Tenant Landlord Handbook

Baltimore Neighborhoods inc has released their 2011 version of their Guide to Local, State and Federal Laws, Governing Tenant-Landlord Relations.  This is an indispensable guide if you are a landlord in Maryland.

Their guides summarize and explain in simple terms, Maryland and local tenant landlord regulations.  A PDF flyer and order form are available here BNI Manuals.  The price goes up in October so order now.  They also offer local  supplements for various jurisdictions like Baltimore City.  If you click through to their form you will see they also offer leases and a tenant application and various other items useful to Maryland Landlords.

Who Is Baltimore Neighborhoods Inc.?

If you are a landlord and are not familiar with BNI, it is time to learn about them.  This is from their website

BNI’S MISSION…

BNI promotes justice in housing for all people in the State of Maryland through fair housing and tenant-landlord programs and public information activities.

BNI’s VISION…

BNI is committed to helping shape a more just society by ensuring equal opportunities in housing throughout the State of Maryland.  BNI promotes citizens living together as good neighbors without regard to race, color, religion, sex, age, national origin, marital status, physical or mental disability, or sexual orientation.

It would be tempting to say based on their vision and mission that they are a tenant advocacy organization. This often implies anti landlord.  In Baltimore Neighborhood Inc.’s case they recognize good tenant treatment starts with Landlord education.

Their manuals are an excellent example.  They are also willing to answer many of your land lording questions over the phone for free.  They are an excellent resource to keep you out of trouble.  Bookmark their website Baltimore Neighborhoods Inc.  They have lots of information there on fair housing and tenant landlord law.

Happy Land lording,

Ned

Baltimore Real Estate investors You Just Dodged a Bullet.

That’s right, the whistling sound you just hear rushing by was the bullet you just dodged.  This bullet was in the form of a new regulation for fire sprinklers.  In it’s original proposal the city council wanted any house needing renovation affecting more than 30% of the floor space  to have fire sprinklers installed.  This could have added as much as $10,000 to the cost of a full renovation. This is because to support the fire sprinklers  older houses may have needed the main from the city to be upgraded.

That could have been a real nightmare for investors who didn’t know about the law or hadn’t planned for the extra expense.  Fortunately  lobbying by investor groups got that provision removed and only new construction needs to comply.  Careful who you vote for becuase your legislators have a significant impact on your cost of doing business.

Join the Property Owners Association

Baltimore is a liberal city in a very liberal state.  You need someone on your side to help fight against laws and regulations that are anti- landlord, anti- investor, and anti- business.  The Baltimore Property Owners Association lobbies both the city and state to help stop bad laws.  I suggest you join.  Without them your next rehab might have cost you $10,000 more.  Here is the  Baltimore Property Owners Association website.

If you like this post don’t forget to vote for me as the best Real Estate Blog in Baltimore.  (It will take a 20-30 seconds for the poll window to open)

Maryland’s Groundbreaking Lead Law

Marylanders can be proud that we introduced a ground breaking lead paint law in the 1990′s.  This was politics at it’s best creating a law that was a win – win for both tenants and landlords.  If landlords registered their properties and took steps to prevent lead paint hazards they would be protected from lawsuits.  Landlords got protection from outrageous lawsuits, tenants got safer properties and the slum lords and bad players who did not comply would still be subject to million dollar law suits.

The best part about this law is it worked.  Lead poisoning dropped dramatically – by 95%.  The process required by the law must be working because today most lead poisoning comes from either; owner occupied homes (the law only applies to rental properties),  or homes owned by landlords NOT compiling with the law.

Landlords – Always the Scapegoat

Yet because landlords are viewed as the bad guys, someone has decided we need tougher laws.  The current law requires landlords of  properties built pre 1950 to do either a lead dust test OR a 10 step cleaning and inspection process.  The new requirement would be that landlords need to do both.  The fiscal note attached to the Senate bill says the cost to landlords (and ultimately tenants) will be $30 Million+ per year.  That’s pretty expensive for something that doesn’t address the real problem.

Who does this bill serve?

Do you think tenants  will want the higher rents this will bring?  Will tenants think it is a fair trade, higher rents for redundant testing?  How will tenants feel when they find out they are paying higher rents because  of lead poising in owner occupied homes.

When In Doubt Pass a New Law

Why do politicians always think the answer is a new law?  If the problem is people aren’t obeying the existing law the answer is not to make a new law.  If people are driving 90 miles an hour on the Beltway and causing horrific accidents the answer is not making the speed limit 35mph.  That only penalizes law abiding citizens.

