the transfer of title thru the foreclosure (or deed in lieu), the lease is still in effect.  And, until the foreclosure or some other cancellation of the management agreement, the property manager is still obligated to enforce the lease.

Our technique – The first issue is to address this in the management agreement.  In the GAR Management Agreement, and in our agreement, there is a clause that authorizes the property manager to stop making disbursements to the owner once we have knowledge that the mortgage or HOA fees are in arrears until the owner can demonstrate the their payments are made current.  This is important because in several instances we were not notified of the foreclosure until after the foreclosure sale had taken place, sometimes 2 or 3 months back.  Now all of the rent paid by the tenant since the date of the foreclosure may need to be refunded to the tenant since the lease legally “died” when the foreclosure took place.  Since the property manager has no authority to represent the new owner, the property manager has no authority to collect rent for this new owner. 

Once you find out that the loan is in arrears, contact the tenant to explain the situation and considerations.  Many tenants will want to cancel the lease immediately and move out.  If the landlord has not agreed to that, then you need explain to the tenant the situation and their options:

1)      The lease is still in effect and enforceable.

2)      The rent the tenant pays to us will be held in escrow until the loan is brought current, the property is foreclosed, or the lease is terminated.

3)      IF the property is foreclosed, then any rent for the days since the foreclosure will be refunded to the tenant.  The security deposit would also be refunded to the tenant.  The tenant is also likely to be offered a “cash for keys” deal from the mortgage company if that is the new owner.  An investor/buyer may offer the tenant the opportunity to sign a new lease.  (NOTE – when disbursing trust funds after a foreclosure, such as the rent and security deposit, make sure to follow your State law.  In Georgia, we would send a letter to all parties announcing our intent, how we plan to disburse the funds, and give all parties 15 days to contest that disbursement if they disagree or want to make a claim against the funds.  We have yet to have a lender request that we send them the rent or deposit and we have always returned the un-earned rent and deposit to the tenant – so far.) 

4)      IF the tenant moves out before the foreclosure, then it will be treated as a “skip” and the tenant’s deposit will be applied toward their unpaid balance.  Their landlord reference would also indicate that they did not fulfill the lease.  So it is easy to make the case to the tenant that they are much better offer to proceed according to item three above.

5)      IF the owner informs us they were able to bring the loan current, then we get a copy of the owner’s most recent mortgage statement to verify that, then release the reserve on the property and disburse the funds due to the owner.

6)      If the lease expires prior to the foreclosure, and the tenant decides to move out, then it is processed as any other move out.

7)      If the lease expires prior to the foreclosure, and the tenant wants to remain in the property, then we convert the lease to a month to month agreement and add a stipulation disclosing the current situation with the loan and the potential foreclosure. 

We had one occasion where the owner’s loan was in default, but the lender did not foreclose for over a year – and then the owner was able to re-negotiate and get current on the loan.  In instances where the amount of the funds withheld from the tenant’s rental payments become substantial, the property manager should make a determination as to what is a reasonable amount to withhold and pay the rest to the client.  In the case just mentioned above, we held 3 months of rent as a reserve and disbursed any overages to the owner until the loan was brought current.

Don’t treat the foreclosure of a rental home lightly.  The landlord/borrower is not the only one to suffer here.  If a tenant gets evicted from their personal home while they are current on their rental payments, consider what the damage claim may be.  Financial costs for the move.  The emotional pain and suffering from losing their home.  The additional hardship of not getting their kids into the same school.  And on and on.  Landlords and property managers should do everything possible to limit liability to the tenant from a foreclosure.

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Dealing with Bed Bugs in your Rental Home - Atlanta Property Management

Zane Langdon - Wednesday, March 23, 2016

Dealing with Bed Bugs in your Rental House

The Facts:
  •          Bed bugs are small but they can be seen without the aid of magnification.  Adults are about the size of an apple seed.  Juvenile bed bugs are very small and more difficult to see.  They are oval and reddish brown in color.
  •          Bed bugs feed on human blood and can live for up to a year without feeding.
  •          Bed bugs usually hide during the day then come out at night to feed. 
  •          Most bed bugs will be found within 8 feet of a sleeping area or resting place (inside the mattress, box springs, bed clothes, furniture cracks, under carpet or rugs, etc.)

