How Being Green Can Increase Your Rental Income

Environmentally-friendly technologies like programmable thermostats  increase rental property owners' rental incomesMost property owners are accustomed to looking at repairs and renovations on a dollar-in/dollar out basis. This is particularly true for energy efficiency-boosting projects like putting in more efficient air conditioners, improving insulation, and the like. Most landlords balance the cost of making the change against the expected savings in utility bills, with some depreciation tax considerations on major appliances such as boilers and on the insulation itself, and make the decision on a strict ROI/IRR basis alone.

This is usually a good discipline. But if it’s the only criteria you use, you may be missing out on an important part of the cost/benefit equation: Environmentally-friendly buildings may command higher rent payments.

Environmentally-Friendly Housing Rents for 24 Percent More

Data shows that having a LEED certification – a common designation issued by the U.S. Green Building Council that is reserved for the properties that have the best energy efficiency and the lowest negative environmental impact – is the second highest driver of rental market value. All things being equal, LEED certified properties command an average rental premium of about 24 percent! Only proximity to a central business location is a higher driver of rental market value.

While it’s not easy to get an existing structure LEED certified unless it was built with LEED certification in mind, a 24 percent increase in long-term rental market value is a powerful incentive to consider making any future extensive renovations or new construction with LEED in mind.

Property owners of LEED certified buildings can maximize the impact of this certification by issuing press releases to local publications and updating their brochures and other sales or leasing literature. (The LEED people, being shameless promoters themselves, will happily walk property owners through this promotional process – and even sell them plaques and certificates to help in that regard.)

The Environmentally-Friendly Projects With the Best ROI

GreenAndSave.com has compiled a list of repairs and improvements – many of them quite easy and simple – that generate substantial ROI just on a cash-in/cash-out basis. Here are the top five green renovations on an ROI basis:

  • Programmable thermostats
    • Added cost: $115
    • Annual savings: $180
    • ROI: 156.5%
  • Standby power reduction
    • Added cost: $20
    • Annual savings: $24
    • ROI: 120%
  • Compact fluorescent lighting
    • Added cost: $60
    • Annual savings $80
    • ROI: 133%
  • Hot water heater blankets
    • Added cost: $25
    • Annual savings: $30
    • ROI: 120%
  • Heating system tune-up
    • Added cost: $200
    • Annual savings: $180
    • ROI: 90%
  • Seal duct leaks
    • Added cost: $450
    • Annual Savings: $300
    • ROI: 67%

GreenAndSave.com estimates an ROI of at least 30 percent on all of these projects, and none of them have an additional cost per project of over $3,000, according to their figures.

Some Thoughts on the ROI of Solar Power

increasing rental housing incomeSolar power is not truly cost-effective in some instances. Traditionally, solar has been sold on the basis of the value of tax incentives. But projects that rely on a tax subsidy in order to be cost-effective are, by definition, generally not cost-effective. Even GreenAndSave.com, a site that is friendly to environmental and green energy causes, assigns an ROI of about 9.2 percent to solar electric systems.

Some locales are better for getting a good ROI on installing solar panels than others, though, and as improvements in photovoltaic cells continue the ROI on solar will gradually change. But on an all-in cost per kilowatt hour, including inevitable maintenance and wear and tear, solar doesn’t make financial sense in many settings. In areas where it does work well, there are still a lot of renovations and improvements you can make that have a better likely return on investment.

Become More Green With the Help of a Property Manager

Are you hoping to make your rental housing more environmentally friendly but unable or unsure how to manage the necessary renovations? Among the many other services they offer, professional property managers are adept at managing renovation projects (not to mention general maintenance and repair projects).

If you’re interested in maximizing your rental income, it behooves you to get free quotes from a property manager or two and start a conversation that could have a dramatic and lasting impact on your finances.

Pest Infestations – Association Board Member Responsibilities

When you get a call or email from a resident who is frustrated, concerned or freaked out about pests, what are you and your fellow board members obligated to do? Whether it?s snakes, roaches, rabbits, coyotes, wasps, rats, mice, bats or any other common household or garden pest, where does the responsibility for pest control end for the resident and when does it become a communal problem for the homeowner or community association to solve?

