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Fair Housing Insurance

One of the most likely risks you will encounter as a landlord or property manager is not fire, tornado, hurricane, or personal injury. It is a Fair Housing complaint being made against you. It might be legitimate, because you were not aware of some of the rules. It might be bogus and merely used as leverage by an unhappy tenant or prospect. If fake, you are looking at a minimum of $15,000 in legal fees and lost rent just to get it thrown out. If real, legal fees and damages can be very large.

Sadly, most landlords are not aware that their insurance policy does not cover them for this. One person suggested their umbrella policy would, but that is not accurate. Umbrella policies don’t add extra risks. They just add more dollars to the limits of your other policies.

In the industry, what you want to obtain is called Tenant Discrimination Insurance. Property managers should check to make sure their Errors & Omissions (malpractice, basically) insurance includes this. If not, it is relatively easy to get it added as a rider. For landlords, though, the solution is not so easy.

Although you probably have landlord’s insurance for your rental properties, that is usually just for physical losses, plus liabilities related to things that happen on the premises. Most of those policies do not have any riders that can add Tenant Discrimination Insurance.

I have found five ways to obtain this. I know of four companies who write separate policies for Tenant Discrimination. They are

If you contact one of the named insurance companies above, they can either take your application online, or refer you to a local agent. You don’t have to move all of your insurance. You can buy just the tenant discrimination from them, and keep all other insurance with your favorite agent or company.

Fair Housing issues can be tricky. For classes and video on this topic, click HERE.

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Who is the Landlord?

The lease says “ABC Property Management Company, Inc. (“Landlord”) and Joe Smith (“Tenant”), agree as follows…” The property is owned by Sally Jones. Who is the real landlord?

It is not ABC. They are the AGENT for the landlord, but not the landlord. Calling them the landlord in the lease just muddies the waters and makes things confusing. It’s not necessary to reveal the true owner’s name. You can say, “ABC Property Management Company, Inc., as agent for Landlord, and Joe Smith, Tenant, agree as follows…”

Someone recently called me with a problem related to such confusion. He filed an eviction lawsuit against the tenant, with ABC Property Management Company, Inc. (a fictitious name made up for this article) named as Plaintiff. It wasn’t quite so obvious, because the real company name did not include the words “property management.” As far as the court clerks and the judge could tell from looking at the complaint, it named the true owner of the property as the plaintiff. The lease named that same company as the landlord. When the tenant failed to file an answer, the plaintiff obtained a default judgment

Afterwards, police officers were present for the turnout order. The tenant’s personal possessions were placed on the side of the road, where they were stolen. A week or so later the tenant hired an attorney. She asked the judge to void out the eviction judgment and turnout order because the plaintiff was not the true landlord. The judge agreed. This issue is similar to me filing a divorce lawsuit against Bill Gates and asking for $10,000,000 a month in alimony. I might get a default judgment, but it’s not enforceable. I was never married to Bill Gates. (Really!!!)(But, I have joke below with Bill Gates in it, as a reward for reading on to the very end.)

Because the turnout order was void, the landlord had no right to enter the apartment and put stuff out on the street. The landlord was liable for actual and punitive damages.

Don’t let this happen to you. Just like you are not supposed to commingle money, you also cannot commingle identities.

That was pretty grim, wasn’t it? Here’s a joke to lighten things up:

MY SON WAS FLUNKING OUT  OF COLLEGE SO I TOLD MY SON, “YOU WILL MARRY THE GIRL I CHOOSE.”
HE SAID, “NO.”

I TOLD HIM, “SHE IS BILL GATES’ DAUGHTER.”
HE SAID, “YES.”

I CALLED BILL GATES AND SAID, “I WANT YOUR DAUGHTER TO MARRY MY SON.”
BILL GATES SAID, “NO.”


I TOLD BILL GATES, “MY SON IS THE CEO OF THE WORLD BANK.”
BILL GATES SAID, “OK.”

I CALLED THE PRESIDENT OF WORLD BANK AND ASKED HIM TO MAKE MY SON THE CEO.
HE SAID, “NO.”

I TOLD HIM, “MY SON IS BILL GATES’ SON-IN-LAW.”
HE SAID, “OK.”

AND THAT’S EXACTLY HOW POLITICS WORKS HERE IN  AMERICA.

And thus, began the practice of hiring morons to work in influential positions of government.

The practice is unbroken to this date.

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Who Holds the Security Deposit?

This post is an excerpt from the Denise Evans book, Alabama Landlord’s Desk Reference and Forms Book.
If you’d like more information, including free table of contents and index, there is a link at the end of the article.

Sometimes a landlord hires a property management company, but wants to hold all security deposits itself. Often, the property manager balks, and says that is not allowed. The answer is more complicated.

A property manager is the agent for the landlord/property owner. Unless the management contract has some different provision, then the manager must surrender the security deposit to the owner if it is demanded. Agents must comply with their principal’s instructions, unless those instructions are illegal or a contract between the parties dictates a different result. There is nothing illegal about the owner holding the security deposit money.

This typically comes up in three situations:

  1. Owner wants the deposit forfeited and manager disagrees.  Unless the management contract says the manager is the one who is allowed to make that decision, then the manager must declare the deposit forfeited. If that happens, ask the owner to sign an indemnification agreement saying that if the manager is sued because the deposit was not refunded, then the owner will pay all of the manager’s legal fees and other costs and expenses.
  2. Owner wants to change management companies, or self-manage. It does not want to declare the deposit forfeited, but it does want sole control over the money.  This has the same answer as #1 above.
  3. Owner wants the security deposit so it can use the money. It is allowed to do that in Alabama, but the funds must be available and refunded at lease end if there have been no deductions.  Obtain the same indemnity agreement as described in #1 above.

Property managers who want to avoid such situations should have a contract clause that says security deposits will be held only by the manager, that forfeiture decisions are in the sole discretion and control of manager, and that if there is a change in management companies the manager will refund security deposit by checks made jointly payable to the tenant and the new management company. That last item avoids the problem of the new management company failing to refund the deposit (but with no forfeiture-related reason) and the tenant is allowed to get the refund from the former company, under Alabama law. With my method, the tenant has ALREADY received the refund, even though jointly payable to the new management company.

Interested in the Landlord’s Desk Reference and Forms Book? Click HERE