Real Estate Investing 101

How to Evict a Tenant in Arizona: A guide to initiating a forcible detainer action

Many people ask us about the process for evicting a tenant in Arizona. Eviction is not difficult in Arizona provided you follow the procedures carefully and completely. As always with legal questions we turn to the professionals. Our good friend, landlord/tenant attorney,Andy Hull has graciously provided a some great advice for landlords faced with having to file a forcible detainer action and evict a tenant.

If you have never filed a forcible detainer action, we strongly advise you to consult with a knowledgeable attorney. The Arizona Bar Association can help you find someone or the people at Andy Hull's office will be glad to help. 

If you are proceeding without legal representation, the Arizona Superior Court web site has a guide designed to help you.

Below is information Andy Hull provides to his client's needing to begin a forcible detainer action.

PROCEDURES FOR INITIATING A FORCIBLE DETAINER ACTION

A. Type of Forcible Detainer

Please notify your attorney prior to filing as to the type of eviction you are filing the following:

1. Immediate Termination (Eviction for criminal activity, severe property damage, etc.)

a. You must speak with an attorney prior to serving the notice. Certain activities may not be grounds for an immediate eviction. Our office can also prepare and serve the notice for you, as can your process server.

b. The notice must specify the conduct which is grounds for immediate eviction in detail, including dates, times and the nature of the incident.

c. You must have witnesses with personal knowledge of the incident who are willing to appear in court and testify on behalf of management. Written statements from witnesses are not usable in court.

d. Security guard logs and police reports may also not be acceptable as evidence. Be prepared with names, addresses and/or badge numbers if subpoenas are necessary.

e. Do not make comments to tenant such as “I will have you out in a few days” or “You better leave or I will take you to court”. These statements could be used against you at the court hearing. Simply serve the notice and wait for your day in court.

f. If rent is owed when the immediate eviction is in process, and tenant attempts to tender rent, DO NOT ACCEPT IT. Acceptance of rent during this time could jeopardize the eviction and allow the tenant to remain in the property.

2. Non-Compliance Eviction (10-day or 5-day Health and Safety)

a. As with an Immediate Termination, you must have witnesses with personal knowledge of the problems appears and testify at court. Before and after pictures, if applicable, may also be necessary to make your case.

b. Once the noncompliance notice has been served, if rent is offered DO NOT ACCEPT IT unless the non-compliance breach has been cured. Acceptance of rent could jeopardize your eviction should the tenant not cure the breach of lease.

c. Make sure your notice clearly details the alleged violation – dates, what happened, etc. The notice must tell the tenant what violation they are being accused of.

3. Non-Payment of Rent

a. Your notice must be dated and signed by the individual serving the notice. If the notice was mailed, eviction cannot be started until ten days after date mailed, or five days after the tenant signed for the mail.

b. Notice should include all amounts owed by the tenant, including any balance (or credit balance), utilities or damages, where applicable, and any late charges and rent concessions that have been given. Fees for service of the notice or other charges such as deposits, etc. cannot be charged unless it is part of your lease agreement.

c. If the tenant attempts to tender a partial payment of the rent that is due, DO NOT ACCEPT IT without having the tenant sign a Partial Payment Waiver agreement. Failure to have the tenant sign this waiver could cause you to lose your right to the remaining rent owed by the tenant for that rental period and your right to proceed with an eviction.

d. After the court date is set, a copy of your five-day notice must be given to our office, either by mail or fax, for your court file. If we do not have a copy of the notice at the hearing, the court may dismiss your eviction. The courts also require a complete copy of your lease agreement in order to award all late charges and attorney fees.

4. Attached are various other notices that may need to be used during your tenancy. Please call with any questions.

B. Cancellations before court

You must call your attorney as soon as a tenant pays in order to cancel the court hearing. If we do not hear from you, we assume that we are to proceed with the eviction. You can cancel with our office up to the date and time of court; however, we may not be able to cancel with the attorney if you wait until the last minute to call. If for some reason, a court hearing is not canceled, we can file a Motion to Set Aside the Judgment, if necessary. Remember, the tenant has until the court date to pay all monies due and owing, including all late charges, attorney fees and court costs. LANDLORDS CANNOT REQUIRE PAYMENT OF FUTURE RENTS. If payment in full is made, it is necessary for the landlord to cancel the court hearing immediately.

