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3 March 2016 - 17:50,
by Mary Kahn,
in Condo Management, Condominium, Property Management, Real Estate, Comments off
Rental tenants have become an increasingly visible demographic in condo corporations over the past two or three years. More and more investors find that buying condo units for the purpose of generating rental income is attractive.
What does this mean for condo owners who live in their units, and for property managers? A lot. It turns out that because of the communal nature of condominiums, resident owners and property managers can end up “taking care” of tenants for investors in a lot of little ways.
This article will take a look at why rental condominiums are booming, what the impact is on owners and property managers, and suggest some best-practices for handling rental units within a condominium corporation.
Why are there so many rental units in condominium corporations lately?
It makes a lot of sense when you think about it. Condominiums provide a lot of advantages to investors and their tenants. They can be very attractive.
- With condos, investors can have diverse portfolio of rentals instead of owning a single building in one location.
- With condos, investors can capitalize on shared amenities that would be a lot more costly to build and maintain in a rental building.
- With condos, the return on investment is usually higher!
- Tenants are more attracted to condominiums due to the security they frequently offer.
- Although such security is definitely a plus for single women or seniors, for example, on the flip side quite often unsavory characters use condos as a haven, as the security can provide an extra buffer against law enforcement.
What is the impact on resident owners & managers?
First up is the overflow of tenant issues. From simple day to day issues such as a fridge not working, to major issues such as a constant disregard for the rules and regulations of the condominium corporation, a lot of tenant issues that are the sole responsibility of the unit owner as landlord can end up on the plate of the condominium corporation or the management & site staff.
What about overcrowding? Many condominiums find themselves trying to deal with multiple tenants in the same unit, ie. the renting out of rooms within one unit. This makes enforcing the “single family dwelling” clause that is in most declarations challenging, and deciding what is and is not “overcrowding”. With the ever increasing multiculturalism in Toronto today, courts are hesitant to enforce overcrowding in certain circumstances. Of course this all affects the cost of operating a building; the more people in a unit the higher the cost of operating.
Next up is problem tenants. This can be a big one. While there are many tenants that are better building occupiers than owners themselves, the few that cause issues unfortunately can create havoc. One of the worst experiences we have dealt with as a management company involved a drug dealer tenant who also preyed on other vulnerable residents (tenants and owners). They caused fights in the common areas, a constant need for police at the building, inordinate amount of common element damages, noise disturbances, filth in stairwells, and the list goes on. Of course this person was not paying rent either, so the owner was constantly bugging the management office for all kinds of assistance in dealing with eviction and the red tape and bureaucracy that comes with it.
I’m sure you can imagine that this all has a negative impact on property value, as well as on common element fees. Property values are impacted as the building becomes less attractive to potential purchasers. In some cases, this can develop a very negative reputation for the building, resulting in units not selling and thus prices being reduced. Common element fees are impacted as there is increased need for cleaning, checking security camera tapes, and management’s time being spent dealing with related problems. So, how are condominium corporations and property managers to deal with this ever more prevalent issue?
Best Practices
Mareka Properties has decades of experience in condominium property management. Here’s some best practices for handling rental units in condominium communities:
- Most important, the board of directors and management MUST enforce “zero tolerance” There is no ifs; ands; or buts about this. It just has to be done. There are several steps that can be taken depending on the seriousness of the situation; including passing a rule mandating criminal checks for tenants.
- Ensure that leases for all tenants have been submitted to the condominium corporation via the management office.
- Take the time to ensure that all tenants do have a copy of the rules and regulations of the condominium. Quite often tenants are not given this document. Here is one example of zero tolerance; if a tenant has not been given the rules by the owner as is required; then there has to be consequences
- Promote an environment of co-operation among all owners; they can be your eyes and ears.
- Educate investor owners and the real estate agents with regard to the rules and your zero tolerance approach. Investors don’t like a lot of red tape – if they find the rules too onerous they will go somewhere else. There has to be a good balance because you do not want to deter good investors.
Mareka Properties has a history of success in managing condominiums that have had issues rental units. Contact us or visit our rental management page to find out more about how we can help.
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