Does Your Property Meet Habitability Standards?

With the economy in low gear, residential property managers are scrambling to keep their units occupied and their revenues stable. Some PMs try to save money by cutting back on services and improvements. But be careful when cutting costs. If your properties fall into disrepair, you could lose thousands of dollars in rent abatements or fines for violating habitability laws.

The term “habitability” has lowest common denominator connotations. But habitability, is not solely the concern of PMs with units at the bottom end of the spectrum since even high-end units can be in violation. Common and sometimes seemingly minor issues can affect habitability standards in any home, such as a leak that causes moisture build up could foster the growth of dangerous molds, or a peeling windowsill on an older home could expose tenants to lead-based paint, or a malfunctioning stove could expose a tenant to dangerous levels of carbon monoxide.

Keeping your properties in line with habitability standards isn’t difficult, but there are a few key steps you need to follow:  

Know the law. Habitability regulations vary by state and municipality, although most are based on a standard developed by the International Code Council. You can get up to speed on the specifics in your area by joining a property owners association like the Chesapeake, Va.-based National Association of Residential Property Managers or the Arlington, Va.-based National Apartment Association. Both groups have local chapters across the country.

For many homeowners-turned-landlords, the laws can be surprising. “Homeowners that turn their private residence into a rental may not correct certain conditions that good tenants would not accept,” says Candice Estey Swanson, owner of Estey Real Estate in Benicia, Calif. “Once the property becomes a rental, the owners are held to a higher standard for the health and safety of the occupants and have to make improvements if necessary.”

Prepare the unit. Your best chance to evaluate a rental property and to make sure it meets habitability standards is when the unit is empty. Use that opportunity to do preventative maintenance like replacing smoke and carbon monoxide detectors, re-caulking in the bathrooms and checking for hazards like water damage or peeling lead-based paint.

“You start with a risk analysis. You’ll never eliminate the risks, but every landlord, no matter how big or how small, needs to minimize them,” says Kit Garren, CEO of the Asheville, N.C.-based property management firm IPM Corp. and a past president of NARPM.  “First, you have to look at the property from a health and habitability perspective, reducing your liability. Then you move up the ladder based on what the market demands, doing things like painting and cleaning the carpets.”

And before the tenant moves in, take photos. Keeping a record of the condition in which you hand over the unit is a must.

Know your property. “I often hear landlords say ‘I have this great tenant who’s lived on the property for five or more years. I get the rent check on time, if not early,” says Melissa Prandi, past president of NARPM and author of The Unofficial Guide to Managing Rental Property. “I then ask if they are doing annual walk throughs and small rent increases. To my surprise, the answer is usually no.”   

That’s because, as Garren says, “Something is always breaking. If there are never any calls for maintenance, that’s a problem.” The solution is to schedule an annual walkthrough of each unit so you can check for damage and identify opportunities to do preventative maintenance.

Know your vendors. Between annual meetings, the PM’s key allies are service technicians.
“A good operation will partner with vendors and maintenance people to get an idea about the unit,” Garren says. “I tell them, ‘I’m not asking you to snoop—just fix what you need to fix. But give me a quick snapshot.’”
And your vendors need to be reliable. That means not only doing good work, but also being accessible. PMs without full-time maintenance crews should supply their tenants with an emergency list of vendors who can come in a hurry if disaster strikes. Make sure you handpick the vendors so you can be sure they will come through in a pinch.  

Making certain your rental units meet habitability standards is a must for good business. Not only is it a matter of law, but it will make your properties more marketable and help them last longer. So even when your budget is tight, it pays to make habitability a priority.