C. Judgments

1. At the hearing date, a Judgment will be entered if your tenant does not appear or if your tenant does appear and stipulates the Judgment. The attorneys who appear on your behalf do not make deals with your tenants without your approval, nor do the attorneys assure your tenants that if they pay the Judgment, they will be able to remain in the premises. Any payment arrangements are referred back to you. You do not have to reinstate the lease and accept payment, despite what the tenant tells. It is your choice. Any acceptance of money must accompany a written agreement signed by the tenant indicating whether you are reinstating the lease or just paying on the judgment.

2. Should your tenant appear and plead not guilty, a trial will be held. This may occur at a different date and time, but increasingly the Judges are hearing trials at the same time as the initial hearing. Therefore, if you think that your tenant may come to court and attempt to raise ANY issues regarding their nonpayment, you should plan to be at court. Please remember that we can not win a trial if there are no witnesses at court. This includes the management as a witness to the amount owed and the delivery of the notice.

3. The Judgment will require your tenant to vacate five days after court (or 12 – 24 hours in the case of an immediate eviction). If the tenant pays, or makes suitable arrangements to stay, you must notify our office to file a Satisfaction of the Judgment. If the tenant does not make arrangements and does not vacate, you will need to have our office file a Writ of Restitution so the Constable may come and remove the tenant for you. Writs are not filed automatically.

4. After the tenant vacates, apply the deposits to the tenant’s account, including the Judgment where necessary. This must be done within fourteen (14) business days after tenant vacates the premises. If the deposits are applied to the Judgment, you must file a full or partial Satisfaction of the Judgment as soon as the amounts are applied. You may charge the tenant for the rest of the lease until you get it re-rented, any lease break fees in the contract, damages to the unit (include a copy of the receipts for the repairs), and any other costs you incur (including utilities, pool or yard service but only if the lease provides that the tenant is liable for these sums. You must return all sums you are not entitled to prior to the fourteen business days or you risk being liable for three times the amount. Send the itemization and/or the funds certified mail to the last known address.

D. Miscellaneous Issues

1. Discrimination issues continue to be a hot topic. Be careful about statements made upon refusal to leave—do not mention number of children, number of residents, or how many to a bedroom unless you seek legal advice first.

2. If you receive money from your tenant after court and you do not wish to have the tenant continue to reside at your rental property, DO NOT GIVE A RENT RECEIPT. Give or send the tenant a letter stating the money is being applied to the debt owed you, you are not reinstating tenant’s lease agreement, and the tenant must vacate per the court order.

3. REMEMBER, you can only legally serve written notices one of two ways: 1) personally give the notice to the tenant or 2) send the notice by certified or registered mail. The notice is legally served five (5) days after mailing or when the tenant signs for his notice, whichever occurs first. If you deliver the notice to the door, you may risk having the eviction dismissed if the tenant denies receiving the notice.

We hope this info has been of help. Special thanks to Andy Hull for keeping our readers well informed.

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Why Won't My Lender Work With Me on a Loan Modification or Short Sale?

BREAKING NEWS: The Urban Team has launched a site dedicated to short sales. We have the latest news and information for those needing to know more about short sales in the Phoenix area. Just go to www.short-sale-phoenix.com. 

Yesterday, attorney and mortgage mediation specialist Doug Farnam spoke with us about loan modifications and short sales. Doug is with the Mortgage and Mediation Group at Thomson Conant PLC and works in the trenches on loan mods and short sale negotiations. The theme of his talk was "Why won't the lender work with me on my short sale or loan modification?"

We felt his talk was of great interest to both investor and regular home buyers trying to purchase short sale properties as well as homeowners trying to negotiate a loan modification or short sale.

We learned a great deal during Mr. Farnam's talk, especially about the role of a little known or understood player called the mortgage or loan servicing company. Although I was familiar with the term "mortgage servicing company", I was not aware of their involvement with loan modifications or short sales.

Let's look at what a mortgage servicing company does. According to the people at the financial dictionary, a mortgage/loan servicing company does the following:

The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan.

Some lenders service the loans they sell themselves, however, a large number contract with an outside vendor to perform this function. This is especially true of loans sold in the secondary market.

According to Farnam, some servicing companies have little incentive to help homeowners with short sales or loan modifications. It often depends on whether the loan servicing company provides debt collection as part of their service.

The contract between lenders/investors and servicing companies generally covers fees for processing payments, paying insurance & property taxes and some or all of the foreclosure process. Thus, they may not be contracted to perform the work required for loan modifications or short sales.

This is not true of all servicing companies. Some, like Litton Loan Servicing, do offer debt collection, short sale and loan modification services. However, the logistics, infrastructure, staffing, IT and understanding of the rapidly changing regulations can make the job daunting at best.

