How to Handle Tenant Bankruptcy in Phoenix

What to Do if Your Phoenix Tenants Filed for Bankruptcy

tenants-in-phoenix-filing-bankruptcy

Whether it’s the result of job loss or financial irresponsibility, tenant bankruptcy can pose problems with Phoenix landlords. It can quickly slam on the breaks of your rental income, leaving you wondering where to turn next.

If you have a tenant who filed bankruptcy or is in the process, there are several considerations to keep in mind. This guide will help you determine how to handle tenant bankruptcy in Phoenix.

 

Defining Bankruptcy

Bankruptcy is a legal proceeding that allows people to eliminated unsecured debt, such as credit cards. This process also stops foreclosure, repossession, wage garnishments, and attempts to collect the unsecured debt.

Guess what else? Depending on what part of the process the tenant is at in bankruptcy, a landlord can’t immediately try to collect debts. In fact, you can face a fine for doing so.

Before you panic, know that the actions to deal with Phoenix tenant bankruptcy depends on several factors. First, let’s discuss the chapters of Bankruptcy.

 

Chapter 13 Bankruptcy

chapter-13-bankruptcy-filing-by-renters

Chapter 13 is also known as a wage earner’s plan. This type of bankruptcy can help wage earners pay off debt under a secured payment plan. They make payments in installments over a period of 3-5 years, while federal law forbids creditors from collection efforts. People who run into issues such as job loss typically file Chapter 13.

 

Chapter 7 Bankruptcy

This version of bankruptcy eliminates unsecured debt such as credit cards and medical bills. There is no repayment plan for Chapter 7, and Phoenix tenants walk away without any debt. Chapter 7 is the most common type of bankruptcy.

No matter which chapter of tenant bankruptcy you are dealing with, there is an automatic stay appointed by the court.

 

What is an Automatic Stay?

An automatic stay is a statutory injunction that prohibits landlords from trying to obtain possession or control of a tenant’s property.

After the tenant receives an automatic stay, a landlord cannot take action.

However, this doesn’t mean that you lose all your income.

A tenant can make a choice to leave your property once they filed for bankruptcy. This means that you can list your rental properties in Phoenix and carry on with business as usual.

The second option is for the tenant to continue paying rent despite that they are going through bankruptcy.

The third option is that they will owe post-petition rent plus fees or face eviction.

 

Do Tenants Have to Pay Rent During Bankruptcy?

rent-payment-due

If the tenant remains living in your rental property, they must pay post-petition rent—although this can take some time to collect.

For example, if a tenant files bankruptcy before the next lease due date, they are only required to pay the next rent payment plus the associated fees.

Furthermore, lease payments the tenant did not pay before filing bankruptcy is still owed. This is known as a pre-petition claim.

The timing of the bankruptcy filing can play a big role in when and how you will receive rent payment.

If the tenant does not pay the amount due, the landlord is able to request a lift of the automatic stay. This allows the motion of eviction to move forward.

 

Evicting a Phoenix Tenant Filing Bankruptcy

The process to evict a tenant in Phoenix over non-payment and bankruptcy is by way of rejecting the lease. This is the legal term for the tenant breaching the lease, requiring them to turn over your property and vacating the premises.

This can happen if you request to lift the automatic stay, where the judge allows the eviction process to proceed. However, you can only evict if the automatic stay is lifted and you’re unable to take action otherwise.

Keep in mind that if the tenant does other actions to void the lease, such as illegal drug use, the bankruptcy filing won’t do anything to delay or stop the eviction process.

When a Phoenix tenant files for bankruptcy, you are not out of options or out of income. While there might be some waiting involved, you will receive your funds whether the tenant pays as usual or its post-petition.

If the tenant is successfully evicted, the same laws apply as any other tenant. The tenant must be moved out from the property on the specified date, or other legal or financial consequences can happen to the tenant.

 

Immediate Action to Take for Phoenix Tenant Bankruptcy

phoenix-property-manager-dealing-with-handling-tenant-bankruptcy

While you can’t prevent a phoenix tenant from filing for bankruptcy, there are other ways to take action and lessen the blow of the process.

