Hi Jo Zhou,   I'm in Denver, CO., so I know nothing about California Landlord/Tenant Law, but I recommend that you consult your attorney and follow his or her advice to the letter.  Starting with firing your PM and then deal with the tenant as your attorney advises.

When you are looking to hire a new PM, have your attorney draw up a contract that defines the nature of the relationship you hope to have with the new manager, and ask to see a copy of the PM's Policies and Procedures Manual.  Read their policies and procedures carefully to determine if this PM's ideas about property management concur with yours.  Pay particular attention to how they screen potential tenants, do they run a credit report, do they conduct a criminal record search, do they conduct a civil records search, do they verify employment, etc.?  Finally, will they share this information with you if you ask for it?

As to the Pitbull issue, personally I have never met a Pitbull I didn't like.  However, in the City and County of Denver, it is not possible to license a Pitbull or a Pitbull cross.  So have your attorney advise about whether or not a Pitbull can be licensed in your municipality, then address the issue in you lease.  So, you can require licensing of all companion or service animals in your lease.  If your community doesn't allow Pitbulls to be licensed, then you're covered.  Beyond that, you may be allowed to specifically prohibit Pitbulls in your lease.  That's a question your attorney will be able to help you with.  If you own more than one rental property, you'll want to make that prohibition addendum to all your leases so that you can show you are not singling out just one tenant.  That's when the prohibition against Pitbulls would become discriminatory against that one tenant. 

Thanks for renting to folks with dogs Dan.Hopefully cats too...... I love cats and actually have a cat rescue ! I dont like liars, so would prefer folks to be honest up front if they have or want a dog , support or not.  Yes i know there is liars in this business tho unfortunetly..  We divided a triplex yard into 3 yards, doesnt look to bad(mostly wood fencing)...... Not sure if you could do a reasonable dog area and have tenants comply to do as told  if open to all.(maybe) Ive not had anyone trying to pull the scam on me with the support dogs as I  look for big restricted breed dog folks. I actually advertise on rescue and humane society pages ect for this...  I am well known in Indpls for doing this and network with  5-6 other landlords doing the same..   It seems they sensationalize the pits being the bad guys on  the news if a child is hurt.. You dont see alot of collie or retrievers  dog bites ect..... and they do happen alot, they just arent in the news !..... It isnt fair how folks perceive pits.... Ill tell you those little dogs at the rescue could be ruthless, Ill take a pit any day.....I dont know the statistics Dan, only trying to  convey to the owners and landlords the real need for this type rental is needed... and for me i stay full..... and our houses are very nice .....  These folks who are looking for  a home with there over  50 pound dogs and  restricted breeds have no options other than be passionate about  finding a home... I will agree that they  should wait till the own a home, as  most owners do not feel as I do . Which is sad......  Pitbulls are quiet dogs, and they  are short haired and not as messy as  say a cocker spaniel.... you get my point. but once again Dan thanks for renting to pets period...... 

Thanks for renting to folks with dogs Dan.Hopefully cats too...... I love cats and actually have a cat rescue ! So your insurance company will allow rots? and not pits??  Could you require the pit folks put a muzzel on there pets while in yard to comply with your rules?  You said you have large dogs at your rentals... I dont like liars, so would prefer folks to be honest up front if they have or want a dog , support or not.  And usually dont get along with a liar tenant  before its all over.... So feel your pain on that issue. Yes i know there is liars in this business tho unfortunetly.. 75% of all dogs in shelters are pits or pit mixes.

 We divided our triplex yard into 3 yards, doesnt look to bad(mostly wood fencing)..... We also did that at our double. Not sure if you could do a reasonable dog area ,and have tenants comply to do as told  if open to all.(maybe in a 4 plex ) 

Ive not had anyone trying to pull the scam on me with the support dogs as I  look for big restricted breed dog folks. I actually advertise on rescue and humane society pages ect for this...  I am well known in Indpls for doing this, and network with  5-6 other landlords doing the same!..   It seems  the news folks sensationalize the pits being the bad guys on  the news if a child is hurt.. You dont see alot of collie or retrievers  dog bites ect..... and they do happen alot, they just arent in the news !..... It isnt fair how folks perceive pits.... Ill tell you those little dogs at the rescue could be ruthless, Ill take a pit any day.....I dont know the statistics Dan, only trying to  convey to the owners and landlords the real need for this type rental is needed... and for me I stay full..... and our houses are very nice !