How association board members can deal with rat infestationsIn theory, the unit owners are responsible for pest control within their own dwellings and exclusive use areas, and the HOA is responsible for infestations affecting anything in the common areas.

Of course, the legal theory sometimes doesn’t match up well with reality, and no attorney in the business of drafting association covenant documents can possibly foresee every possible eventuality and describe the solution and exact division of responsibility in detail.

When it comes to responsibility for pest control and eradication, it will take goodwill and common sense on the part of both residents and the board. This is especially the case because when there is an infestation affecting both private and common areas, the eradication effort needs to be coordinated and simultaneous.

Pests Can Be Surprisingly Hard to Eradicate

An association’s attempts to eradicate pests can be complicated by a number of unforeseen factors. For example, your pests may be impossibly cute, causing their eradication to traumatize the children who live in or visit your development. But even humane methods of removing cute pests can bring about problems.

That’s what happened to a Broomfield, Colo. HOA. They were faced with a rabbit problem and initially planned to kill the precious little rodents – until they heard an outcry from their residents.

“What do I tell my granddaughter when the bunnies are gone or she sees them in a trap? What are we going to say? We killed the rabbits because they ate our flowers,” said one grandmother.

In the end, the HOA in question pardoned the pesky rabbits and sought for a way to trap and relocate them elsewhere. It was at this point that the HOA ran into a complex series of local laws that regulated how far away from the capture location animals can be relocated. For example, cottontail rabbits had to be relocated within 10 miles, while other species of rabbits had different regulations. Some species required them to get a special permit from the Colorado Division of Parks and Wildlife.

You shouldn’t have much trouble with your common roaches, rats and wasp infestations. But for more unusual animals you’d better check with local wildlife officials before trying a relocation process.

How State Laws Treat Pest Infestations

Your state law may shed some general light on who’s responsible for what. For example, California Civil Code Section 1364 (The Davis-Sterling Act) spells out:

(a) Unless the Declaration provide otherwise, the association is responsible for repairs, necessary replacements and maintenance of the common areas in a CID, other than “exclusive use common areas,” and the owner is responsible for maintaining his or her separate interest and “exclusive use common area.”

But note that the law defers to the Declaration, which, in most cases, is your association’s CC&R document. This state law, and likely the law in your state, only kicks in only if your documents don’t adequately delineate responsibility.

California law also has special provisions for termites and other wood-destroying pests that allows the association to take control of the situation and prevent the infestation from spreading to other units.

Pest infestations are bad. Handling them on your own is worse. Get help from a professional association manager >>

Pest Infestations Caused by Humans

Sometimes there’s no direct cause for pest infestations. Mouse and snake infestations just happen, regardless of how much communities do to dissuade them.

But sometimes residents do cause pest-related problems (e.g., an old widower who enjoys feeding stray cats). In this case, documentation is key. If a problem resident can be identified (preferably via multiple witnesses), your eradication efforts need to be combined with one or more registered letters or other formal notices. If the problem behavior does not stop, the association may have cause of action to sue the problem resident (or, if it’s a renter, the owner) to cover the association’s eradication costs.

Paying for Pest Extermination-Related Relocation

State law varies on what party should pay for relocation. In California, for example, the Davis-Sterling Act says that if you have to relocate a family for fumigation or other measures, the association must pay for the relocation.

Check with your state’s laws. If they aren’t clear, it’s a good idea to address this squarely in your association’s CC&Rs and vote on how you want to handle this in your community. However, as a practical matter, if the association wants to retain the authority to force a family to relocate temporarily while their home is tented (to prevent further damage and infestation, for example), it makes sense to have the association pick up the costs, too.

Board Member Tips: Dealing With Late Dues Payments

Do you know what happens when one of the owners in your community can’t or won’t pay their homeowner association dues? As an association board member responsible for collecting dues on the association’s behalf, what are your rights and responsibilities in such a situation? What are the courses of action available to you? Keep reading to find out.

Don’t Ignore Late Dues Payments

How to collect unpaid association duesThe most important thing to remember is that you can’t ignore the problem. As much as any of us hate to be the bad cop, if you’re on the board your fiduciary responsibility is to all the members of the association as a whole. If you ignore the non-payment of dues, you are doing an injustice to all the other owners in the association who are meeting their obligations.