  1. Prepare for eviction early: If you have signs that a tenant might file for bankruptcy, such as habitually late payments or verbal hints, start the process now. If the eviction is already in motion before the tenant files, it can be easier to evict.
  2. Work with the tenant’s bankruptcy trustee: Their trustee calls the shots on who gets paid. Keep the door of conversation open so you can find out new information about rent payment.
  3. Know your rights and the laws: Even though a tenant files for bankruptcy, this doesn’t mean you are out of money or out of luck. Working with an experienced property management company in Phoenix can help guide you through this process.

 

Being prepared for the possibility of Phoenix tenant bankruptcy is an advantage. However, an even better advantage is avoiding situations like this if at all possible.

These are a few guidelines on how you can possibly prevent the circumstances of tenant bankruptcy.

 

Be Selective with Tenants to Help Prevent Bankruptcy Issues

It’s important to know who you are renting to and their credit and past rental history. Look for the following when screening a new Phoenix tenant:

  • Run credit reports for tenants: Most landlords look for credit scores between 600-650 when it comes to renting units.
  • Require first and last month’s rent to move in: This will keep you covered for at least two months while the tenant is working through their bankruptcy filing.
  • Obtain credit enhancements: This is a way to help you collect rent if the tenant is going through bankruptcy. In addition to security deposits, you can also tap into letters of credit and lease bonds. A good credit enhancement entails the likelihood of being enforced due to bankruptcy.

 

Get Help Managing Your Phoenix Rental Property

Property management is full of twists and turns, including when tenants file for bankruptcy. Real Property Management Phoenix Valley is your source for experienced property managers, tending to issues including bankruptcy and eviction. We invite you to contact us about our property management services and get a free quote.

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How to Handle Evictions in Phoenix: An Expert Guide

Evictions in Phoenix are unpleasant, yet sometimes necessary, part of the income property owner experience. The reasons for eviction vary depending on the individual or situation, with the eviction process full of twists and turns.

phoenix-eviection-process-coronavirus

With “no-cause” evictions being deemed as unlawful and unfair, this leaves landlords needing “for cause” reasons on eviction proceedings.

Knowing the reasons why you can evict can help you navigate the eviction process in Phoenix. Below are several causes that call for a legal eviction.

 

6 Reasons You Can Start an Eviction Process in Phoenix

1. Noise Complaints

Under Arizona law, tenants must abide by the duty known as “the covenant of quiet enjoyment.” This means that tenants must live peacefully, especially in multi-family units, and without interfering with neighbors.

In terms of noise complaints for Phoenix evictions, the specific violation is a noise that affects health and safety. The landlord or property manager may approach the tenant with a warning, otherwise known as a Cure and Quit notice.

Two options include allowing the tenant to correct the problem in five days, or start the eviction process.

Arizona does not clearly define what is considered as noise disturbances. If the eviction process is followed through, the judge will likely use common sense. Typical daytime noises such as footsteps or plumbing won’t usually result in eviction.

However, excess noise levels that especially occur at night or disturb sleep is a cause of a violation or eviction.

 

2. E-Cigarette Use

vaping-cause-for-eviction

Smoke-free policies are allowed in Arizona rental properties. Common areas such as laundry rooms or lobbies must remain smoke-free.

E-cigarettes and vaping are not considered tobacco products in Phoenix. They are defined as a vapor product but they emit secondhand aerosol. It contains nicotine and low levels of toxins that are linked to cancer.

People exposed to the aerosol absorb nicotine. Along with the other elements inside of the aerosol, it can cause respiratory distress.

While you may not have a specific clause for e-cigarette usage, there may be a nuisance clause on secondhand smoke. If other tenants are reporting the aerosol as a nuisance, you can approach the tenant to stop the behavior or face possible eviction.

 

3. Medical Marijuana Usage

In Arizona, recreational marijuana is illegal but medical usage is allowed under Proposition 203.

Medical marijuana usage is a gray area in many cases. According to Rental Housing Journal, you may prohibit medical usage even if the tenant is using it legally. This is because it’s your right to protect your property and marijuana is still federally illegal.

On a federal level, the law does not recognize the difference between recreational and medical marijuana.

Be sure to clearly outline what is expected of medical marijuana usage in your rental property. Having this information on the lease will allow you to take action if necessary.

Keep in mind if a tenant has medical marijuana in their possession without a medical license, this is a possible felony offense.