.....  These folks who are looking for  a home with there over  50 pound dogs and  restricted breeds have no options other than be passionate about  finding a home... I will agree that they  should wait till they own a home, as  most owners do not feel as I do . Which is sad.....

 But lets face it , in America its cool to "rescue" pets now a days and esp pits.So you know these young couples are gonna be into that...  Hell there is even a pitbull show on tv  too. I think you have to own one or two to understand the breed. I have !

  Pitbulls are quiet dogs, and they  are short haired and not as messy as  say a cocker spaniel.... you get my point. but once again Dan thanks for renting to pets period...... 

I appoligize for  taking up your [email protected] As I am new to this site and not good on figuring out where to post what yet...

@Jo Zhou undefined

@Jason Cory I will go with your route. I found a firm in San Diego who specialize in real estate law (From Yelp, I didn’t get any referral from friends. I just have few friends who do real estate business) because I believe PM is the key thing in this issue, I don’t know what is their plan to betray me.  After this mess cleans up, I will manage myself with attorney’s reviewing of contract. It is so scary to lose the total control of the properties.

Also, do you guys put property in each LLC or buy enough umbrella policy? My attorney who help us create the family trust, said since we don't have lots of properties, LLC is very costly. What do you think which way we should protect our properties?

I called a bunch of attorney yesterday, one of them suggest to great asset protection trust, anyone suggest it?

I am so appreciated that all of you spent so much time to address my issue and share your valuable experience and thought. I feel so supportive in here. Thank you biggerpocks to provide this platform. 

Originally posted by @Jo Zhou :

@Jason Cory I will go with your route. I found a firm in San Diego who specialize in real estate law (From Yelp, I didn’t get any referral from friends. I just have few friends who do real estate business) because I believe PM is the key thing in this issue, I don’t know what is their plan to betray me.  After this mess cleans up, I will manage myself with attorney’s reviewing of contract. It is so scary to lose the total control of the properties.

Also, do you guys put property in each LLC or buy enough umbrella policy? My attorney who help us create the family trust, said since we don't have lots of properties, LLC is very costly. What do you think which way we should protect our properties?

I called a bunch of attorney yesterday, one of them suggest to great asset protection trust, anyone suggest it?

I am so appreciated that all of you spent so much time to address my issue and share your valuable experience and thought. I feel so supportive in here. Thank you biggerpocks to provide this platform. 

 Exactly why I only rent to Section 8 tenants. The case worker functions as the go-between, i.e., PM. The housing authority does the criminal & background checks before they are approved for the program with annual checks so you/I don't have to do it. If a Section 8 tenant was doing this one call to the case worker fixes the problem. I've never met a single tenant that challenged their case worker from fear of getting kicked off the program & losing their assistance. Also, the housing authority is liable for their tenants in the event of damages, threats, malicious intent, etc.  

Too many risks as a landlord not to have leverage securing your assets. Regular PM's have zero control over tenants & accountability to the property owners. 

Eventually owners go this route or keep getting sued because they refuse to learn you can't be nice to tenants. 

These types of topics are why I do not miss residential investing. I just do not need the drama in my life.

As mentioned by someone else the potential tenant could say they bought a policy and then  immediately drop it thereafter.

In residential many years back in multifamily there was an instance where a tenant did not have a dog. An inspection of the unit showed a pit bull. The tenant said they were just (Watching) it for a few days for someone. What really happened is their parents had to move it from place to place because the other place would not let the pit bull stay there. Nobody would claim the pit bill in the unit so animal control was called and came. They took the pit bull and left a notice with the tenant that the OWNER could go up to the county and show documentation animal is theirs and pick back up. They would not let it stay there in the unit with nobody claiming it.

