Legislative: Interior Inspections

Interior Inspections:

Many Cities Across Missouri are working to add an Interior Inspection on a regular basis for all rental property.

In Kansas, there is a state law that basically states that inspecting an interior of a rental property without the consent of the rental resident.  Thanks to The Associated Landlords of Kansas, there as a rental housing provider you can have your resident sign a form that tells them of their rights to refuse an inspection and they can choose to have the home inspected now, decline inspection now, but leave it open to inspection in the future or they can choose to have no inspections during their time in the home.  Many Kansas communities are now looking at new laws that demand an interior inspection between residents.

In Missouri, there is no state law to prohibit these interior inspections, although Missouri POA attempted to get a similar law to Kansas passed in 2017 and failed.  Independence started inspections in June, Kansas City is discussing a new interior inspection and many other cities are adding.  Several St Louis cities have added an interior inspection between tenants.

As an update:  the Indpendence Rental Ready keeps changing and most recently the Housing Authority from Independence Issued a letter to all landlords informing them it was a violation to share a Housing Authority Inspection with the Independence Rental Ready Program as it violates the tenants 4th Amendment Rights.

In researching this subject in other states, we see numerous groups are collecting money and suing their cities to challenge the laws.

Mid-America Association of Real Estate Investors Platform

Existing Laws:  There does need to be a way for a rental resident to be able to request a free interior inspection from the city if they find themselves in deplorable living conditions and contend that in most cities there is probably a city health or codes department that they could call to request a free city inspection without fear of reprisal from a rental housing provider.

Run Down Housing Stock:  Mandatory interior inspections on all rental properties be it periodic or between tenants, has been said to be caused by the fact that citizens are complaining about run down housing  But take a look across any city and you will find that part of the blame lies in the fact that there is older housing stock, but take a closer look at the run down houses on any given street and you will find that while some are probably rental, that most are more likely owner-occupied properties where the owner is elderly and does not have the ability or the funds to maintain their home.  You will also find that many of those owner-occupied properties have been abandon as owners got older and passed and there are no heirs to do anything with the home.

Fourth Amendment:  Requiring all rental residents to submit to an interior inspection without a warrant or their consent is a violation of the rental resident’s fourth amendment rights.  Further conditioning a rental provider license based on an inspection could force some housing providers out of business.  If the resident will not allow an inspection, we are told by cities to evict the resident, however, to evict a rental resident we need to have non-payment of rent or a violation of the lease.  At this time, most existing housing providers do not have anything in their lease telling the rental residents that they are 2nd class citizens and too stupid to know if a potential rental is uninhabitable and must allow a city inspector to let them know if it’s a quality rental or not.  Maybe after a few years we can come up with some sort of lease clause that let’s rental residents know they have no rights in their home or property any longer.

Pace of Business:  Requiring an interior inspection between residents could also cause a hardship to the good housing providers.  You see the good housing provider maintains their rental property and when a current resident gives notice that they are moving out, the landlord starts marketing the home for a new resident.  Often the new tenant moves in with in 24 to 48 hours of the hold tenant moving out.  The good housing provider keeps their properties repaired and requires their tenants to maintain the home in good clean condition so it can be re-rented quickly.  Adding an interior inspection between tenants will cost time and rent money coming in.  We have talked to housing providers in areas with inspections between residents and it is causing a 2 to 3-week delay, which ads up to at least 1 month lost rent.  Those costs are being passed on in the form of higher rents.

The Five Percent:  At one city council meeting, a council member said that the new interior inspection ordinance had been a long time coming, and was proposed as a way to stop the slumlord, the bad landlords from operating.  The council member further agreed that only about 5% of the rental housing providers in their city were a problem.  So, to solve the problem of 5% of the landlords in the city, who are not complying with current laws, codes, and regulations, they decide to add in new regulations to penalize the other 95%.

More People Renting:  In today’s economy, more people are becoming renters, not less.  Do research and find that there is a shortage of quality rental housing just about everywhere in the country.  This shortage of rental housing is driving up rental prices.  As Cities ad new requirements, this adds expenses to the owner, who will pass those expenses on in the form of further rent increases.  Cities should be working hard to find ways to attract housing providers to their city, so there are more available quality rentals to bring down rental prices rather than finding ways to drive them out.

