QUESTION FROM ONE OF MATT’S READERS-

“I just came across your website and found it very helpful. I have a question concerning a landlord issue. We recently just moved out of a home we were leasing. We did everything the landlord asked for and followed the lease perfectly. During the time we stayed there the landlord would visit almost everyday unannounced. He would use the driveway and work in the shed behind the house. Many of his friends would just wander the yard also. He also used our water hose almost everyday. We did talk to him about this and he told us we had to get use to it. We decided we would just stick it out and not renew our lease.

Upon moving out the landlord said we had left a small spot on the back of his 32 year old pink countertop. He rented the property out right after we moved and is still using the countertop. He charged us $540 for the small spot saying it had 3 years left his loss. So he was charging us $180 a year. I read up on Indiana law and I thought it said he can only charge fair market value. I also read we were entitled to have reasonable notice when he came on the property. That we were entitled to peaceful living which we definally did not have ( I did take many pics/videos of him coming and going all the time) Do we have any rights? The 45 day deposit letter he sent us just said he was charging us $180 a year his loss. Is it vaild? He has no intention on fixing or replacing the counter plus he is still using it. Do we have any rights? He also asked us to lie for him if the county assesor came by. He is saying his wife lives in the rental under her maiden name so he can claim the homestead exemption. Is the lease vaild if he does not even own the home? The home is under his wifes maiden name only. Any input would be greatly appreciated! Thank you for your time.

Maria”

Matt’s Answer-

Landlords are not always right.  Tenants are not always wrong.  If your facts are correct, you might have a very good case.  Indiana has a security deposit statute that poses a “Zero Sum Game” for landlords.  If a landlord wrongfully holds a security deposit after the lease ends, the landlord loses.  If a landlord fails timely to provide the “45-Day Letter” and any security deposit balance owed to the tenant, the landlord loses.  So, landlords should be careful to follow the “45-Day Letter” Rule very carefully.

Sounds like this landlord is trying to cheat you,  Fight it.  Don’t let him charge you for a new countertop, when you did not even damage the old one.  Right is right, and this landlord is wrong.  You should consider going to small claims court.  I would need to see your evidence and the lease to be certain about your best options.

You might want to read this post-  Indiana’s Security Deposit Law

Good luck.

Matthew A. Griffith is an attorney, business performance coach, mentor and entrepreneur.  He coaches, advises and guides business owners, entrepreneurs, inventors, property managers, investors and real estate professionals.  Matt has nearly two decades of experience helping businesses grow.

Question from One of Matt’s Readers

“I am a landlord with several properties. I’ve been having a problem with a particular small claims court judge. He always want to put off rendering a decision on a cases. It takes two to three weeks to get a decision on any type of damage hearing. When I do receive the decision in the mail the amount awarded is always about half of what I asked for, with no explanation. I take meticulous records and proof to court and have everything documented. I’m always surprised when he doesn’t make a decision right there. Is the judge required to explain why he disallowed part of my damages. Is this something I should appeal? On what grounds?

or am I throwing good money after bad?”

Matt’s Answer

In Marion County, Indiana, there are nine small claims courts. You can appeal judgments from these nine courts to the Marion Superior Court on any grounds.  Actually, you don’t need a reason to appeal.  So, one option is for you to obtain your ejectment in the small claims court and then appeal the adverse monetary judgment to the Marion Superior Court. That will be a longer process, however. That is one option.

Another option is to avoid the small claims courts completely and file all of your lawsuits in Marion Superior Court. That is a slower and more complicated process, however. My law firm had a client who experienced the same troubles that you are experiencing. That client, out of pure frustration, filed all its lawsuits in Marion Superior Court. It costs more money and often requires a lawyer’s help.  That is a second option.

A third option would be to ask the judge for a few minutes of her time to discuss her court procedures in private. You cannot talk about a specific case in private with a judge, but a good judge would be receptive to a general discussion about her courtroom procedures and the evidence she requires. I would try to make that overture. That might not work, but it is probably worth a try.

A fourth option might be to change the way in which you present your case. If you do not provide the court with a one-page summary of all your damages, you should start doing so. I would label the summary as an exhibit and formally introduce it into evidence. I would make a “big deal” out of your summary of damages. It should be typed, include a title, and look like a formal document. Make it a serious effort.

Here’s yet another suggestion… file a motion to correct error or a motion to reconsider after your next inadequate judgment award. Describe why the court erred and provide an itemized damages calculation. There is not a formal means by which the court in small claims cases can consider a motion to correct error or motion to reconsider, but I would still give it a shot. If you try this, make sure you file this document soon after you get your judgment.

Another option is to simply keep doing what you’re doing. Frankly it is not unusual to wait two or three weeks to get a decision out of any judge in any court in any county in the state. So, I’m not surprised or alarmed that it is taking some time for you to get your judgments.

As a final thought, it might worth trying to bring an attorney to your next case. Judges tend to treat litigants differently when a lawyer is present. After that one case, you might find that the judge treats you differently.

