REAL TALK RENTALS

The Necessary Evil: Evictions

Ben Bailey: Coming up on this episode of Real Talk Rentals, we're going to be talking evictions. They're a necessary evil and there's all sorts of rules and regulations to follow. So we're going to try and walk you through it step by step. Welcome to Real Talk Rentals, a podcast brought to you by on Q Property Management, where we're going to give you all the tips, tricks and secrets behind the scenes that goes into property management. I'm Ben and with me, as always is my co host, Mr. Eric Dixon, the go to Guru on all things property management and real estate out here in Arizona. Today, we're going to be talking about a touchy subject. We're going to try and really, really give you the facts and walk you through it as carefully as we can. And that is evictions. Nobody likes them.

Eric Dixon: No one likes evictions.

Ben Bailey: No, they're not fun. And there are some things I think we'll get into here that can show how to mitigate them and how to hopefully avoid them for everybody involved. So, Eric, I'm going to ask you the first question here, which is what are the situations that lead to an eviction?

Eric Dixon: Well, it's a necessary evil for sure. You know, in my mind, I think in everyone's mind, evictions are unfortunate, no matter the circumstance. Right. So we'll go through a couple. And for those listening, we're actually we've got a lot of cheat sheets here because I wanted to make sure this is one topic we want to we want to do in order and explore all the options and so forth. So I would say every circumstance is unfortunate, but the most common reasons is nonpayment of rent. That's kind of the one that the most common for sure sure happens the most. You know, you don't pay your rent on time and it's not like you don't pay rent on the first, You're evicted on the second, you know, and we'll walk through that timeline. But there's the nonpayment of rent for sure the second most. Uh, I was going to say most popular, like, it's definitely, definitely not a popular popularity contest, but the most common sorry, lost my train of thought there. The most common is a breach of lease. So whether it's an unauthorized occupant, unauthorized use of the home, they're doing an Airbnb out of the house and it's a long term vacant rental home. They have pets and they were supposed to have no pets and the landlord doesn't want to approve them after the fact. You know, those are breaches of lease that aren't curable or aren't cured in time. So I'd say those are the main scenarios. And why you would.

Ben Bailey: Yeah. And you mentioned non curable there and we'll get into that more. But that's like, you know in a lot of scenarios. It can be solved before an eviction. You know, it could be like, oh, you know what? My brother was staying here. He wasn't supposed to. I totally forgot to let you guys know he's gone.

Eric Dixon: No. And what's great is even nonpayment of rent is curable up to a far point in the eviction process. It's like maybe they lost their job, but we want to work with them. The owner wants to work with them. And you can cure that breach. You can cure the nonpayment of rent. You can cure the no pets by either getting the landlord to approve the pet or somebody else's dog sitting for the remainder of your lease or whatever. Even unauthorized occupant. It's like cool, have them apply. If they if they get approved, then they can stay.

Ben Bailey: And I've seen that here where people come in and say, Hey, yeah, so and so has to move in with me, what do I got to do? And they just go through the approval process like any applicant would.

Eric Dixon: Absolutely.

Ben Bailey: All right. So this is the nitty gritty. This is why we we have all these notes. But what are the steps involved in executing an eviction? We did the really smart thing for an audio medium. We printed out a flowchart that no one can see.

Eric Dixon: So yeah, so I'm going to visually I'm going to paint this picture in your mind, right? So for those of you driving, sitting at home with AirPods on or whatever, it's not that complicated. It's really just knowing that throughout the process there's there are options that the the tenant has and the landlord has or the property manager, you know, in our case. So I'll kind of just walk through it and then Ben, stop me if you have any questions, if you think I'm kind of breezing through it. To me, the eviction process is so common that I just kind of breeze through it, you know? Sure. And I have to remember, a lot of people don't know.

Ben Bailey: Even smart people been doing this for 20 years.

Eric Dixon: Yep. So really, there's a notice of default or a notice of a breach. So you have to notify them. Right. Whether it's by for nonpayment of rent. We send certified letters on the on the fifth of the month with the five day notice and Yeah. That's an eviction notice. Really. Yeah. Usually it's like 95% of the time they just pay and maybe there are a few days late and it's fine.