Some Suggested Alternatives

  1.  Licensing of Rental Property:  All businesses must hold a business license and we feel that rental housing providers are no different, a business license should be obtained in a similar manner to any other business in the city based on the same factors that other businesses in the city have. That may be an income based business license or one based on physical location.  HOWEVER, as some cities do not require business licenses, if there is no license requirement for the local barber or diner, then there should not be one for the housing provider.
  2. Enforcing Current Code:  Before a new law is written about mandatory interior inspections, a review of current law should be completed.  Create an informative brochure on current codes in a community outlining steps a resident can take if they feel they are living in substandard conditions.  Explain who to call and how they request an interior inspection.  Make this a downloadable form and require that all housing providers include this as part of their lease agreement.  And as far as blight goes, enforce current codes and regulation on all housing, rental, vacant, occupied and community owned.
  3. Vacant / Abandon Housing:  This varies by city but every county has a way to foreclose on a property when the taxes are not paid.  However, in Jackson County and probably in other counties, a home does not get foreclosed upon for taxes until they have not paid taxes in 4 years.  The owner can then, stop the sale by paying the oldest of taxes.  So many of these very run-down homes are either because the owner passed away or moved to assisted living, they own them free and clear so there is no mortgage company to foreclose and they sit for 4, 5, even 10 years.  They are vacant, no one lives there and no one maintains.  Finding a way to speed up the process to foreclose on these homes due to unpaid taxes, would (1) not allow homes to fall in such disrepair over 4 and 5 years of vacancy and (2) improve the landscape of our communities and the housing stock greatly.
  4. Elderly Home Owners:  These are people that worked hard, purchased and paid for their own home and in their declining retirement years have a home they no longer have the physical ability to maintain and quite often do not have the monetary resources to pay someone else to maintain.  Many communities have laws that you can’t foreclose on a home of a person over a certain age due to taxes.  That’s fine and dandy, but are you really helping this person when their house is falling-down around their ears.  If they can’t afford the taxes, they can’t afford to maintain it.  If there are laws on the books prohibiting taking a house for back taxes from an elderly person, there should be a city program that goes to these people and helps them fix code violations, helps they maintain their homes and keeps their yard maintained.

Real Estate Investing is a Business

All in all, the local housing providers who buy, fix up and sell / rent are in the business.  To sell or rent a property, this business person must provide a quality product.  That means that the home needs to be in clean and well-maintained condition to be able to attract a renter or a buyer.  The housing provider already has a good incentive help beautify the community – it is their business and they want to eat, pay their own mortgage, send their kids to college.  The housing provider works to buy up run down houses that are savable, they fix them up and make them a vital, productive home in the community again.

This is our business, it is what we do. . . so rather than creating TIFFs and other packages to incentivize a big corporation to move to your community, maybe spend some of that money instead on one of the largest businesses already in your community – the Real Estate Investor.  There are 1000’s of us across the country.  We go about our business of buying the run- down houses in your communities, we fix them up, we sell them and rent them.  We have no government incentives to do what we do.  We go to the bank to get a loan, we borrow from private individuals, we use our own money and we pay more in interest, fees, insurance and taxes that the regular residential housing owner.

In thanks for all of our efforts to improve the community, the community creates new laws to limit our ability to do business, they send the city codes inspectors to our homes we are in the middle of renovating or that we may have just purchased last week, they fine us, they ticket us, while the run-down houses down the street doesn’t get a second glance because grandma lives there and she can’t afford to maintain her house, so let’s not make her pay her taxes or fix her roof.  Communities create new laws that cost the housing provider money, slows them down and makes it harder to do business.

Community Officials, please ask yourself this . . . what would happen to your community if no one was out there to buy the vacant or rundown houses?  No one wanted to fix them up?  No one wanted to rent them out?  No one paid taxes on them ever again? No one ever lived in them again and had jobs to pay income taxes?  No one ever lived in them again and spent money in the community?

We can see it now . . . . Life with No Real Estate Investor Housing Poviders . . . whole communities of vacant and abandon houses because no one is buying them, no one is fixing them, no one is living in them.

Congratulations you are now a community official for the city of Detroit in 2010 . . . good luck with that.

Community Officials, please reach out to your local Housing Providers, we are here to help, if you would only invite us to the table.