Professional tenants like to play games and accept ZERO responsibility for anything. Large pits need room to run around. If they are kept inside all the time they can do massive damage to a unit or house.

I am mainly convinced that mid to high end residential rentals throw off very little cash flow and it's more about the appreciation boosting the overall returns.

Good Luck. No legal advice given.  

I have California buyer clients that own small apartment buildings (10 to 20 units). They had run up in equity of 1 million to 1.5 million and they are getting 3% annual return. They get tired of residential tenants so 1031 into passive commercial NNN and get 7 to 8% returns.

I looked at residential a long time ago and it just wasn't for me.  Bigger Pockets you can hear 1,000's of nightmare stories about being a residential landlord. It's a tough business and lifestyle that does not fit many investors well.

Just received PM’s email, she said the tenant’s son is autism, they are getting the dog certified. 

Could I withdraw the property for rent?

This is not a Fair Housing issue unless it's a properly documented Service Animal that the tenant has proper documentation of the need. But you never mentioned anything about Service Animal so I have to presume it's a pet. That being the case, the tenant can sue your insurance company and there have been cases where the tenants won such a case causing most insurance companies to remove that clause from their policies. There's a lot of missing info to make a could call on this one.

@Dick Rosen , until I sent the above message, I didn’t know it is a service animal, I didn’t know they have a child with autism. If PM properly communicates it with me, I will communicate it with my insurance company, too. If my insurance is ok, I am fine. The whole house has tile floor, it is what the tenant likes for the dog. I am ok with dog because i know it is a family member.

After PM found out the dog is a pitbull, PM’s attorney gave her 2 options: 1. Certify it as a service dog. 2. Get the enough renter’s insurance and sign a hold harmless agreement with me. They chose to go with 2, so the tenant went to get a renters insurance. Preprare to sign the document with me. After I research, I found out option 2 does not provide me with any protection. So I told PM we cannot rent because my insurance will cancel me.  Who creates this mess at first?    PM or attorney? Do both PM and attorney forget to protect me?

It is not me to refuse to rent it to them, it is my insurance policy. However, if the tenant threats to sue, regardless the dog, I don’t want to rent it to people who will sue me. There is always a better way to communicate, lawsuits is just not a right way to do.

I agree that residential has lots of trouble. However, in CA, going into commercial requires a large capital injection at the beginning, even a small Starbucks site sells for 3.7 million. Investing out of state has lots of unknown for the beginning investor. Need somebody who has experience to guide at first. 

@Joel Owens : I remember you point out the residential property is a headache in my last post. I have checked that the money we put down in CA to buy a SFH could buy us some commercial property in other state. Here is just very expensive and return is just 3-4%. I really wish we could leave California. So many people in the posts said CA was a crazy state, I feel exactly the same. I am so willing to move somewhere else. We are just tied by my husband's job.

Anyway, I appreciate that you show us some other options. It worths to dig into.

Originally posted by @Jo Zhou :

@Joel Owens : I remember you point out the residential property is a headache in my last post. I have checked that the money we put down in CA to buy a SFH could buy us some commercial property in other state. Here is just very expensive and return is just 3-4%. I really wish we could leave California. So many people in the posts said CA was a crazy state, I feel exactly the same. I am so willing to move somewhere else. We are just tied by my husband's job.

Anyway, I appreciate that you show us some other options. It worths to dig into.

I do not know how you are getting an ROI of only 3 to 4% in San Diego. Where most of my units are located the lowest appreciation year in the last 6 has been 6% and appreciation in the last year was 17.5% according to Redfin. If I financed at 25% down and was cash neutral my ROI for the year was 70%. If I purchased at 20% down it was 87.5%. In the last 6 years my annual ROI has probably exceeded 50% annually.

Verified fact that San Diego has close to the top ROI for financed buy and hold RE in the nation. San Diego RE has been very good to my family.

I do share your frustration on this pet issue.  I have run into support animals that are likely bogus a few times and so far have been successful fending them off but I realize I take on some risk doing so.

