Hi, it's Kris German and welcome back to The
Apartment Dealer Show. Do we have a treat for you today. I just sat with Mr. Mike Brennan, who
is probably the most prominent eviction attorney, especially here in Southern California. And
Mike and I had a great discussion when it comes to being very intentional as a landlord
with your rentals and what has changed in the landscape of tenant real estate law. The
relationship between tenants and landlords has only become that much more contentious.
Cities. One city after the other has been stepping in to put additional layers of
protection in place for tenants. Many of which that you may not even be aware of as a
landlord or have any idea that your local city, the local municipality, has its own set of rules,
that you could fail in dealing with your tenants or giving three day notices or if a tenant
hasn't paid and the process to go about it, let alone how has the process changed now that
you have to engage an eviction attorney and the process that that attorney has to go through
at the courthouse because that has changed. Timelines have changed, costs has changed,
and not for the better, all for the worse. Everything is taking longer and is costing more.
Needless to say, landlords, multifamily investors, this is a conversation that you do
not want to miss. Set aside some time, if you cannot watch the full video now, pick a
time you can sit, this is very important. Again, the legalities of owning your multifamily
properties. Let's go to the interview now. So Mike, welcome back to the show.
Good morning. Thanks, Kris. How are you? I'm doing well, sir. I'm doing well. And
truly thank you for your time. I know that the landlord's greatly appreciate it. I know that
you're a very busy guy, but there's a lot to talk about. And I wanted to start with this, it's
interesting in speaking with some of my closest clients and individuals that are, you know,
fairly large owners, let's say they own over a hundred units or more and those that have been
in the business, let's say for 20 years or more. There seems to be a common sentiment and that
sentiment is, "Kris, owning apartments just isn't as fun as it used to be." And they may not
even be just speaking to the changes in the laws, because these are folks that they can afford
the lawyers, they can afford counsel and that sort of thing. I think it's more so that as
they look down the road and the rights of private property ownership are being challenged.
Your profits are being challenged with respect to rent control and these sorts of things.
The increased cost that is whether it's because of property insurance changes in tax law and what
have you and also the relationship between tenants and landlords has become much more contentious,
really not because of either party, but because of the culture and because of the media and,
and what's being, you know, popularized, they sum it up as, and literally those words
like, "Kris is just not that fun anymore. It's not what I signed up for." Would you say you
hear much of the same from your client base? Yeah, it's not just my client base. It's my client
base, my staff, you know, everybody involved in landlord tenant on the landlord side. It's not
as fun as it used to be. It used to be, you know, I had a great time in the early stages
of my career. I really loved what I did. Now you raised all the right, you know, hot
buttons. You've got increased costs, you've got, you're, as a landlord, you're battling
the government. Just to keep your profits, just to run your properties the way that,
that the law requires you to run them is from a habitability perspective, things of that
nature, you're limited in the amount that you can push through to the tenants, meaning you can't
raise the rents in, in unison with, for example, inflation, and you hit the nail on the head when
you said that there's the, in the last 10 years, there's been a significant cultural shift.
You know, the tenants now are very emboldened. They feel like there's nothing they can
do that will get them evicted. There's a virtual army of attorneys out there
that are representing them for free. I can tell you that, you know, in trying to hire
attorneys, there is a negative connotation to working on the landlord side in the law schools.
It's actually fostered in the law schools, the law schools themselves. And this comes from one of the
career advisors at one of the local law schools, they tell me that, you know, the law schools
push the non profit end of things, they push the, you know, go out and help the tenants, there's
this cultural shift on a lot of different levels that are taking place, is taking place.
And you know, so there's this negative connotation to be on the landlord's side of that table. And of
course, in that kind of an environment, it's not fun for anybody who's on that side of the table.
And as a component of that, or in addition to that, I should say, it's my opinion that,
you know, 20, 30 years ago because apartment ownership, not that it was easier, it just wasn't
so convoluted. And an individual could buy an apartment building, multifamily property. Kind
of manage it, you know, halfway and regardless they'd wake up two decades later, essentially a
self made millionaire, not really with much of a business plan, really not meaning to do so.
That just was the way of apartment ownership, especially here in Southern California.
But today, because of all the changes landlords need to be much more intentional.
Investors, buyers looking at new purchases need to be much more intentional about their ownership,
exactly where they're buying and being familiar with things like, is there a local rent control
ordinance or certain tenant protections in place? And that changes now from city to city.