Ben Bailey: I do want to add that I when I first started working here, I had no idea what five day notice meant.

Eric Dixon: Because you've never paid your rent. Yeah.

Ben Bailey: We call, we just calm around the office five days and people would be like, Hey, I've got some five days I have to send out. And I was like, What is this? Like? I didn't want to ask and now I know. Oh, okay. That means it's certified mail going out about a breach.

Eric Dixon: Yeah. And we have to manually I mean, there's some automation with it, but at the end of the day, you've got to you have to certify mail these notices. Right? So right there, there's basically three options the tenant has. One is they cure the breach and they stay in the house, so they pay the rent before we go to the next steps. And it's like it never happened. So it's not like this black mark on you. It's like, no, it's like it never happened. You cured the breach and the days are done and it's over. The second is, and this wouldn't really apply for late, late rents unless they just know they're not going to make it. But the tenant could surrender possession. They could say, Hey, let's avoid the eviction process altogether. It's going to go on my record a certain way. And the judgment and all that, here are the keys and they just walk in. And some of them, they know this. There's unfortunate circumstances all the time. Even with divorces, they get tricky because they're like, Hey, look, we're going to have to split into two homes.

Eric Dixon: We know we're not going to be able to stay, so we're just giving you the keys. And it kind of fast tracks the process. We apply the deposits to move out and then we do the disposition differently. And we talked about the disposition last episode. So that's number one. And two, they either cure it or they surrender the property. The third is if they remain unpaid or the the breach remains open, then that would be the tenant not complying and we would go to the forcible detainer is filed. So for us, for example, and this is pretty standard with with management companies, at least in Arizona, but we send a five day on the fifth and then ten days later the 15th rolls around. And if you're still unpaid or you're still in breach of the lease, we send it to the attorney and it's going to go 10,000 or less. It's going to go to justice court. 10,000 or more goes to Supreme Court pretty. So most of them are in the Justice Court. And then any questions so far? Am I?

Ben Bailey: No, no, no. Yeah, I think we're good. The three steps. So this is, I think step three. Here is what? Most people think of when they think of an event. Yeah.

Eric Dixon: And you have to think what I did skip over is between the first of the month was rent was due and the 15th the property manager or the owner or being communicative with the tenant, they're saying, Hey, can you bring it in? Can you bring the rent in? Can you bring the rent in? Every day? It's getting it's going to get more expensive. When we file with the attorney, then you've got attorney's fees and you've got court costs and you've got so we do all we can, whether it's calls, texts, emails, documenting the whole time. The owners do not want this to happen. You've got to keep in mind they're not collecting rent. They realize that collecting that rent in the future is going to be tough. Usually the tenant is leaving the house disgruntled.

Ben Bailey: Yeah, and no one wants I mean, nobody in the world wants to go to court or involves attorneys and judges. Yeah.

Eric Dixon: So. So from this whole process, though, 15 days, it's there is enough time. You know, we have tenants who will, if they have trouble with employment or something, they can get rental assistance or they can get a get a if they lost their job, they find a new job and they call us and say, Hey, my new pay stub will come, my new paycheck comes the 20th. Can you wait till the 20th to file, say, Well, we usually do the 15th, but let me ask the owner. It's ultimately up to the owner.

Ben Bailey: I know we ran into this a lot too, when COVID was happening where people were like, I've applied for the rental assistance. Can you give me a little bit to find out if it's coming in, when it's coming in?

Eric Dixon: Oh, yeah. And what's crazy? So it's summer 2022 right now, right? We're two over two years past the start of the pandemic and. When was it? Two weeks ago. Somebody said, Hey, they're applying for rental assistance, not COVID rental assistance, but just general rental assistance. And they said they won't. They approved me for rental assistance. Once the judgment was filed against me in court and I'm like, whoa, the if they're waiting to help you until you get the judgment, it's already over. Like you're five days away from getting kicked out of your house. Like what? The system is so backwards. I'm getting too political, but the system is way too backwards. There's way too much red tape. And it's it's a mess. So from there, if we do file so it's the 15th and we do file a process server, then serves the tenant with a summons and complaint. And the court date is usually set 6 to 10 days away. So it's like, Hey, it's the 15th. We file process server servers and within a few days and then 6 to 10 days out court might be between the 20th and 30th of the month. And this is assuming a rent due date of the first of the month. And then from there there's the hearing date. So let's just say the hearing dates to 25th. Again, there's three options at this hearing, and I'll kind of walk through the three options here. One is the tenant appears and pleads non guilty and the trial set trial is set within three days, depending on the court jurisdiction. If the tenant wins, they stay in the unit. If they don't win and the tenant is found guilty, a judgment is entered in the landlord's favor and a writ restitution is issued after five days. And then we we kick the tenant out. Very unfortunate. We hate when that happens.