I had a nice chat with the people at ILS, Investor Loan Services, this morning. They specialize in servicing real estate loans backed by investors rather than banks. They discussed the many hurdles their industry has faced while trying to deal with the ever rising number of loans in default. One of the problems was simply software. Each bank or investor has their own set of rules on how to handle a loan in default. This requires industry specific software developers to customize modules that drop into the accounting software a servicing company uses. In addition, the Federal Government, Fannie Mae and other involved parties constantly change the regulations creating even more havoc. 

The bottom line, as I am coming to understand things, is banks and their loan servicing companies would love to help homeowners in trouble; They simply lack the resources and even control to do so.

Politicians publicly promise help, yet do not understand the complexities of providing solutions. There are several dozen variables that can impact the success or failure of a loan modification or short sale. Just because Bank of X sold a homeowner the loan doesn't mean they still own the loan and each investor who does chooses how they want to handle loan modification or short sales.  I believe it will continue to be a slow case by case process with more standards of practice coming into play over time.  

Hope this information helps demystify a very confusing problem in our industry.

Gene Urban and Ron Urban
The Urban Team at Realty Executives
602-234-5777

Landlords... Make sure You Conduct a Move-in & Move-out inspection

Most landlords know the importance of conducting move-in and move-out inspections. Some who are new to the business may not and will likely learn the hard way.

The inspection, with documentation is extremely important for all parties. If a problem erupts it will be a battle of he said, she said and landlords often loose in court.

The move-in, move-out inspection is relatively simple. the landlord and tenant walk the property and the tenant notes any items he or she feel are broken, damaged, missing, in need of repair and such. A move-in/move-out form should be used. Several such documents can be found on the internet and downloaded for free or a small fee. In addition, it is considered wise to take pictures and/or video of the premises as well. We'll talk more about that below.

We are told it is important the tenant fill out the form so there is no question of impropriety. They should also sign and date the form. This form is used prior to occupancy and at the end of the lease agreement and can be used by both parties to establish pre-exiting conditions and/or damage during occupancy.

Attorney Andy Hull says the following about using the form:

In an attempt to avoid being sued, or at least to properly defend any lawsuit regarding the deposit, the landlord should always have the move-in/move-out inspection form, the names of the individuals who did the move in/move out inspection, and the supporting documentation (invoices, photographs, vendor statements, etc.)

Today, many landlords take video during the move-in and move-out inspections as a way to document the condition of the property. We are told it is important to date stamp the video and show the property address and unit number at the beginning and end.

Some say the inspection is a CYA thing. We disagree. We feel it is intended to create a clear understanding between parties regarding the condition of the home or apartment. Thus, performing a thorough inspection is simply prudent.

If you have more questions about this process, we recommend you talk to a competent attorney who specializes in landlord/tenant law. In Arizona, we really like the people at Andy Hull's firm and have found them to be quite helpful. They can be reached at 602-230-0088.

We hope this post has been helpful and we truly appreciate you visiting Real Estate Investing 101. Come back often as we update this site on a regular basis.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

 

 

Common Mistakes Landlords and Investors are Making on Rentals

I was interviewed by Melissa Blasius at News Channel 12 a couple days ago and asked to discuss common mistakes we see investors make as they enter the rental market.

We are seeing a number of issues with many new investor/landlords. The most common are:

• Failure to conduct background screening of potential tenants.
• Many landlords are waiving security and pet deposits.
• Few investors write a business and marketing plan. They don't treat the project like a business.
• Some investors do not have sufficient cash reserves to cover non-occupied times or necessary repairs. We recommend 6 months of operating capital. Do not use credit cards for this.
• Many underestimate hold times on property. In the current market, close to 10 years may be necessary to reap optimum rewards.
• A lot of landlords do not realize it can take 3-5 months to find a good tenant in the current market. Vacancy periods are long right now due to the large number of available homes. Turnover is high as well.

The interview was part of the ten o'clock news program and carried as a news article on AZCentral.com. Below is the video feed for the interview. Hope you enjoy it.

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

What is an AS IS addendum in a real estate contract?

As more and more buyers, especially investors, purchase properties from banks and by short sale they find themselves signing an AS IS addendum to the purchase contract. The Arizona Department of Real Estate (ADRE) has created an AS IS addendum used in conjunction with the Arizona purchase contract. Today's post explores the AS IS addendum and explains some of its language.

The video does not cover the entire AS IS addendum. Please read and understand the entire document before signing.

This video commentary is not intended as legal advice. If you have legal questions regarding this or other documents used in a real estate transaction, we recommend you talk to a competent counsel.

This is the first of a series of training videos we will provide. Check under "Videos" in the category section of our side bar for more offerings.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777