So you need to be much more intentional. And I know in our conversations, things have
changed at the courthouses. And so let's start with a right to counsel because the landlords
definitely need to know about this development and it goes to the point of being intentional
with their management and their practices, best practices. What is right to counsel? How,
how has this reshaped things at the courthouse? So, for those who aren't familiar with the phrase
right to counsel, is a, it's a movement across the United States and essentially it's, where
either a city or a local municipality votes in and gives every tenant a right to an attorney
as if they were in a criminal proceeding. So under the United States Constitution, if
you're charged with a crime, you automatically have a right to an attorney. Well now, in
Los Angeles County, and let me be clear, in the unincorporated areas of Los Angeles County,
this was voted in maybe, I don't know, four or six weeks ago, by City Council, I'm sorry, the Board
of Supervisors for the County, they voted in the right to council, and so what that really means
is that every tenant, they say low income, every low income tenant, but obviously tenants being
evicted can fudge the numbers and be funneled into that category as a low income individual.
But essentially, every low income tenant who's at 80% or lower, I believe is the threshold
of the adjusted mean income for that area, will receive a free attorney. And there's
a couple things to think about. Right now, the budget in Los Angeles County that was
passed for that is $21,000,000 per year. They've only got enough funding for the first
year right now. Out of that $21,000,000, there's $13,000,000 earmarked for these attorneys. The
county put out their findings and said, if you, if the average public legal aid type of
attorney is paid by the county $300 an hour, you know, that's a lot of evictions they can prevent.
Okay. So if you do some math real quick, the county had the option of taking that money and
paying the landlords for the unpaid rent. And the county said that the typical tenant in eviction
for unpaid rent right now is around $3,500. And if you run that out, I think it comes out to
like 4,000 landlords they could have helped or 4,500 or something like that.
Essentially make the tenant whole. Right. Well, they would have
made the landlord whole. Or made the landlord whole. Yeah.
Right. They would have made the landlord whole. And instead the county
did the math and said, well, We could pay the landlords or we could take that money, that
$13,000,000, and if you divide that by, you know, $300 an hour, you get something like 45,000
hours of attorney time that we can pay these attorneys to defend these people in the evictions.
And for the landlords out there, you keep saying, using the phrase very intentional. And I agree
again, you're hitting the tone of things right on the mark, but I would call it due diligence.
The biggest challenge I've seen in the last year, and this was before right to counsel, is we've
had this explosion of tenants rights attorneys, because they all knew it was coming and all
of these firms are getting lined up to be one. It's like insurance defense, right? If you're
a PI firm, you want an insurance company as one of your clients who just feeds you business.
So now these tenants rights firms have just come out of the woodwork and we have hundreds and
hundreds of attorneys defending the tenants now. And the problem that's coming out of that for the
landlords, we're starting to see it even before right to counsel has been implemented because
it doesn't go into effect until January 1st. But all of these tenants firms that lined up
to be on that list of the attorneys that are receiving that free work, they are, what we're
starting to see in the courthouse is they're becoming very hyper technical about this stuff.
And it isn't a question of whether the landlord is right or wrong. I mean, the landlord
can be right about everything and win every motion that is brought by these firms. So
the point I'm making is these firms are just, they're getting hyper technical and bringing all
these motions before we ever even get to trial. And in the vast majority of those situations, the
landlords win. The problem for the landlords on this is that it slows them down before they can
even get a trial date and it costs them money. So it's time and money, the very two reasons
that landlords are evicting the tenants in the first place. So that's as we stand today.
As right to counsel grows because in the report that the county put out, they said, "Hey, yeah,
we only have enough for unincorporated L.A. right now, but our goal is to put right to counsel in
every single city in the county of Los Angeles by 2030," and they probably will do it, they're going
to use that U.L.A. tax money to do it. That's what they're saying they're going to do anyway.
So, in the next five years, you know, every single city in the county is going to have
right to counsel. And like I said, there's already an army of attorneys out there lining up and, and
getting their feet wet and, and trying to get into the industry to understand how this stuff works.
And they're really wreaking havoc on the landlords and the evictions. And I'll give you some stats to
kind of bring this into context. A few years ago, pre COVID, we probably had, out of a hundred
cases filed, you probably had 45% that the tenants never even filed an answer. Roughly 45%. Now you
have roughly 95% of the tenants file an answer. Of the tenants that filed an answer, you
know, pre COVID, 98% of those cases would settle without a trial. Of the people, of that
new, you know, 95% that are filing an answer, you're getting an incredibly greater amount of
motions and hearings and jury, virtually every single tenant now demands a jury trial.