If you do not have umbrella policy get one and get one with enough cover that you are comfortable for situations like this.  I realize there are other ways to get asset protection but an umbrella coverage has some advantages including the insurance has a big stake in any legal action, you are protected to the level of the insurance so no worries, and there is no need to try to maintain separation of funds.

LLC will cost $800/annually tax, can be pierced if there in not good separation of assets, likely will not spare you from being named individually in any law suit, and there in no other significant stake holder to assist in the legal battle.

Good luck

@Dan Heuschele , I mean 3-4% cap rate. The appreciation is good, but only when I sell, I feel "rich". Mine, cash on cash return is low, I cannot repeat BRRR process. Maybe I didn't do it right. I don't have enough equity to refinance right away. I need more learning.

I do have umbrella policy, but just find out geico will not extend the umbrella policy if we are oversea for one year. Need to find one that will cover if we are not here. 

As far as I understand....a service dog is not something that gets registered somewhere, but rather the dog has to have been trained to do a particular task, without which the tenant can't live. And you are allowed to ask for a notarized letter from a doctor to state what that particular task is and that it's necessary for the person.

So, if you're saying that they're stating that they'll get the dog registered.....that means that this dog is a pet now....and not a service dog.....there is no such thing as a registry for service dogs.

Originally posted by @Jo Zhou :

@Dan Heuschele, I mean 3-4% cap rate. The appreciation is good, but only when I sell, I feel "rich". Mine, cash on cash return is low, I cannot repeat BRRR process. Maybe I didn't do it right. I don't have enough equity to refinance right away. I need more learning.

I do have umbrella policy, but just find out geico will not extend the umbrella policy if we are oversea for one year. Need to find one that will cover if we are not here. 

Maybe I do not do the BRRRR right also...

I have done the BRRRR process a few times and I have never got all of my initial investment and all of my rehab costs even when the BRRRR has been assisted by market appreciation.

The hurdles:

• Low appraisals for refinancing at least in San Diego
• Typically limited to 75% or lower LTV
• Costs of San Diego rehabs

I typically get my initial purchase costs back and some of the rehab costs.  However, my post rehab equity typically has gone up significantly, I can now rent the newly rehabbed unit at top of market rent, and I now have some of the investment to leverage it on a different investment.

If they cannot document it as a service animal, then they submitted a incomplete application. 

IF you fear a lawsuit before they move in, just imagine your lawsuit when they do move in and you are in their control.  

Get rid of your PM.  I have had people threaten to sue me for discrimination but I remind them that there are protected classes. Criminals are not a protected class. Pet owners are not a protected class. I would tell the prospective tenant that I will continue to take complete applications until it is rented. If they do not have the proper paperwork to verify that it is a service animal, than it is considered a pet. You can discriminate against pets. I require a prescription, to verify a service or Emotional support animal. Without it, it is just a pet.  Alot of people threaten to sue but most don't have the money to get a lawyer to find out they don't have a case.  Bottom line, get rid of the PM. Give your PM 30 days notice and find a new PM to take over.  Personally, I would find a more qualified renter. Let them spend thousands of dollars in lawyer fees to find out you choose a different qualified renter. 

Originally posted by @Michaela G. :

As far as I understand....a service dog is not something that gets registered somewhere, but rather the dog has to have been trained to do a particular task, without which the tenant can't live. And you are allowed to ask for a notarized letter from a doctor to state what that particular task is and that it's necessary for the person.

So, if you're saying that they're stating that they'll get the dog registered.....that means that this dog is a pet now....and not a service dog.....there is no such thing as a registry for service dogs.

Your definition is as indicated by ADA but HUD has a much lower standard. As a landlord your criteria is the HUD criteria which basically does not include any training requirement.

So the restaurant can deny access to an emotional support animal (an animal that in no way has been trained to help a disabled person)but a landlord is not allowed to deny the access to the support animal.

What I am seeing is that people can pay some money to get an animal classified as a support animal even if the person has no need for a support animal.  This is making it tough on landlords and is not fair to those with real disabilities that have trained support animals.

I have been threatened to be sued twice by tenants that wanted their bogus support animals in my no dog units.  Both times I indicated I would see them in court and both times they decided it was not worth the fight or knew their animals were bogus support animals and that they did not have a need for the animal beyond it being a pet.