 

4. Landscape Damage

When the tenant moves in, there should be written reports of any existing damages that both parties acknowledge.

If you discover new damage, such as excessive landscape damage, you may file a Notice to Quit.

However, for the cause of eviction, the damage is intentionally caused by the tenant by their gross negligence. You may offer the option for the tenant to pay and fix the damages. You can also deduct the money from their security deposit.

If the issue remains unresolved after your Notice to Quit, you can consider moving forward with an eviction.

 

5. Unpaid Rent

In Arizona, most evictions are the result of unpaid rent.

Not only are tenants evicted for not paying rent, but they are also evicted for being habitually late with their payments.

There is also no provision in Arizona that allows a tenant to withhold rent. This includes an oral dispute or a landlord breaking an oral promise.

If a tenant does not pay rent on time, you can terminate the lease if it is not paid within five days.

On day six, if the payment is still not received, a landlord can file a suit for eviction.

Under normal circumstances, the inability to pay rent is not a legal defense to the eviction. However, keep in mind that COVID-19 temporarily changed the eviction process under the governor’s orders.

Because of this order, evictions are down more than 60% compared to last year for unpaid rent reasons.

Furthermore, the tenant has options to avoid eviction. In Arizona, a tenant may catch up and pay their entire balance in full in addition to late fees and attorney fees. If the tenant manages to come up with the money before judgment, they can avoid eviction for unpaid rent.

 

6. Unauthorized Pet

unauthorized-pet-leads-to-eviction

Most landlords have pet policies enforced before the tenant moves in.

However, sometimes tenants will bring an unauthorized dog, cat, or other pet on the premises.

How do you handle unauthorized pets?

In the state of Arizona, an unauthorized pet is considered a material non-compliance.

In this instance, the property owner must give the tenant 10 days to remove the pet from the premises. This allows the tenant to come into compliance.

If the tenant does not remove the pet at your request, a lawsuit may be filed on the eleventh day.

 

Notice to Cure or Quit

Before Phoenix evictions can begin, a notice to cure or quit is given to the tenant. This gives tenants the opportunity to rectify a situation before eviction.

In Arizona, tenants are allowed 5 days for violations that materially affect health and safety. They get 10 days for other violations within the lease agreement.

With this notice, tenants can choose to correct the problem without facing eviction.

Even if the eviction process begins, there is still a chance that the tenant may keep their home.

 

Which Evictions in Phoenix Are Curable?

Although all of the instances above could end in eviction proceedings, most are considered “curable” under the law.

For example:

  • Noise complaints can be rectified by turning down the TV or stereo volume
  • an unauthorized pet can be approved to stay with fees paid or removal from the premises
  • Landscape damage can be corrected
  • Unpaid rent can even be paid with late fees.

The only exception would be the lease language that specifically states drug or e-cigarette use on the premises is grounds for immediate termination.

However, this too is open to interpretation by the judge that would hear the case.

 

New Coronavirus Eviction Proceedings

As mentioned above, Governor Ducey put an order to delay evictions that are related to coronavirus circumstances.

However, it’s a misconception that evictions aren’t happening. Executive order 2020-14 allows a constable the power to delay an eviction. If a tenant provides the constable with the reason why they are being evicted with a cause related to Coronavirus, the constable can determine if a delay is necessary.

These orders are in effect until July 2020. An attorney is able to challenge a constable’s determination, but the constable cannot challenge a judge.

A landlord may still move forward with an eviction on the sixth day, but the process may look different or take longer.

 

How Professional Property Management Can Help with Evictions in Phoenix

rental-eviction-notification-process

When considering an eviction with current tenants, it is imperative to seek counsel to ensure you have covered your bases. You must also have proper documentation and back-up to win your case.

When choosing Real Property Management Phoenix Valley, know that you are working with trusted and tenured property managers. When necessary, we’ve seen property owners through the eviction process in Phoenix.

With our guidance and expertise, you can feel certain that tenant troubles are handled quickly and professionally. Please contact us regarding professional property management services for your Phoenix property.

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Rental property inspections

Rental Property Inspections

Real Property Management Phoenix Valley has been managing Phoenix rental homes for 14 years.  Through our experience we have created the six successful steps of rental property inspections.  We will share those steps with you in this blog.