And, so the costs are going through the roof for the landlords. And one of the
big issues that pops up on this is, this is where the landlords are really struggling.
The landlords are really struggling because, as you said accurately before, you know, pre COVID
you could become a self made millionaire overnight almost by accident just by buying real estate.
And so, you know, it was some, I'm not going to say it was easy to be a real estate
person prior to that, but running it, especially on the eviction side, was very easy.
And that's all changed. Now with every city, I'll give you a specific example of how this
comes to bite the landlords in the rear end in a second. Montebello, remind me if I don't
bring that back up, let's talk about Montebello. Virtually every city out there now is toying
with the idea of just cause. Not every city is implementing rent control, but a lot of cities
are looking at just cause. And what comes along with just cause is a whole list of requirements
that the landlords need to comply with prior to even accepting rent in some jurisdictions,
prior to serving three day notices, prior to filing an eviction. There's a list of things
that landlords need to do to be in compliance. And these ordinances are getting harsher and
harsher. Take, for example, city of Pasadena, Measure H. That is an incredibly confusing
ordinance for a landlord to comply with. And you know, so, these landlords come from
a background where things were pretty easy. There were only a few jurisdictions where, that
had just cause or had rent control. They're, those jurisdictions, the landlords who own property
in them, seem to know what they were doing most of the time. Now, everything has changed. And all
of these landlords that have never had just cause before, they think they're in compliance and
my staff will ask them when they open the case, "are you in compliance? Did you do everything you
need to do?" "Yes, we did it." Yada, yada, yada. And then we get discovery from opposing counsel,
and through the process of discovery, we find out, you're not in compliance. You haven't done
everything you need to do with these just cause ordinances. And so, landlords are,
understandably, incredibly frustrated now. And this is only going to get worse.
And I'll come back to Montebello and explain how this is going to get worse. We just
had this pop up the other day. So we keep a list of all the cities that have any sort of a just
cause ordinance. And Montebello does not have a just cause ordinance and it doesn't have
rent control. But we had a tenant's attorney raise what was called an urgency ordinance,
and Montebello passed an urgency ordinance and they specifically say, "this is not a just cause
ordinance. We are just tracking data. We want to, we want data on evictions so we can decide
whether we want a just cause ordinance." So as part of that urgency ordinance, it
requires that every landlord sends a copy of any notice they've served to the tenant.
Well, our client didn't do that. And so, the defendant's attorney raised that as an issue.
Now, nowhere can you find Montebello's just cause ordinance because it specifically says this
is not a just cause ordinance. And we looked at some of the answers that are drafted by the
courts. Even the courts don't have Montebello listed as a city that has any sort of a just cause
ordinance. So the client had to dismiss their case because they hadn't complied with that component
of that urgency ordinance. And so it's this kind of stuff that's popping up all the time now that
is really causing a problem for the landlords. And I don't want to say there's nothing that can
be done about it, but the landlords have to up their game when it comes to their diligence.
And you've heard me say this for years, part of it is showing up at your city council
meetings. And if you're not showing up at your city council meetings in those cities in which
you have buildings, you don't know that the city's passing an urgency ordinance like that. And so
you don't know that there are these rules that you need to comply with as a landlord, and
you're only going to find out about those rules when you're in the middle of an eviction, and
the tenant's attorney sends discovery saying, "prove to us that you actually sent that
notice to the city." And it's, like I said, it's incredibly frustrating for the landlords and
they are starting to see, "oh, you know, I didn't do that. I needed to do that. I didn't know." And
what it boils down to is a lack of knowledge about their own industry. And that's all since COVID.
Well, for the landlord's perspective, because who would anticipate that there's an additional
layer of laws or protections, whatever you want to call it, between them, the tenant and the
courthouse or the local, say, laws of the state. Because in the old days, the tenant didn't pay.
It's very simple. You didn't pay. And so there's a process for this and the courts regulate that
process. But now you have the cities in between convoluting things saying, "well, you know, we're
going to put some stop measures here in place to, to help the tenants," and landlords wouldn't,
especially if they've been around for some time, wouldn't assume that's the case.
It should be there's the law as it's executed at the courts and my attorney
is gonna be my representative at the courts and the city really shouldn't be involved. They
should maybe come around if I need permits or there's something to do with habitability.
But not in my dealings with a tenant and did they pay or not or are they a nuisance and
these sort of things and I can evict for these reasons and I can't evict for these reasons.