I have dog units.  My no dog units have rationale for not allowing dogs.  I am not anti-dog; I own a dog and have always had a dog.  I am anti tenants claiming their pets are support/service animals.

@Dan Heuschele Thank you for clarifying. There are always some bad ones who want to game the system. The law is designed to help those people in real need, those who lies ruin the system. 

@Jo Zhou Dogs are not a protected class. However, there are PLENTY of red flags to suggest your PM doesn't have your BEST interest at heart. Fire them and move on. Don't even sweat them suing you. It's a lot of work on their part - will they even follow through? Probably not. Even if they do, the burden of proof is on them, not you! Best of luck!

@Jo Zhou

It seems like you have your solution.  Deny applicant based on the fact it's a pet (for now).  Fire your property manager which will take 30 days.   In the meantime Rent the unit to a qualified applicant.  You don't need to hold the unit open until they get their pet turned into a service animal.  I love the fact that the pm attorney told the applicant how to game the system and to sue you as well.  

HUD's website makes it clear that a support animal does not require any training. HUD's requirement is more lenient than the ADA requirement for support animals. See HUD section entitle "Reasonable Accommodations Under the Fair Housing Act", especially the second to last sentence in the quoted section:

"An assistance animal is not a pet. It is an animal that works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person's disability. Assistance animals perform many disability-related functions, including but not limited to, guiding individuals who are blind or have low vision, alerting individuals who are deaf or hard of hearing to sounds, providing protection or rescue assistance, pulling a wheelchair, fetching items, alerting persons to impending seizures, or providing emotional support to persons with disabilities who have a disability-related need for such support. For purposes of reasonable accommodation requests, neither the Fair Housing Act nor Section 504 requires an assistance animal to be individually trained or certified.  While dogs are the most common type of assistance animal, other animals can also be assistance animals."

My view is the HUD definition of support animal is so lenient that it is part of the problem and that the ADA definition would better serve the true disabled and the landlords.

Originally posted by @Joel Owens :

I have California buyer clients that own small apartment buildings (10 to 20 units). They had run up in equity of 1 million to 1.5 million and they are getting 3% annual return. They get tired of residential tenants so 1031 into passive commercial NNN and get 7 to 8% returns.

I looked at residential a long time ago and it just wasn't for me.  Bigger Pockets you can hear 1,000's of nightmare stories about being a residential landlord. It's a tough business and lifestyle that does not fit many investors well.

 I hear you, Joel. Sometimes residential can have drama. More so if you you're like the OP and come on frantic after yet another bad PM has put her in a corner.  I for one have never come on here with an urgent help me frantic need with my residential rentals. Not even once. 

I have commercial also. I would like to extend your 'passive NNN and get 7 to 8% returns' and add 'between vacancy.' I'm full now, but 2 of my stores have experienced vacancies of over 24 months at a time. Pluses and minuses to each I guess.

@Jo Zhou    I think the problem the PM is concerned about is the fact that they have told the potential tenant that they met the criteria to rent the apartment.  Now they have seen the potential tenant and you want them to tell the tenant they do not really meet the criteria.

That is a great way to get a Fair Housing Lawsuit going.

The exact criteria should have been decided before the property was ever advertised.

All the property managers I know would not do it.  You might also owe them the fee for renting the apartment.

Oh, I've heard this song and dance so many times. "My pit bull is friendly and gentle. He wouldn't hurt a fly," blah blah blah. My personal experience with pit bulls is that is exactly correct. I've run into pit bulls at the dog park. My neighbor has a pit mix. And I have never met a pit bull that wasn't the sweetest thing and only wanted to love on me.

Regardless of my experience, the reality is that pits have been identified as an aggressive breed and most insurance companies won't cover any liability caused by an aggressive breed.

Dog ownership is not a protected class. As a landlord you can say "no pets" and/or stipulate the kinds of pets you will allow.

It gets a little murky when a pet is supposedly a service animal. A service animal is one that is trained to provide a service to help the owner with day-to-day life activities, like a seeing-eye dog.