Step One: Review your lease agreement.  Note how many occupants should be residing in the home.  List the number of minors vs adults and if there are pets.  Also, make note of the responsibilities.  For example is the tenant responsible for the landscaping?  Who is responsible for the appliances?  Lastly note which appliances belong to you versus the tenants.  All of these notes will make your rental property inspection move smoothly.

Step Two: Use a dedicated inspection form.  Break out the form by room and be sure to include the garage, front & back yards.  The more detailed the form the more thorough the inspection will be.

Step Three: If your tenant is home wear headphones.  Don’t let them distract you from the task at hand.

Step Four: Complete the rental property inspection in an organized manor.  In each room take pictures first and then stop to complete your form.  This will help to make sure you don’t miss anything.

Step Five: Be mindful of things that might be strategically placed to make you miss things.  For example, be sure to move a throw rug even if you just fold it in half because it may reveal stains on the carpet.  Also, try to move back sheets that might be covering up windows because you may find broken blinds underneath.

Step Six: Check ALL ceilings as they may reveal roof and/or plumbing leaks.  Check and change air filters and/or smoke detector batteries if needed.  Check the front AND back of all doors to look for any holes and to see what might be hiding behind the door on the paint and/or baseboard.

For an example of an inspection form please listen to our podcast.

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Phoenix Rental Lease Agreement

Phoenix Rental Lease Agreement
 Phoenix Rental Lease Agreement

One of the most important items a  landlord will have is their Phoenix rental lease agreement.  The more detailed and specific the agreement the better for both the property owner and tenant.  In this blog we will discuss four important components of the lease including occupant names, late fees, legal notice fees & appliances.  The lease agreement should include all property owner names and the full address.  Additionally, it should include all occupant names include minors.  Real Property Management Phoenix Valley suggests listing minors as well as their date of birth.  We also recommend obtaining that information from the lease holder in writing.  This information will be very valuable for when you complete a property inspection.  We suggest taking this information with you to the inspection so you can verify that only the people on the lease are residing in the home.  This will help you to recognize if there are any unauthorized occupants in the property.

Next let’s address late & legal notice fees.  Late fees should be specified as a per day amount versus one lump sum after the due date.  This way the tenant has incentive to pay the rent as close to on time as they can.  The daily late fee amount should be somewhat substantial so that the tenant has incentive to pay on time.  Also, we do encourage a grace period of one to two days but not much longer.  This ties into our next component of legal notice fees.  Spell out in the lease agreement that the tenant is responsible for any legal notice fees.  This way if the tenant doesn’t pay the rent you can charge them back for the cost of serving them with the legal notice of an eviction. The tenant will have between 5-10 additional days to pay rent.  For this reason you do not want the grace period to be longer than two days.

Final for this blog we will address appliances. The lease agreement should list which appliances the home owner is including in the property.  It should also spell out which appliances the landlord will fix and which the tenant is responsible for.  Keep in mind that the landlord will always be responsible for the stove, built in micro and dishwasher.  However very often the tenant is responsible for the fridge, washer & dryer as they tend to be optional appliances.

For more information on our lease “must haves” visit our blog/podcast page to listen to our two additional segments.

For more specifics on our Phoenix rental lease agreement “must haves” tune into our podcast below.

 

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Utilities & AZ Landlord-Tenant Act

Utilities & the AZ Landlord-Tenant Act
Utilities & the AZ Landlord-Tenant Act

This week our blog will focus on utilities & the AZ Landlord-Tenant Act.  The Act states that your lease agreement must clearly list what utilities are the responsibility of the tenant.  Additionally, the lease should specify whether the tenant is responsible for putting the utility into their own name.  Often times with multi-family properties the utilities stay in the owner’s name.  When this happens it must be disclosed in the lease if the units are individually sub metered.  Additionally, you can have the tenant pay for their usage as well as any costs associated withe the sub metering.  Be sure to always send the tenant a copy of the invoice.  Also, keep in mind that if your property isn’t sub metered and you decide to sub meter you must give the tenant notice.