Right, that's exactly right. Or did I send a copy of that notice to the city every single time
the tenant violates the lease? And if I didn't, I'm not even allowed to collect rent
in some situations. So, or for example, registration, did you register your unit?
Because if you didn't register your unit, you're not allowed to collect rent, you're not
allowed to demand rent, you're not allowed to, even if the tenant offers it to you,
technically, you wouldn't be allowed to take it. So, in the bigger cities where this is common
practice, like Los Angeles, landlords know it. If you're running a business, if you're
an apartment owner in the city of Los Angeles, those landlords know what they're getting into,
you know, most of them. Even some of them in Los Angeles don't really have a clear understanding of
what's required of them because there's been a lot of changes in Los Angeles in the last few years.
But when you start getting into these outer cities outside of the traditional rent control areas, and
now you have these new just cause ordinances that, like I said, like you said, they just wouldn't,
it's almost counterintuitive that the city itself would be injecting itself into the middle
of your relationship with your tenant. Why do you need a copy of my notice, my
three day that the tenant didn't pay? Why in the world would the city need that? It's
just, again, It's just the way I see it, it's just they're purposely making things that
much more difficult and that much more tedious so that you step on a landmine and you fail.
That is exactly right. It's intentional. So there's that component of it, so we'll
put that in a compartment over here. But how much would you say as you deal with your
clientele that the issues that they're having, they're having difficulties in court and say,
losing cases or don't present the best case because of bad business practices? In other
words, they're not keeping good documentation, how they're dealing with the tenants, the
habitability of their units. Like, in other words, they're bringing some of this upon themselves.
How much would you say it is of that spectrum? I would be hesitant to characterize it as bad
business practices based on history because they have good business practices for what
used to be. In the changed environment though, their business practices need to step up.
They need to modify their due diligence in running their buildings. You know, to be honest,
Kris, it's very rare that I see habitability as a legitimate issue in a building anymore. It
happens, and you see it, but that's not going to cause you to necessarily lose your case.
There's plenty of ways around habitability. The biggest issue I see is, like I said, the
landlords that all these laws have changed. It's not what it was pre COVID. It's not as easy as it
was pre COVID. There's a lot more layers of red tape, we would call it, that the landlords need
to understand and comply with, and they're not doing it and they don't know about it, especially
if they haven't done an eviction in, let's call it four and a half, five years, they're used to
evictions and what they had to produce prior to COVID. And now it's a whole different story.
Now, you know, we'll talk about this more at the luncheon is strategies for success.
But there are some strategies they could employ. Those strategies just weren't
necessary pre COVID. And during COVID, everybody was busy focusing on how do we navigate
COVID. So they weren't really focusing on, oh, there's a new just cause that just got passed in
my locality. What are the requirements under that just cause? Am I doing it? Am I registering
my property? Am I reading the ordinance? I mean, the vast majority of my clients have never
read any ordinance that applies to their building. So like I said, I wouldn't call it bad business
practices based on a historical perspective, but I would say, hey, the landscape has
changed. And we've talked about this for the last three or four luncheons, as a
landlord, especially the smaller owners, you've got to decide, you know, do my kids want
this asset? If they don't want it, you know, am I ready to step up and read these ordinances
and understand what is legally required from me now in order to own that building, in order
to run that building? Do I want to put that time and energy in? And a lot of the
landlords, you know, they don't, to be blunt. And until they're in the middle of an eviction and
they find out, oh yeah, you know, you've got some, there's no perfect case, but you've got some
issue right here that could cause a big problem. Oh you know, I guess I should have done that.
Yeah, well, maybe that'll change their approach to this industry, but I see a lot of the landlords
that it won't change their approach. So they still want to approach it as it, as it
like was, you know, 5 and 10 years ago. Well, and I'm in the process of, for example,
selling a portfolio of properties for a family where the kids want nothing to do with it.
They see it as just too problematic. And the parents say, "okay, well, we don't want
to manage anymore either. We don't like what we see. Managing apartments today is
not what it once was. And so we're, you know, we're ready to retire. And since you kids don't
want it, we're not going to kill ourselves, hanging it onto these buildings for the sake
of..." I mean, they're not happy about paying Uncle Sam, there's some strategies around that.
But for this, you know, for our conversation, the point is that it's not owning apartments isn't
what it was for those that have been around for some time. And for let's, you know, the children,
let's call it new investors. They're not signing up because they say, "well, no, no, thank you. I
mean, there's easier ways to make money and invest and there's just, it's too involved."