Prevention (Instructions for the Tenant to cover at the move in appointment):
  •          Do not bring furniture, mattresses, sofas, etc. found on the street into the home.
  •          Do not place backpacks, suitcases, purses, on beds, sofas, or upholstered chairs, especially right after a trip away from home.
  •          When traveling, always check the bed and surrounding area for bed bugs before unpacking or laying on the bed or sofa.  Keep your suitcase off the             bed and make sure to inspect the suitcase carefully before re-packing to leave.
  •          If you discover bed bugs in any of your clothing or shoes, wrap them in plastic until you can launder them on the highest heat setting the materials can           take.  Shoes can be placed in the dryer for 30 minutes at a medium-high setting.

The Response:

Encourage residents to report bed bugs immediately.  Make sure your maintenance contractors know to report any indication of an infestation.  The longer an infestation is allowed to continue, the wider it will spread, which will make it more difficult and more expensive to eliminate.  While there are some pesticides sold at hardware stores that claim to kill bed bugs, they often do not work, at least not fully.  This is likely due to the amateur’s inability to identify and treat where the bed bugs are hiding.  Many times they are in hard to reach spots such as inside the mattress or behind wood work.  The most effective way to get rid of bed bugs is using a professional pest control operator.  They have better equipment to locate and treat the problem.  They can even access specially trained dogs to locate where the bed bugs are hiding.  We recommend that the landlord take control of the situation to make sure the infestation is dealt with effectively.  Then they can charge the tenant, if applicable, for the work performed.  If the landlord directs to handle the problem, then there is a higher probability that the work is not done correctly which could turn into a problem for the landlord when the next tenant moves in.

Liability (Who Pays):

In a single family rental we would normally charge the tenant for the cost of the treatment.  If the bed bugs were not present when we performed the move in inspection, then the tenant must have brought them into the property.  However, that is not always the case.  If a rental house had a previous bed bug infestation, then they may have re-appeared due to no fault of the new tenant.  Remember that bed bugs can remain dormant for up to a year without feeding.  Also, in a multi-family property it is much more difficult to prove who brought the bed bugs in.  The bed bugs could have come from a neighboring unit and that neighbor may not have reported the issue.  You would need to prove who brought in the bugs before assessing charges against the tenant.  In several states, such as Florida, their law specifically states that the owner of a multi-family building (not houses or duplexes) must pay to have bed bugs removed unless the landlord can prove which tenant is responsible for the infestation.  For single family landlords, consider adding a clause to your lease such as “Tenant shall be responsible for the immediate treatment of any bed bugs in the Premises by a licensed pest control operator and the immediate and permanent removal from the Premises of any mattresses, bedding, clothing and other similar items that may contain bed bugs or bed bug larvae.” 

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How to Deal with a Fire in Your Rental House - Atlanta Property Management

Matt Nelson - Wednesday, March 02, 2016

How to Deal with a Fire in Your Rental House

Fires happen in homes every day.  According to the National Fire Protection Agency there were 369,500 home fires in 2013 resulting in 2755 deaths and $6.8 Billion in damages.  Many of these were in rental homes. 

What is the first step?  When you get a report of a fire in one of your rental houses, determine that the tenants are OK and the extent of the damage.  Take a video or a lot of photos of the condition.  Then protect the property.  That may meaning getting a tarp on the roof, reinforcing walls that have burned, or any other steps to prevent additional damage from being done.  Do not worry about whether you have made contact with your insurance agent yet, or not.  Your insurance company will appreciate your efforts to reduce the amount of the claim by preventing additional damage.  Dealing with a tenant that dies in the property is covered in another article.  For this article we will confine ourselves to dealing with the fire damage and liability.  If the damage is significant enough to make the house uninhabitable contact your insurance company immediately.  If the damage is not that significant, you may choose to handle the issue outside of your insurance.  Bear in mind that an owner or property with multiple claims may become uninsurable eventually.  The general rule of thumb is a client that makes 3 claims within 3 years is likely to be canceled regardless of the size of the claims.