Ben Bailey: And there's a lot of other fees tacked on.

Eric Dixon: At that point. And then it becomes a mess. Right. So usually and we'll get to this, but the tenant doesn't appear. They're like, Hey, look, dude, I know I'm late on the rent. I'm not going to fight it. I'm not going to fight this. But if they really think they're in the right and there is, especially during COVID evictions, we're kind of on hold anyway. Yeah. And so as we got back into the normal swing of things, there was some gray area with some judges and stuff. Now it's back to kind of black and white, and the tenant usually knows going into it. So that's option one is they appear and they plead not guilty and then they either win or they lose. The second is the tenant fails to appear, appear, and they get the judgment. They entered into the judgment right away, and then a writ of restitution is issued. So and then they have five days and go down a timeline there. That is what usually happens on a non payment of rent or a lease breach that the tenant has no intention of fixing. So sure, if they're like, Hey, look, I know I haven't paid the rent, I'm not going to waste my time going to court just for them to say, Boo.

Ben Bailey: You lose. I know I've been using the house as an Airbnb. We all know this. I'm just not.

Eric Dixon: Showing. I'm not going to I'm not going to embarrass myself in front of the judge. Right. Right. And then the third option is the tenant appears, pleads guilty, and they get a judgment. So that would be a rare case. I don't know that I've personally been involved in one of those where the tenant just shows up and is like, I plead guilty, boom, here's the judgment. The same result would be if they didn't show up at all. So so if you go down either of those where they are, the writ of restitution is filed, then we schedule the lockout with the constable and we really, really, really try and work with the constable and the tenant and the landlord and the time frames to where it's not going to be kicking them out and locking the doors, especially in the summer here in Arizona. You literally can't just kick people onto the street when it's 20 years old or 20 years old. 120 degrees. Yeah.

Ben Bailey: Real quick. Yeah. You might not have the answer to this. I should have prepped you beforehand. But Constable, when you say constant.

Eric Dixon: Yeah, that's another word.

Ben Bailey: When? Yeah, when I started working here, like I think of Constable as something like I heard in, like I want to say the Disney Robin Hood cartoon when I was a kid that it was like the constable was attacking Robin Hood or something. I was like, that's still a thing, a constable, still position.

Eric Dixon: Yeah. So the constable is, it's usually and I say usually the ones that I've talked to, it's either ex law enforcement or something. Got law enforcement background and they are, they're coming guns ablaze in their usually have a gun on their hip ready to go and they're not clearing the home, they're knocking hey this is the constable. Get out. If they are there most of the time they're not. No one's there. Sure if they are there and the tenants came in. I need two more days. Can you please give me two more days? The constable will call us, pleading for two more days. Right. Okay. At some point there's going to be an intersection of and it's going to be like, Hey, it has to. We have to lock you out. Yeah, but we'll work with them for a few days and make sure that they're not homeless and then that that makes it to where we can rekey the house, secure the home, and the constable helps facilitate that legally through the through the county.

Ben Bailey: I want to circle back on one thing here, looking at this flowchart that all the way up until the hearing. There's still. The tenant can still.

Eric Dixon: Oh, yeah. They can still make it, right?

Ben Bailey: Yeah. Yeah, they can still. So the hearing could be scheduled and they can come and say like, Hey, I got to pay this.

Eric Dixon: And there is a little bit. Yes. But the owner also has to say drop it.

Ben Bailey: Yeah.