And to this whole point, you know, when there's a local ordinance and when
cities differ from one location to another, it impacts property values. And that's another
thing that I think landlords need to take into account is that we've seen say for example, like
Bell Gardens. Bell Gardens has an atrocious local rent control. And in terms of how much you can
raise rents annually and then how they figure out the average rents. If you want to try to bump
it up a little bit more, it's just atrocious. And values there have got pummeled in the last three
years, and I can name a handful of other cities. There's been, it seems like there's been a mass
exodus out of Pasadena. So it's having an effect on values. I think that's another thing landlords
have to take into consideration as well in terms of where are their assets or where do they
look to buy a building. Some may say, "well, it's going to spread across the land and pretty
soon you won't be able to run from these things." But at least for the time being, people need to
be aware that everything we're discussing, all the changes in the law and how things are becoming
more difficult even if you're telling yourself, "well, I run a good shop, my tenants aren't a
problem, I don't have evictions, no worries for me." Well, okay, nonetheless, depending on where
you own, what may be impacting you is your equity, the value of the property, so in one way, one
shape or another, it's impacting the landlords, what's going on here here recently.
Absolutely. You are, kind of, dancing around a really important topic that I'm shocked
more landlords aren't addressing right now, and that's Proposition 33. Prop 33 is going to
decimate landlords values on their property, if it passes. And at this time, you know, we're in that
home stretch. For those who don't know what Prop 33 is, it's an attempt to rescind Costa Hawkins.
And what it will do, there's a little bit of confusion about it. Those who know, think, that
Prop 33 will instantly implement rent control over every single property in the state. That's not
accurate. What it will do is if it passes, it will rescind Costa Hawkins or repeal it, and it will
allow every single city or municipality to decide if they want rent control and to what degree.
So, Costa Hawkins, right now, protects new construction, anything built after I believe
it's 1993. It protects single family homes, what we would call separately alienable
properties. And for those protected categories, cities are not allowed to implement rent control
on those. If Prop 33 passes, that will go away. Each city will be able to decide whether they
want rent control. There will be no protections on single family homes. Even, think about the
extreme of this, if you are a retired individual, and you rent a room out in your house, you
live in the house and you rent a room out, under Prop 33, depending on the city you live in,
the city could say, that room is controlled too. You can't, now you can't evict
people for any old reason, and on top of that your rent increases are limited
to 3% or 60% of CPI, whatever they want to say, and there would be no protections like there
exists right now under Costa Hawkins. So if you think about the impact of property values
in any city that decides, "hey, Prop 33 passed, now's our chance to implement rent control."
It's going to be devastating on property values throughout California. So, that's, like I said,
I'm shocked. We're in the final stretch that the politicians will tell you that the ballot is in
November. It's between August and November that people start to look at the issues and start
to think about "hey, how will this impact me?" And so at this time, we've beat this twice
before. It's important to remember that. We beat it in 2017, I believe it was, and 2019.
It's the same guy, his name's Michael Weinstein, he runs the AIDS Foundation. He's the same guy
that's funding this every single time. He's let it be known he's not gonna back off this issue.
It's really interesting who this guy is, if you go and look him up. I think it's important
for people to know, he's a landlord himself. But he's a landlord that's been prosecuted in the
city of Los Angeles as a slumlord. And so it's really odd that a guy like that would be pushing
this, but he is, he's funneling tens and tens of millions of dollars into pushing this rent
control law across, throughout the state and the impact on the housing is going to be terrible.
On top of Prop 33, which everybody should vote no, let's be clear, no on 33. There's another
proposition that is going to get a little confusing for landlords. That's Prop
34. So remember this, no on 33. Yes, on 34. All right, so 33 is the rent control...
Before we depart 33, so this started out as being known as the Justice for Renters Act,
and that's how a lot of us were discussing it was Justice for Renters Act. Now it's
Prop 33. And I think for our viewership, biggest problem here is potential vacancy control,
because if they're able to regulate the rental rates on vacancies, which I imagine would be,
and I'm curious as to your thoughts, Mike, it's probably one of two options here, scenarios.
You have a tenant that moves out and the city has determined there's a median rental rate for
one bedrooms, two bedrooms, three bedrooms, and you're going to fall in somewhere there based
upon this, say the square footage of your unit. So no longer will the open market prevailing
rate work. It's going to be based, the city is going to tell you how much you should be able to
rent a specific bedroom type, or the tenant moves out and they were paying $1,200 and you can only
raise, and I believe it's similar in New York, you can only raise the rent a percentage above
what the previous tenant was paying. So why, going my conversation on values, this is
extremely important is let's say today, in general in Southern California, the average
rate of return when you buy a new building, let's say it's 2% to 3%, cash on cash return.