Oppose MD Senate Bill 504

The vote on this punitive bill will take place soon in the Senate Judicial Proceedings Committee (JPR).  Let your Senator know that you expect a higher standard.  Let them know you want laws that address the real problem, not laws that sound good.  Lead poisoning is too important an issue to deal with it via a feel good law.   Here’s a website that makes it easy to find your representatives.  Type in your address and your representatives come up on the left.  You are looking for the state senator.  Here is the Maryland General Assembly webpage.  You can find and track proposed laws on that site. You get bonus points for contacting the members of the Judiciary Procedures Committee which is hearing this bill.

Here is a link to a fact sheet prepared by the the Property Owners Association.

I recently wrote about the SAFE Mortgage Licensing Act.  Here is some of the actual wording from the proposed regulations regarding the SAFE Act.

As noted earlier, the SAFE Act encourages CSBS and AARMR to establish and maintain the NMLSR, and  these organizations have development of the NMLSR under way.   In addition to developing the NMLSR, CSBS and AARMR developed model legislation to aid and facilitate States’ compliance with the requirements of the SAFE Act.

I think that pretty much meets the definition of Gobbledygook.

HUD has proposed new mortgage licensing regulations that would affect how investors do owner financing.  Unless you are selling your own personal residence you would have to be a licensed mortgage loan originator in order to offer owner financing.  I felt this is an unreasonable and unnecessary requirement and submitted a comment saying so (See below).

Now becoming a licensed loan originator is no difficult task; it would be on the scale of effort time and cost to become a real estate agent.  However if you just want to sell one or two properties that is a lot of work and expense for no gain to either you or the buyer.  This is regulation for the sake of regulation.

This could potentially affect anyone doing rent to own, land contracts, lease options, wraps, owner financing  “Lonnie” mobile home deals, and perhaps others I haven’t thought of.  I wonder how many small property owners will be breaking the law simply because they won’t know about this new regulation.  At a time when we need creative ideas to get the real estate market moving a gain they want to add regulations to impede it from getting back on track.

The regulations were posted on a site that is new to me http://www.regulations.gov.   The specific regulations is called: SAFE Mortgage Licensing Act: HUD Responsibilities Under the SAFE Act.

Here is my comment:

I am a small business owner focused on real estate. I, like tens of thousands of other small business people around the country, renovate distressed property. We then sell these beautiful homes to deserving homeowners.  In any market, but particularly in this difficult market, the ability to offer owner financing is a benefit to both the seller and the buyer.

The proposed regulations would now require me to become a licensed loan originator in the event that my company decides to offer owner financing on home. I do approximately 5 -15 transactions a year. While large companies will simply chalk it up to the “cost of doing business,” small companies like mine will simply not offer financing – a detriment to buyers – the very people who these regulations are designed to help.

I request that the language under 3400.103 (e) (5) be replaced with:  “Any company or individual who only offers or negotiates terms of a residential mortgage loan secured by a dwelling that is owned in it’s entirety by that company or individual. This exemption applies to up to 10 transactions in a given calendar year.”

Reasons for this exemption – why regulation is unnecessary for owner financed deals..

1)      Owners are not “brokering” any one else’ money. Why should they comply with “brokers” rules?

2)      In most mortgage lending, the loan originator is a middleman whose interests are not aligned with either the borrower or the lender. The loan originator is compensated by the number and size of the deals not the quality. He or she actually has an incentive to make unsound mortgages happen. HOWEVER: When an owner sells a property with owner financing they are loaning their own money. They have a selfish best interest in seeing that the loan is appropriate and can be afforded by the buyer.

3)      Technically an owner is not even loaning money. They are simply accepting payments over time. Again the owner’s selfish best interest is to see that the mortgage is affordable to the buyer. This easily meets the requirement set out in the preamble; Supplementary Information: 1. Background “.   .   .   residential loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer.”

4)      Consumers are protected because owners must still comply with other regulations regarding residential loans. These regulations apply whether the owner would be required to be licensed or not.

5)      Many of our financial problems today stem from loans made by licensed loan originators. Regarding owner financing, you want to solve a problem that doesn’t exist by requiring a license that did nothing to stop the problems we have now.

6)      Most importantly, who is being served here? Most small property owners, landlords, renovators, absentee owners, will simply not go to the trouble to get licensed. These are the very owners most likely to do owner financing! By instituting this requirement for owner financing you will be taking a legitimate option out of the marketplace for consumers.

Fortunately there are proposed regulations and not final.  The comment period is over but many investors posted comments.  I will post an update when and if I hear something further.

Happy investing

Ned