I have given you several suggestions. You might experiment with one, two or all of these. Unfortunately, there is no single, absolute and perfect solution. It is frustrating when courts ignore the law and the facts. It is even more frustrating, when it seems that a court has its own agenda. Please be patient and diligent. Persistence helps as well. Keep trying, and keep fighting for a just result in your cases.  For your own good, assume that it is your fault that the judgments are wrong.  Assume that you could communicate your position better. In other words, don’t blame the judge for hearing you wrong. Try speaking clearer.  Present a better case. You may be perfectly right and you may be doing a good job of presenting your case, but assume you could do better. You might find that a better articulated and presented case will serve you well.

Good luck.

Question from one of Matt’s readers-

“How should I screen tenants?”

Matt’s Answer-

That is a great question and more important today than ever. As the foreclosure wave pushes more and more people out of their production homes and into the rental market, landlording is seeing a rebirth. Once again, it is not so bad to hold rental properties. Generally, the number of vacancies is dropping. And, more and more investors are moving away from the more creative real estate investing techniques and back to buying and holding rental properties.

Landlording is back!  (I never thought it went away, actually.)

For both the seasoned landlord and the newest of real estate investors, it is important to screen tenants and have a command of the tenant screening process. There are a number of factors to consider, such as:

· What forms do I use?

· Do I require an application fee?

· How do I screen?

· What is my screening criteria? What makes a good tenant?

· How do I avoid discrimination claims? What are my duties and rights?

· How do my rental application and lease agreement work together?

· Was does it really mean to “pre-screen” tenants?

· Should I use a tenant screening service?

These are great questions, and the answers are relatively simple. It does, however, take some time to learn about your rights, responsibilities and opportunities, as they relate to tenant screening. I cannot address all these topics here, but let me take the last question- “Should I use a tenant screening service?”

The answer is: Yes, you better. Using tenant screening services is the most cost- and time-effective way to improve your chances of a successful landlord-tenant relationship. Good tenant screening services are a bargain. I have written for more than a decade on the subject, and believe in them more today than ever.

Do “bad” tenants slip through, even with a tenant screening company helping you? Yes, it happens. But, for the most part, professional tenant screening greatly improves your odds of finding the best tenant in your pool of tenant applicants. I believe in tenant screening services so much that I agreed to teach a class on landlording, called “Landlording 101,” for the local office of the National Tenant Network, last year. WE WILL PROBABLY OFFER THE CLASS AGAIN THIS SPRING!  IF YOU ARE INTERESTED IN ATTENDING, EMAIL ME.

Also, once each month, I host the “Landlording Subgroup” of the CENTRAL INDIANA REAL ESTATE INVESTORS ASSOCIATION.  The next meeting will be held in my law office building- 151 N. Delaware Street, downtown Indianapolis at 6:00 p.m. on March 23.  If you’re a CIREIA member, register to attend the meeting at www.cireia.org.

At these classes, I answer the questions listed above. If you are a landlord and have not attended one of my classes, please do so soon.  If you haven’t established a relationship with National Tenant Network or another such service, do so this week. That is one of the first and certainly most important steps in the tenant screening process.

Once each month, I host the “Landlording Subgroup” of the CENTRAL INDIANA REAL ESTATE INVESTORS ASSOCIATION.  The next meeting will be held in my law office building- 151 North Delaware Street, downtown Indianapolis at 6:00 p.m. on Monday, March 23.  If you’re a CIREIA member, register to attend the meeting at www.cireia.org.

At these classes, I can answer any landlording question you can think of, because I’ve seen it all at this point in my law career.  If you are a landlord and have not attended one of my classes, please do so soon.  If you are not a member of CIREIA and are serious about real estate investing, GO TO WWW.CIREIA.ORG AND JOIN ASAP!

Question from one of Matt’s readers-

“Dear Mr. Griffith,

I rented an apartment in West Lafayette IN for six months and the lease ended on DEC 31, 2008. I had vacated the apartment on DEC 22, 2008 and left the keys and forwarding address with the landlord. Does the 45 days count from the date my lease ends or the date I left the forwarding address? I will appreciate your response.

Thanks,

S.A.”

Matt’s Answer-

Your question concerns Indiana’s security deposit statute, also known as the 45-Day Letter Rule.  Most states have a similar rule.  The 45-Day Letter Rule governs how a landlord of a residential property must handle the tenant’s security deposit after the lease is terminated.

In Indiana, the 45-day triggering event is the date the landlord regains possession. For you, that would be the date you returned the keys.

The statute requires the landlord to provide you (via US mail is acceptable) with an itemized list of any damages, which can include unpaid rent, and the balance of your security deposit, if any.

I represent far, far more landlords and property managers than tenants.  So, I can say with great confidence that the 45-Day Letter Rule is not well understood or even known by most landlords.  In fact, when I speak at the “Ask Matt” portion of the monthly meetings for CIREIA, I often ask how many attendees (real estate investors) do not know about the 45-Day Letter, and there are no fewer than 10 hands raised each time.