Eric Dixon: Right. Like they could, they could show up at court with the full money and it's like it never happened. Right. Yeah. That's, that rarely happens, but usually it's before the hearing date. They might call a day or two before and say, Oh Eric, Eric, look, we have all the money, here's a money order. And we're like, Oh my gosh, thank you. It's they have to cover all attorney's costs, The process server, the court costs, all that, but they get a stay in the home. Right? So you're right. They're they're looking at through the fifth, through the 15th, usually through the 20 ish. It's like you could pay it and and stay in the home.

Ben Bailey: I do remember an issue we had here with with someone who. Was constantly a tenet getting served and almost to the hearing date. And the owner kept constantly, like I want to say like two or three times said, like, okay, well, you know, we can waive it. And by the time it happened for like the fourth time, understandably, the owner was like, I'm not doing this again.

Eric Dixon: Yeah, I'm not. And the owners, you have to realize, like they usually have their own debt obligations on the on these properties. The majority of them have mortgages that are due and they're like, look, I can't just not pay my mortgage. And a lot of them depend on the rent to come in to at least cover some of that.

Ben Bailey: Sure.

Eric Dixon: And there is some that they are counting on that rent to come in. There's a legally binding contract with the lease and they are counting on it, I'd say for the most part. Our owners, our clients, landlords, you guys listening, you are compassionate people and you hate when you see other people have hard times. Yeah, but when it's habitual, it's really tough. It's like. It's like the the boy who cried wolf right, Right. Hey, look, you said this was the last time. Last time you said it's the last time last.

Ben Bailey: Maybe you can't afford this property.

Eric Dixon: Yeah, and maybe. Maybe we just need to move on and so on. A lot of those. That brings up a good point for a solution. And alternative solution is a is to negotiate a lease break even different than the terms in the lease. Like, hey, look, let's not go down the eviction. It's going to cost the landlord a lot of money, going to cost the tenant a lot of money. Let's just negotiate our way out of this. And we do that on occasion as well. Yeah.

Ben Bailey: So you mentioned cost there, and that's a question I hear a lot is what what are the costs involved in an eviction like the dollar cost for a landlord.

Eric Dixon: Yeah. And so it's going to be different by attorney you use or if you do it yourself type thing but you know there's going to be attorney fees, court costs and most of those are flat rate right? Sure. One advantage we have is a as a property management company with a big portfolio and a lot of time, years under our belt and experience is we have great rates with our eviction attorneys. Right. And we've used several over the years. We feel like our relationship, especially with our current one, is so good that if you were to evict somebody through us, it is a lot less expensive for both the tenant and the owner than if Joe Schmo calls and goes direct. Right. In fact, when we were prepping for this show, this is one of the ones that took most of the preparation compared to the other episodes here. I thought of a friend of mine, a good friend of mine. He was self managing and he knows we own a property management company, but he's cheap and he's just like, Look, man, I'll do it myself. He said, Oh, I got to evict this guy. Do you have an attorney? And I thought nothing of it. It was like, Yeah, here's the attorney we use. They're awesome. Here you go. So he and I gave him a range of which I thought the cost would be right. Yeah, that we pay. And then after evicted him, I was like, Dude, how did the attorney do? He's like, Yeah, it was great. But it was like double what you quoted. And I was like, Oh man, I'm sorry. It must have been a unique circumstance. He's like, Oh yeah, I guess, blah, blah, blah. Then I asked the attorney, He's like, Oh, dude, I didn't know that was a referral from you. Yeah, I mean, our rates are about half with the public is sure. And so it's one more cost savings If you have a legitimate property management company with a relationship. It's not that we're the eviction pros.

Ben Bailey: No, no.

Eric Dixon: It's just that with the with the volume and the attorneys know that our lease they can support and is bad, they can back it. Yeah.

Ben Bailey: So it's yeah, it's probably the opposite of that. They know that if we're to the point where we're doing an eviction.

Eric Dixon: That it's really.

Ben Bailey: Necessary. That it's necessary because you know, yeah, we're not trying to go down that road. So if we're coming to them and saying, hey, we got to do this, they know that it's legit.