If the properties aren’t sub metered then the owner must use one of more of the following billing systems:

  1. Per tenant meaning that each tenant receives their own bill
  2. By square footage taking the entire bill and dividing by total square footage to then get a price per square foot; that number is then multiple be the total size of each unit
  3. Per type of unit so one bedrooms have a set price, two bedrooms higher price etc.  With this option each type must have the same price
  4. Per number of water fixtures; we have never known anyone to use this system because typically all one bedrooms would have the same number of fixtures so option 3 would be much easier

No matter the system that you use you can only charge the tenant for their cost and you can’t add a mark up.

For a full copy of utilities & the Arizona Landlord-Tenant Act click here.

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Arizona Landlord Tenant Act

The Arizona Residential Landlord Tenant Act (“ARLTA“) is the law governing most private, residential, rental agreements. In other words, the Arizona Landlord Tenant Act provides tenants and landlords with rights, obligations and remedies in the rental relationship.  There are six sections in the act.  In this post we will discuss the section on terms and conditions that must be included in a lease agreement.  According to the Act, rent must be payable at the time and place agreed upon by the parties.  Additionally, rent is to be paid at the dwelling unless otherwise specified in the lease.  If the rental agreement doesn’t  have a fixed term than the term is week to week for roommates and month to month for all other cases.  In our lease agreement we always break out the rent AND tax amount.  This way if the rental tax increases the landlord can pass the cost onto the tenant with thirty days notice.

Within the lease the landlord may request a contact person who can enter the unit should the tenant die.  Should that occur be sure to always collect a copy of the death’s certificate.  If the landlord is unable to contact that person within ten days than the landlord may dispose of the tenant’s belongings after death.  If the landlord makes contact with the authorized person they have the authority to enter.  They then have either twenty days or the last day that rent is paid for to remove all belongings.  After that period the landlord can remove any items and has no further liability to the tenant’s estate or heirs.

Real Property Management Phoenix Valley has three podcasts on our recommendations of items to include in a lease agreement.  To listen please visit us here.

 

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Phoenix Lease Agreement Creation

Our latest podcast is  now available and it closes our series on phoenix lease agreement must haves. To review; our first segment was about specific items to include in the lease.  Then our second segment reviewed lease payment information. In this segment we discuss HOA addendum, pet agreements and lease end/move out verbiage.  Our free tip relates to the conversion of the lease to month to month.  All three segments will help the Phoenix landlord to draft a comprehensive lease agreement.  The lease agreement is an essential item for successful property management in the phoenix area because it sets the expectations for both the landlord and the tenant.  We always suggest enforcing the lease agreement rather than making modifications once the tenant is in place. Also we suggest Phoenix landlord’s to be familiar with the AZ Landlord Tenant Act and you can obtain a copy here.  To listen to the first two segments visit us RPM.

 

 

 

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Renting Out Your Home in Phoenix: Initial Legal Concerns & Costs





So you have decided to make some extra money by renting out your home in Phoenix, AZ. Before making the leap, there are a few things you need to consider. 
Did you know that most states have Landlord/Tenant laws that can affect what you can and cannot do within the rental relationship? How about local health codes and/or city or county licensing requirements for rental properties? Do you have to have carbon monoxide detectors or how many smoke detectors are required? When is rent due and what is the legal late fee? And then there is the question of security deposits: whose money is it and when does it need to be returned? How do you make a claim to be reimbursed for expenses incurred by the tenant?
As you can see there is quite a bit to know about being a Phoenix Landlord and many ways to put your investment property and yourself at risk by not following guidelines, rules, ordinances and laws pertaining to rental properties. Before renting out your home, make sure you familiarize yourself with these items and talk with your insurance provider to make sure you have an investment property or landlord policy as a homeowner’s policy will not cover loss, damage or injury once you are no longer the primary resident in the home. You will need to plan spending three to seven hours to familiarize yourself with the various legal and insurance considerations before renting out your home.
Next you will need to have a way that the prospective renters can apply to rent your property. Leases can be purchased online or at an office supply store for low prices ($30-$40). However, many times these leases are not compliant to your local laws, and expose you as a Landlord to undue risk and liability. Use caution to ensure that you are not inadvertently violating renter’s rights by asking questions that may be unlawful as a landlord to ask. It is a good idea to have your lease reviewed by legal counsel to ensure the lease protects your rights as well as is compliant with your state’s laws.   You will need to plan spending two to three hours finding a lease, as well as $100 to $300 for an attorney to review your lease to ensure that it complies with regulations.