For more information on this law, visit the "Ask Matt" page at CIREIA’s website-  http://www.cireia.org/clubportal/ClubStatic.cfm?clubID=1507&pubmenuoptID=21366

Another question from one of Matt’s readers

"I was at the CIREIA meeting tues. and had a few questions about the 45 day rule.

1. Does it apply to section 8 also?

2.Does this also apply to section 8 unpaid utilities and any damages after they move out?

Thanks for your time,

B.H."

Matt’s Answer-

The 45-Day Letter Rule applies whenever any landlord takes any "security deposit" from any residential tenant in Indiana.

A "security deposit" is anything beyond the first month’s rent.  So, if you take the first and last months’ rent, you have a security deposit in the form of the last month’s rent.

What’s CIREIA?   

It is the Central Indiana Real Estate Investors Association.  I’ve been its Legal Affairs Chairman for more than 15 years.  For more information on CIREIA, go to its website- CIREIA’s Website.  If you are serious about owning investment real estate in Indiana, you should be a member of CIREIA.  Joining CIREIA for $150/year-  that’s a “no-brainer.”

.

Matt’s Answer-

What a great question. There are several issues here. I’ll take them in chunks.

FRIVOLOUS LAWSUIT

I’m going to assume that your case was in a small claims court, even though you didn’t say that. Crazy things happen in Small Claims Courts. The level of “lawyering” and judging is often not as high as it is in superior and circuit courts. There are exceptions, of course. But, your case shows why we have appellate courts to fix what lower courts screwed up.
Appeal!
In Marion County, Indiana, appeals from the Small Claims Courts go to the Superior or Circuit Courts. In Marion County, you get a fresh start. . . a new trial. The Small Claims Court judgment is vacated. You start over and get a chance to get the case determination right. So, my first response is: Appeal! That’s an easy solution to all your problems.

INSURANCE

Secondly, ask your insurance agent why you’re not fully insured! Should you be suing your insurance agent for malpractice? Maybe the insurance agent’s Errors & Omissions coverage is your solution.
On a side note, I’d encourage you to learn how to communicate properly with insurance agents. There are specific things you should do in order to develop the right Insurance Plan for your business, and I can share those techniques with you in another article or during a consultation.

JUDGMENT LIENS

When a judgment is entered by a court of record in an Indiana county, a lien is automatically created against any real property owned in the same county. If the judgment-defendant has real property in other counties, those properties are not impacted. However, a judgment in “County A” can be “recorded” in “County B.” At that point, the judgment is a lien on real property owned by the judgment-defendant in both counties.
Importantly, judgment liens apply not only to the subject property but to ANY real property owned by the judgment-defendant.

PERSONAL LIABILITY

If I understand your facts, there is no judgment against the LLC owner, just the LLC. In that case, there should be no collection efforts against the LLC owner. A plaintiff cannot collect a judgment issued against an LLC from the assets of the LLC’s owner. So, the owner (you) should not be concerned about a charging order. Actually, charging orders are a good thing, in a sense (read on).
Some of you might be asking: “What’s a charging order?”
A charging order only applies to LLC’s, not corporations. A charging order is an order that requires the LLC to pay to the plaintiff any monies that would be distributed from the LLC to the owner. There must be a judgment against the owner, before a charging order could be issued. Charging orders are the only remedy a plaintiff would have to collect from the ownership interests a judgment-defendant would have in an LLC. So, in other words, a plaintiff cannot acquire an owner’s ownership interests in an LLC. By contrast, a plaintiff can acquire a judgment-defendant’s stock in a corporation.
Why do the courts distinguish between corporations and LLC’s in this area of the law?
The rationale is that LLC’s are partnerships and that a plaintiff should not be permitted to become someone’s partner. So, if A and B are partners in an LLC, and C gets a judgment against B, C should not be able to enforce the judgment to become A’s partner. A has the right to chose his partners. He picked B, not C, to form a partnership. C could get a charging order against the LLC and collect any monies that would be distributed from the LLC to B. If A and B owned a corporation together, then C could acquire B’s stock and become a co-owner with B.
Back to your situation. . . the law concerning charging orders is irrelevant to your situation for the reasons I described above. What you have at risk is your equity in the LLC. You cannot do much about the equity you have in the LLC at this point, now that the judgment was entered. Any transfers of equity you were to make now could be considered “fraudulent transfers.” And that is an entirely separate topic for another article.

THE LESSON(S) HERE-

Call your attorney. You lost a lawsuit, and probably did not have a good attorney with you in court! You saved the cost of having an attorney in court, but at what greater cost? Was it worth it?
Appeal bad decisions.
Learn how to communicate with your insurance agent to develop the right Insurance Plan.
Plan. Planning is an activity that occurs in advance. I’m not sure from your short question what your Asset Protection Plan includes. Clearly, planning is important, as your situation reveals.