Eric Dixon: Yeah. And so as far as cost goes, the the tenant bears the cost technically, like we get to build the tenant, but usually the security deposit is already depleted of missed rent, late fees, court costs, attorney fees. And so usually if there's an eviction, I shouldn't say usually every single time the tenant owes money. Right. But the landlord has to front those bills and then we have to send the tenant to collections or garnish wages or, you know, do that sort of thing. So it is a big pain for the landlords. They hurt, they miss rent that month or month and a half. They have to turn utilities back on in their name. They've got to pay to get the place rent ready again. Then they have to worry about potentially recovering the costs from the eviction. And what all while that's happening, we're remarketing the home trying to find a new, better qualified applicant. Right. And so, you know, the costs I would say those are the hard costs. The long term costs of a for a tenant is it really affects their credit. I mean, if you get a judgment in your name and you've got collections agencies going after you, it's going to be near impossible to buy or lease lease a place in the next seven years while it's on your credit.

Ben Bailey: Yeah. And I mean, we've talked about this in our tenant application, but that's like one of the first things we check is. You have evictions on you.

Eric Dixon: It's a non-starter. Oh, you've been evicted.

Ben Bailey: Sorry. Yeah, and that's unfortunate because things happen. But, yeah, anything you can do to avoid it. Obviously, we talked about some of those things and. And maybe we should we should talk about that. What can be done to avoid that and less impact both for the landlord and, and the tenant.

Eric Dixon: Yeah. And so we'll start with the landlord. You know the for those that would hire a property management company, we offer an eviction protection program. It's very inexpensive. And our eviction rate, we did the numbers yesterday as we were prepping here, but it's 0.02% of our tenants get evicted.

Ben Bailey: Not even half of a.

Eric Dixon: Percentage, not even half a percent. And that seems crazy. But we what we took into account is ones that we placed and screened that got evicted. Right? Right. And that takes into account thousands that we manage for. But the ones that get evicted more often at a higher percentage or ones that we take over mid lease that we didn't do the screening for maybe an owner bought. I know recently an owner bought an eight unit multifamily apartment complex. It's a good little place, nice area and we've already evicted two of the eight people and he's like, What the heck man? I just bought this. I was told these are great applicants and great tenants and stuff. But really what happened is the seller postured the property, you know, deposits for three months, rent all this stuff, filled it with people.

Ben Bailey: To show it off as slow.

Eric Dixon: It off. And then we evicted a couple of people right off the bat. And those don't go into our numbers because it would skew Yeah but if we do the, the move in and we do the, the screening upfront, you know, it's less than half a percent. So this eviction protection program, it's very inexpensive. But even for that less than 1% or these properties that you bought and we did not screen the tenants, we'll still cover them in this program. And we cover all of the the eviction costs, the court fees, the attorney's fees. We do try and recover it from the back end from the tenant. But I got to tell you, it's like minimal recovery on that side. And so as far as how to avoid it on the front end for a landlord, yes, there's protections. It's basically like a little insurance protection guarantee program. But the the real way to avoid evictions is to do the screening correctly up front. You know.

Ben Bailey: The right people in there.

Eric Dixon: Put the right people in and they don't get evicted. Yeah.

Ben Bailey: Yeah. It's we were talking about this yesterday, but I. We we do see every once in a while somebody signs up with us and we realize, like they just signed up with us because.

Eric Dixon: Oh, they wanted us.

Ben Bailey: They wanted us to evict this tenant.

Eric Dixon: And they know if they would have called and said, Hey, I want to sign up with your service so you can evict my tenant, that we wouldn't be interested. It's like, Hey, after the eviction, because, because you're halfway through it, just finish it and then bring it on. And so you're right. I mean, some of them, it is kind of crazy. You know, they work the system a little bit, sign up. We do the eviction, but then when we place a great tenant there, they're lifelong clients, so it ends up working out. But if you do, I would say to if you if you have any questions with the evictions or you are struggling in that I don't want that to you to shy away based off my statement there. But yeah, just let us know and we can help you. We can line you up, say, Hey, do you know what? Drop what you're doing, let's restart the process. I can't tell you how many landlords try and do it themselves. They try and file it. The courts save a few bucks here and there. Yeah, and they've screwed up the timelines. And I'm like, You're not going to win this. You need to scratch this. You need to send out a new notice and let us take over.

Ben Bailey: Yeah, yeah, exactly. It's just about being upfront, right? Like, if if you need help with that, that's one thing. But like, don't try and sneak it in and tell us after the fact because yeah, the timelines are all going to be messed up.

