Washington recently joined the ranks of a growing number of states to have enacted rent control, aka rent cap, laws. As small, independent landlords who have faced many of these challenges firsthand, we’d like to share actionable insights on how we plan to adapt to the new rent control law while keeping our businesses thriving. While this new law mainly affects Washington landlords, we believe landlords in other states, both with and without rent control laws, can still benefit from proactive adaptation and shared knowledge.
What’s New?
In a nutshell, the updated law limits annual rent increases to 7% plus the Consumer Price Index or 10%, whichever is less, along with mandates for a 90-day notice before any adjustment and a ban on rent increases during the first year of a new lease. For manufactured housing communities, the cap is limited to a 5% annual increase. It also includes stricter notice requirements, including the use of a specific rent increase notice form, mandatory service of the rent increase notice in person and also via certified mail, and it allows the attorney general the ability to apply civil penalties and investigate violations.
These measures aim to create stability for tenants, but they also require us to adapt our planning and operational strategies. Note that individual cities can still require longer notice periods that 90 days; for example, Seattle requires a 180-day notice.
Compliance with New Rules and Regulations
Adhering to the new law isn’t just about avoiding penalties (though that still is a primary goal) – in Washington this may result in a refund of rent increases collected, plus damages to the tenant, plus up to $7500 in penalties – but it’s also about maintaining a reputable and sustainable rental business as well. Here are a few steps we think every landlord can – and should – take to help ensure compliance:
- Stay Informed: Regularly review state resources and legal updates. Set calendar reminders for key dates, such as the earliest time you can adjust rents, and when it is time to send notices and create lease renewals.
- Document Your Process: Keep thorough records of all notices, communications, and any adjustments made. This transparency not only helps you stay compliant but also builds goodwill with your tenants.
- Seek Expert Advice: Consider consulting with legal professionals or landlord associations to review your lease agreements and operational procedures. Here in Washington the RHAWA is a valuable resource; there may be similar organizations in your part of the country as well.
Thorough Tenant Screening is Essential
Even as regulations evolve, one principle remains steadfast: a thorough tenant screening process is crucial. We often talk and write about tenant screening, for a multitude of reasons. This is even more important now. A robust screening protocol helps minimize risks and fosters a community of reliable, respectful tenants. Here’s how to enhance your process:
- Comprehensive Checks: Incorporate credit and background checks, check references – both previous landlords and employers, and confirm employment and income in your screening routine.
- Consistent Documentation: Maintain detailed records and standardized forms that streamline your evaluations for each applicant.
- Open Communication: Create, share, and clearly discuss screening criteria with prospective tenants, setting the tone for a transparent and respectful landlord-tenant relationship.
- Check References: Contact the rental references your applicant has provided. Give special weight to the responses of prior landlords, who are not the applicant’s current housing provider, as they won’t have the potential incentive to give a good recommendation for a tenant they’re looking to get rid of. Where rental references are not available or are difficult to contact, reach out to past and present employers. The important part is to contact real people that know the applicant, confirm they are giving you accurate information, and get a feel for how they conduct their relationships.
- Verify Identity and Income: Require a digital copy of an official government-issued ID, and verify that it matches the person you’ve met and are screening. Ask for documentation of income and/or assets, which can be W2’s, statements, or sometimes tax documents.
Understanding Notices and Lease Documents
Clear, comprehensive notices and lease documents are critical in this new regulatory environment. With mandatory 90-day (or longer) notices for rent adjustments and updated lease terms:
- Standardize Templates: Develop or update your lease templates to clearly outline the terms regarding rent increases, notice periods, and tenant rights. Some property management software provides lawyer approved, state-specific lease templates. We have compiled and reviewed them here.
- Effective Communication: When issuing notices, detail the reasons behind any changes, ensuring your tenants understand the process and remedies, if any.
- Record Keeping: Retain copies of all lease documents, receipts for certified mail, and notices, to safeguard against potential disputes.
- Mastering these documentation practices not only ensures legal compliance but also helps foster trust and clarity between you and your tenants.
Our Reality as Independent Landlords
Operating as small, independent landlords means we’re involved in every detail -from property maintenance to personal communication with tenants. As I’m sure you are acutely aware, rental property owners have seen rising expenses and tax obligations lately. However, like any other business, careful planning and adherence to best practices enable us to support our properties and the people who live in them. By continually learning, adapting to changes, and sharing strategies, we can protect our investments and build stronger communities.
Adapting to the New Rules: A Strategic Approach
Here are some strategic tips as we move forward:
- Proactive Communication: Utilize the 90-day (or 180-day) notice period as an opportunity to engage with tenants, clarifying the reasons behind any adjustments. Sometimes, tenants aren’t aware of the costs of maintenance, taxes, and insurance that are behind the rent increases.
- Budget Reassessment: With capped increases, reassess your operating budgets regularly to ensure you’re prepared for maintenance, repairs, and unexpected costs. Establish a reserve fund for emergencies.
- Networking and Best Practices: Connect with fellow landlords through local forums and associations. Sharing insights on compliance, tenant screening, and documentation can yield invaluable support and collective strategies. We will continue to do so in this space as well.
Looking Ahead
While these regulatory changes present challenges, they also pave the way for new strategies, practices, and operations. By ensuring compliance, thorough tenant screening, and solid lease documents, we can hopefully continue to thrive in an evolving market.
Thank you for taking the time to read through this update. We look forward to hearing your thoughts and strategies as we navigate this new chapter together.
*P.S. Keep an eye out for upcoming videos, courses and one-on-one coaching where we can dive deeper into these topics and share more of our insights.*
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