RPMWV Phx offers full service Phoenix Property Management & Real Estate Services.  For more information on all of our services please visit our website at rpmwvphx.com or call 602-281-2884
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Neighbor Danger: Survey from Real Property Management Reveals DIY Landlords May Put Neighborhoods at Risk

Neighbor Danger: Survey from Real Property Management Reveals DIY Landlords May Put Neighborhoods at Risk 
DIY Landlords do not Adequately Conduct Background Checks, According to Survey 

SALT LAKE CITY (May XX, 2014) – Do-it-yourself (DIY) landlords, individuals who manage their rental properties without assistance from property management companies, may be putting neighborhoods at risk, according to a survey on landlord practices conducted by independent research firm Liminality, Inc. on behalf of Real Property Management. That’s because DIY landlords have lenient or non-existent policies when it comes to conducting background checks, the survey of a national probability sample of more than 150 DIY landlords nationwide revealed, which suggests criminals – including sex offenders – could be living next door. The survey found that 21 percent of DIY landlords sometimes or never conduct background checks on their prospective tenants.

The survey also revealed these disturbing findings about DIY landlords:
• Only 44 percent conduct sex offender checks
• Only 51 percent conduct criminal background checks
• 23 percent sometimes or never conduct credit checks
• Only 51 percent contact past landlords for references

Why are background checks so important for neighborhoods? Without thorough screening, criminals – who are likely to commit crimes again in the future – can easily move in next door, potentially putting families at risk. Rates of recidivism, or the act of criminals committing another crime, are high, according to a study from The Bureau of Justice Statistics published in 2014 that tracked 404,638 prisoners from 30 states who were released from prison in 2005. That study found 76.6 percent of the tracked criminals were re-arrested within five years.

In comparison, Real Property Management, the nationwide leader in managing rental homes, has policies in place for franchise offices to conduct rigorous background screenings on behalf of their property-owning customers, which includes credit, employment, rental history, criminal and sexual offender checks. All franchise offices follow local and state rental regulations. “We are very surprised to learn many DIY landlords are not disciplined enough to routinely conduct background checks,” said Real Property Management President Don Lawby. “Not only are they risking an expensive investment in their property, but they could also compromise the well-being of their neighbors. The bottom line is if DIY landlords don’t have the time or resources to screen tenants, they should consult a property management company that can do it for them.” For more information on the benefits of professional property management or to find your local Real Property Management office visit: www.realpropertymgt.com. About Real Property Management Real Property Management is a privately held, Utah based corporation with over 25 years of experience providing full-service residential property management for investors and homeowners throughout the United States and Canada. For more information about Real Property Management, property management services or franchising opportunities, visit www.realpropertymgt.com. Follow @rpmwvphoenix

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HOA’s – Landlord & Tenant Responsibilites

As a Phoenix Property Manager, we know that not all Home Owners Associations (HOA) have policies and procedures in place when dealing rental properties so it is important to check out the HOA rules prior to leasing your home. If your home is in an HOA, you have certain rights and responsibilities whether you are the tenant or home owner. It is important to research and know your responsibilities.   If you are a home owner of a rental property located within an HOA it is important to now that rules and regulations regarding your rental. Contact the HOA and find out their polices on rental properties prior to leasing your home. Be sure to collect any tenant registration forms that the HOA may require, since they can levy fines against you if not completed in a timely manner. Some HOA’s require the tenant to sign crime free addendum so it always a good idea to collect these forms prior to signing a lease.
Once the property is rented, typically the landlord is the first point of contact and the person held responsible for violations and payments of fines. Landlords within an HOA are responsible for ensuring that their tenant play by the association rules so it is important to quickly relay any information to your tenant so that they can remedy any issues and reimburse the landlord any fines. Additionally, when the information is quickly relayed to the tenant the tenant has the right to challenge or dispute violations and fines. The best way to prevent rule violations and fines is to provide the tenant with a copy of the CC&R’s. Since it is not always easy to deal with tenants that violate the HOA rules and regulations it is important to be sure your lease has a clause requiring compliance with all association rules and regulations. 

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