Eric Dixon: Yeah. And then I would say the to avoid an eviction on the tenant side, it's hard because it's going to be different by owner. Some owners are like they didn't pay the rent 15th comes you file that eviction. Yeah and some of them are a little bit more either compassionate or they just realize like, man, let's do everything we can. Let's use every resource we can to try and keep them in there. Partial partial payment agreements, negotiate to end the lease early. If it's inevitable that you're like, Hey, look, this is inevitable, you're going to get evicted. Let's talk about it now versus 35 days from now in front of a judge and just say, hey, look what positive of that for a tenant would be. No judgment right away. Yeah, you know, it'd be like, hey, look, if the owner agrees. I agree. What if I move out this weekend? You keep the deposit and I'll pay the lease, break fee or whatever, You know, you negotiate it out. Obviously, that's not common practice every day. But I can tell you nine times out of ten, we and the owner would rather do that, then go through the eviction process.

Ben Bailey: Yeah, it really is about and I hear this all the time, so much of what I do is online for the company. And I see, you know, I'll see somebody make a comment online about us and I'll go to the property manager and they're like, I had no idea this person was in this situation. Why didn't they call me? You know, if they just reached out like, we want to help and avoid this. Everybody wants to avoid it. So.

Eric Dixon: Well, I do think there's a stigma out there that property managers aren't helpful or they're not they're not there to help the tenant because the owners, their client or whatever, it's not the case. We know we need to we need to balance that. We have a landlord in one ear tenant and one ear, and we got to make sense of it and make make everybody happy. Yeah, there was one one tenant that came in. They were actually the owner said, Hey, I'm going to evict them because I was I can't remember. I think their neighbor told them, Hey, your tenant that just moved in has dogs and they're like, No, I can't be my tenants. They have no pets. Yeah. Anyway, push came to shove. We did an inspection and they did. They had four dogs. Yeah. And they just moved in several months earlier. And instead of going through the eviction process, we just call them and said, Hey, look, we know you have dogs. The owner is like anti dog man. Like you cannot have pets. They won't approve them if you pay double rent, they don't want your dogs. And so rather than yes, we could have evicted them. But instead of that, we just said, you know what, if you guys will just move out by X date, make sure you leave it clean. We'll do a normal disposition when you move out. Yeah. And they came in and gave the keys and they were very apologetic. They're like, Hey, look, you know, there was a miscommunication and they're like, Hey, look, I thought I thought the dogs were on the application, whatever it is, what it is. But it's like we avoided an eviction because of people communicated. Exactly. So it's like, Hey, just communicate and we don't have to evict them. Yeah. Yes, they had to move. Yes. The landlord is upset that somebody moved in their home with dogs or whatever, but it's like, no, we communicated and they're happy, the landlord is happy and we were able to facilitate it. So. Yeah.

Ben Bailey: All right, man, I know this was thrilling conversation about eviction.

Eric Dixon: Yes, I was actually nervous. It's kind of boring, guys. I know evictions again. They're a necessary evil. Kind of reminds me of an HOA. Yeah, it's a necessary evil. Yeah. Yeah, it's enough. Good. And there has to be. There has to be consequences for not.

Ben Bailey: Absolutely.

Eric Dixon: Following through with the lease. But do understand, too, if you've rented before, if your landlord, if you if you have a property manager. Nobody enjoys evictions.

Ben Bailey: Yeah. Nobody wants to go through it.

Eric Dixon: The attorneys don't even like it. And it's what they do. They represent landlords and they're like, Dude, this is horrible, dude, I gotta go to court every day. Every single day. There's. I don't know, I'd venture to guess there's. Hundreds of people a week that are evicted every week in Maricopa.

Ben Bailey: Across here, here Arizona. Yeah, for sure.

Eric Dixon: So it's sad, man. I hate it. We hate it. We hate meeting the constable, we hate the conversations. But but we want to make it as clear and black and white as possible. And that will help along the way, whatever that looks like.

Ben Bailey: Yep, Absolutely. All right. Well, that's it for us this time. So make sure you leave us a five star review. It really, really helps out and we would appreciate that. And we'll catch you guys next time.