How do you determine the cause of the fire?  If you file a claim with your insurance company, they will normally have an investigator, an expert, to determine the cause of the fire.  This person will often create a scope of work outlining the damages which need attention.  This list can be used with the contractor that will make the repairs.  Even if you don’t place an insurance claim, you may want to hire a fire investigator (3rd party investigator) to determine the cause of the fire.  With many fire departments, their investigation is limited to whether or not the criminal act of arson was committed.  Once the Fire Marshall has ruled out arson, their investigation is often finished.  So do not wait, or count on, the Fire Marshall’s report to determine the specific cause of the fire.   

What happens to the Lease?  Most leases will have a “Destruction of Premises” clause which says, in short, if the property is made uninhabitable due to fire, flood, etc., then the lease can be terminated immediately.  The obligation to pay rent terminates with the lease.  Whether or not the lease will continue can be negotiated between the parties.  If the tenants want to move back in, and the owner is willing to let the tenants stay, and the repairs to make the house can be done within a reasonable period of time, then the parties may agree to some temporary arrangement while the needed repairs are under way.  We have seen several fires over our 30+ years of experience and several thousand houses we have managed and each case has been handled a little differently based on the extent of the damage, the cause of the fire, and the attitude of the parties.  However, if either party wants to terminate and move on, then that is the likely outcome.  Local building codes will determine if the property is habitable and, in all likelihood, it is not legally “habitable” immediately after the fire.

Who is liable for the damage?  The result of the fire investigator’s report will determine this.  If the fire was started due to the tenant’s abuse or neglect, then the tenant is liable for the damages.  If the tenant has renter’s insurance, then their insurance company will cover the damages.  If the landlord files a claim under the landlord’s policy, then the landlord’s insurance company will usually work directly with the tenant’s insurance company.  If the tenant is responsible for the fire, but does not have insurance, then the landlord can charge the tenant for the amount of the landlord’s deductible in addition to any other obligations permitted in your lease.  For instance, in our lease form, if the tenant is responsible for the fire, the tenant’s obligation to pay rent continues until the lease expires or until the house is re-rented.  Normally the landlord would not have the right to charge the tenant for the full amount of the claim since they are getting their insurance to cover the loss.  The landlord’s insurance company may choose to pursue the tenant, but that is up to them, not the landlord.

Is there a silver lining here?  If your house is damaged or destroyed by fire, this may be an opportunity to update your house.  Once you and your insurance company have agreed on the amount of the claim, they are normally very reasonable regarding how you repair the property.  For instance, if your 1980s rental house had a separate living, formal dining room, separate den, and a small galley style kitchen, this may be an opportunity to update the property with a modified “open concept” floor plan.  Similar opportunities may exist to update the master suite if that suffered damage.  We recently had a house that was burned to the ground and we built it back to the same floor plan and dimensions.  However the new house was made of materials that are more durable and resistant to tenant damage which has reduced operating expenses for the property.

Let’s hope this never happens to one of your properties.  But if it does, now you know how to deal with it.    

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Housing Market updates from GAR - Atlanta Property Management

Matt Karoglou - Tuesday, December 22, 2015

Georgia housing indicators for November are in:

 -   Pending Sales were up 23 percent to 7,861.

 -   Average Sales Price was up 7 percent to $218,840.

 -   Inventory levels shrank 7 percent to 41,891 units.

 -   Median Sales Price increased 7 percent to $175,050.

 -   Days on Market decreased 8 percent to 72 days.

 -   Months Supply of Inventory was down 23 percent to 4.6 months.

 -   New Listings increased 4 percent to 9,568.

Excalibur Homes is an Atlanta property management company. See why landlords choose us. Click here to find out more about our leasing and management services.

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2855 Marconi Dr, Suite 310
Alpharetta GA 30005
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