Here are three more reasons you can’t ignore late due payment:

  • If your association gets a reputation for letting responsible members carry financial weight for the slackers, they’ll likely start selling, word will get out, and property values in your community will fall.
  • Failing to collect unpaid dues will deprive your association of funds needed for maintenance, upkeep, landscaping and servicing the common areas. The cost of ignoring non-payers is thus much greater than what they owe because it affects property values across the whole community.
  • If you fail to pursue the collection of unpaid dues, your fellow association members may file suit against you to force you to act. Otherwise, you could be in violation of your fiduciary duty to look after their interests and could be removed from the board.

What You Can’t Do to Collect Late Dues

It’s imperative that you don’t publicly shame owners into catching up on their dues by publicizing their names; this is prohibited in practically every state. Remember that the business of collecting unpaid dues is between the board and the individual owners. No one else should know.

You may need to disclose the aggregate amount of shortage to any association member who asks to inspect the books but, in many states, you must redact anything that would personally identify anyone who’s in arrears.

What You Should Do to Collect Late Dues

First, get an attorney. You will hopefully be able to collect the amount in arrears in due course. But if you don’t, this process may well eventually result in a lien filing and an eventual foreclosure. If this comes to pass, you’ll want your legal ducks in a row from the very beginning.

Note: This is one area where it may well pay to have a professional association manager in on the process. While board members often serve short terms and are typically new to the process of collecting late dues themselves, a veteran association management firm will have already been through this process many times.

Next, check your bylaws and covenant documents carefully. If they were well-drafted to begin with, they will outline a process that you must follow whenever you attempt to collect dues payments in arrears. In most cases, you’ll have to send one or more registered letters, so you’ll have a receipt in hand if you need to go through a legal process.

There’s usually nothing wrong with a reminder phone call or two, but ensure you don’t run afoul of the Fair Debt Collection Practices Act. This statute prevents you from disclosing information over the phone about the unpaid dues to anyone but the responsible party, prohibits “harassment” and restricts the hours at which you can call.

Save time and avoid stress – get a free quote from a professional association manager >>

Can You Charge a Late Fee?

You may charge a late fee only if the fee has been specified in your association’s CC&Rs, duly passed by the association board or by voters in accordance with your association’s governing documents and bylaws.

Can You Arrange a Dues Payment Plan?

Save time avoid stress - get a quote from a professional association managerLife happens. If you were in the non-payer’s shoes and facing financial challenges, you’d probably appreciate a chance to work out a payment plan. Some states, including California (under the Davis-Sterling Act), grant the owners the right to petition the association to arrange a payment plan. These plans can include ongoing fees and assessments, but don’t allow for the continual charging of late fees if the homeowner is in compliance with the terms of the plan that you work out together.

In the vast majority of cases, working out a payment plan is cheaper and more successful for the board, while simultaneously being less traumatic for the owner than a foreclosure or forced sale.

Small Claims Court or Liens?

If attempts to resolve the delinquency fail, you may be forced to take the owner to small claims court. Specific rules on how to do this vary by jurisdiction. A court may issue a judgment that can eventually result in a wage garnishment until the dues are paid.

You can also potentially get a lien on the home. Once you have one in hand, you can, as a last resort, begin the foreclosure process within 30 to 90 days after the lien has been recorded, depending on the jurisdiction. The association board must usually vote to proceed with foreclosure. Generally, you must formally offer the owner in arrears a “meet and confer” session to address the problem.

If that doesn’t work, you must go through the courts, serve a summons and, once the title has been transferred, engage in a waiting period before you can put the house up for sale.

Closing Thoughts on How to Collect Late Dues

Let’s face it: dealing with the non-payment of association dues, and dues-wrangling in general, is anything but a pleasant job. Anyone who doesn’t enjoy confrontation or stays away from awkward conversations would want to avoid it.

Fortunately, association board members like yourself have allies who will happily be your dues wrangler – not to mention legal advisor, maintenance mogul and more. If you want to save time and avoid stressful situations like collecting late dues, get a free quote from a professional association manager.

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