In the real estate business, sometimes you get sued. Perhaps you screwed up, or perhaps it’s bogus, or perhaps it’s a bit of both.
“A bit of both” is what faced us a few months back, and my brother Phillip, who is our property manager, handled it in his all-but-patented way that turned what could have been a loss of $3,500 (and what would certainly have been a colossal waste of a time) into a win/win situation with one 15 minute conversation.
I believe this story can help illustrate how to deal with tenant relations and other similar situations.
Phillip’s philosophy on handling these problems is heavily influenced by Dale Carnegie’s classic book How to Win Friends and Influence People. In the beginning of his book ,Carnegie describes “Two Gun” Crowley, a notorious murderer who wrote a letter shortly before he was finally shot by police that read, “Under my coat is a weary heart, but a kind one – one that would do nobody any harm” (Pg. 22). Indeed, a serial killer seriously believed he “would do nobody any harm.” What do you think the average person thinks about themselves then? Everyone is the hero of their own story; it would be wise to remember that.
Download Your FREE Tenant Screening Guide!
Hey there! Screening tenants can be a tricky business, and this critical step can be the difference between profits and disaster. To help you with your real estate investing journey, feel free to download BiggerPockets’ complimentary Tenant Screening Guide and get the information you need to find great tenants.
How to Get Sued
The whole mess started with our previous manager, who worked very hard, but was extremely disorganized. In September of last year, a tenant of ours at one our older buildings called the emergency line because “sewage was leaking from the ceiling above her.” The plumbing in the upstairs unit broke and while we fixed this quickly, it didn’t exactly leave a good impression.
Then a second, much more minor problem popped up: water was leaking in through her window. This was a small issue, but a cluster of miscommunications and mistakes followed that blew it all out of proportion. Between the beginning of October and the end of November, she called our office three times asking for it to be fixed. We sent our maintenance guy out twice, but both times he couldn’t get in. She had put a chain lock on her door without our permission. In addition, we could barely get ahold of her. Each time we called, it would go to a voicemail that wasn’t set up. So our maintenance guy had trouble scheduling an appointment.
Then, our previous manager lost track of the file. In November, our tenant stopped paying rent and we began the eviction. Right before the trial she paid back most of what she owed us. But our experience is that these partial payments this late in the game don’t turn out well, so we continued on with the eviction.
During the trial, she claimed that her mattress and some other property was damaged by the leak. I have no idea if this is true, but she claimed she was withholding rent because of neglected maintenance and therefore didn’t feel like she should have to pay any of the eviction fees. We actually probably would have lost the court case if it wasn’t for one email we sent her that said we tried to come but couldn’t get in because of the lock.
Note to everyone: Keep as good of records as you can and get as much in writing as you can. It comes in handy in situations like these.
Still, there were so many chances to avoid this problem, such as keeping better track of priorities and making sure to get such maintenance orders handled. The big mistake was that after the first two attempts, the whole problem fell to the back burner.
At this point my brother took over property management. One of the first things put on his desk was a lawsuit from our soon-to-be evicted tenant for $3,500, alleging that through negligence, we had caused her a significant loss. Oh, what a wonderful gift our previous manager left my brother with.
How to Get Unsued
After she had been evicted, but before the sheriff had come, my brother had a chance to speak with her. She came into the office sporting a scowl on her face as if to pick a fight and was accompanied by a HUGE man (think Dwayne “The Rock” Johnson) who seemed like the type you would want around if such a fight were to take place. All three of them sat down together in what was a bit of an intimidating situation.
OK, now it’s time to take notes.
So my brother didn’t know about the situation with much detail, so he started off as follows,
“I know you’re mad about what happened. I haven’t dealt with this situation so I’m a little in the dark. Please tell me what happened from your point of view.”
Friendly and validating without conceding anything. She explained all of her grievances. In fact, this was the first time Phillip even heard that she claimed to withhold rent because of the maintenance.
Now at this point, my brother could have attacked her reasoning: “We sent out our maintenance guy twice. You wouldn’t answer our calls. You put a lock on our door in violation of the lease,” etc. Or he could have made it easy for himself and simply said, “Please sue us and make my life a living hell.” They’re all the same.
Remember, everyone is the hero of their own story. You cannot fight them. As the great negotiating book Getting to Yes puts it, “Separate the people from the problem” (pg. 10). What good would have it been to tell “Two Gun” Crowley he was a monster when he believed he “would do nobody any harm?” Instead, one must get on the other person’s team to make tenant relations work.
This is THE KEY to tenant relations:
You are always on their team.
You are always the good guy.
Don’t get me wrong, there’s a bad guy as well. That bad guy is the lease, the owner, the law, fair housing, whatever. But it’s not you. You’re on their team. You’re the good guy.
In this instance, “the past” was the enemy. “I can’t change the past, so we should find the best way to move forward.” Then her concerns and fears started coming out: she didn’t have much money, she didn’t have a new place to live and it was hard to find one with an eviction on her record.
Always listen to what the other person is actually after. It may not be what you thought originally. In this case, her supposedly damaged property was not among her concerns.
After learning what was bothering her, Phillip responded,
“OK, well it looks like what you really want to do is move on and find a new quality place to live, and I think I can help you come up with the best solution for your situation.”
The first part verifies you are on the same page. The second line is key, and Phillip uses it all of the time. It puts him on their team while managing expectations. We’re talking about the best solution available, not what you are demanding. He continued,
“You can continue to sue us, that’s an option. I think it would be better to try and work something out, though.”
She held plenty of responsibility for what happened, but she also had the right to be upset. To say that suing us was a stupid idea is to call her stupid, no matter what euphemism you use. What this line did was validate her opinion, but it also shifted the discussion toward a more amicable solution.
My brother then offered to pay her back her deposit, write a letter for future landlords explaining the situation and open up the court case to satisfy the judgement and get the eviction off her record. In this case, the deposit was a mere $350. Nothing but a token compared to the costs in time and money to prepare for the trial, not to mention the possibility of losing it. And for her, she got what she needed without having to wait for a court case she probably would have lost anyway. A win/win.
By this time, the scowl had been wiped off her face, and she was actually smiling and quite excited. After all, she and her teammate had just come up with a satisfactory solution to her problem. She then enthusiastically asked,
“Do you have anything for rent right now? You know, I would even be OK staying in my current apartment!”
Phillip decided the best thing to do was for both parties to move on. He’s probably right, but I almost wish he didn’t. The story just sounds all the better if he had convinced someone who’s suing us to drop the suit and then sign a rental lease with us in the period of 15 minutes. Oh well.
What strategies do you take when tenant relations start to go south? What’s worked best for you in the past?
Leave your tips, comments and stories below!