I know it's not nothing to write home about, but that's the reality of the average rate of
return, 2% to 3% percent cash on cash. I could envision a situation where investors are going to
say, "okay, well, now this vacancy control is in place, the city you're selling in has determined
they are going to institute vacancy control," to Mike's point that every city is going to have
a choice, "and because of that, I no longer can buy your building and only earn 2% to 3% cash
on cash. I need to start out at a higher cash flow because going forward, my destiny is in, has
been charted for me based upon what you did with your rents before I took over the building."
So let's say they even say I want to start out at 5% cash on cash return versus the
2%. The change in value, in other words, you got to bring the property value down in order
to increase the investor's cash flow, easily would be 20% if not more. Easily. And so that is why
this is a big deal and landlords, you know, we, we have been talking about raising your rents and
renting to the specific tenant type since people have been attending my educational events.
A lot of landlords didn't heed our words. Of course, this was prior to rent control, and then
once things got passed in 2019, then they wished, you know, they would have done differently. But
even to your point that we defeated this in 2019, we did, but then the politicians passed rent
control even against the vote of the citizenry. So my fear is that even if we are able to
vote this down again, which I don't know, the culture is, since COVID, the dynamic has
changed in terms of people's perception of what they deserve and what they should work for.
It's going to be that much tougher to defeat it, but even if we do, what's the potential that
they're going to come right back behind it and say, "well, we know better than you that
voted and we're going to pass X, Y, Z." And obviously nobody knows, but even the fact
that they're, this is a potential, this goes back to good business practices being very
intentional with what you're doing about your, you know, with your properties. You know, you got
to be proactive when it comes to the management, specifically your rental rates and so forth.
Sorry, Mike, I didn't want, I just wanted to... I'm glad you brought that up because it's
an important point that I skipped over is that vacancy control. And I think it's a
combination of what you just brought up, Kris, you've got the, like you said, maybe they
say you can only raise it a certain percentage based off that last tenant's monthly rental value.
Or they say, we're going to take the HUD fair market rental values, and that's the maximum you
can charge. And that buyer of that building is going to say, "well, heck, I could put my money
in bonds right now and do better than that, so, you know, why wouldn't I?" So the impact on the
value of that asset is going to be destroyed. I'm not saying it'll go down to a point where it's
worth nothing anymore, but it will be, severely negatively impacted by that, the passage of that.
But I do, I want to go back to prop 34 because 34 is really important. Prop 34 is actually a bill
that says health care providers like the AIDS foundation cannot spend hundreds of millions of
dollars advocating outside of their industry and so it's really important. We want to shut this guy
down. So no on 33. Yes on 34. And going back to your point, I do want to address that. I don't
see what happened in 2019 happening right now, meaning even if we defeat 33 I don't see the state
stepping in and saying "hey, we're putting vacancy control on," they can't really do that because
the state would have to repeal Costa Hawkins. There are these protections in place. And the
state doesn't have the authority to just repeal Costa Hawkins. That's something that really
does have to go to the voters. And I don't, I haven't seen anything coming out of
the legislative sessions that implies that that's the direction they're going either.
More importantly, I know that Governor Newsom, he has visions of the presidency at some point
in the future. And it's interesting, he's now taken a step away from his leftist positions
and moved more centrist. And you can see that even in his ruling on the housing, the homeless
encampments and his willingness now to say, "okay, we can get rid of homelessness encampments."
So I don't see that coming from the state level. What I see is if landlords, you know, really get
involved and donate money, because that's what it's going to take. And they defeat this, I see
Michael Weinstein coming back again, you know, in the next year or two, with more money, and
trying to push it through and like you said, and I think this is really key to remember the cultural
shift that has taken place on many levels just since COVID is dangerous for apartment owners.
The apartment owners that the older generation that have owned them for a long time. Like you
said, we're not having fun doing this anymore. They're kind of tired of this battle. Their kids
don't want it, and so this shift in the culture is allowing some of this stuff to get pushed through
which is dangerous. It's dangerous for the people who own now, especially the mom and pops, and
it's dangerous for the industry as a whole. Now we have our upcoming Apartment
Owners' Educational Luncheon here in the month of October. And of course, all the viewers
unfortunately cannot be with us. We probably could fill a small arena, but we keep it local to,
you know, those landlords that we service. Of course, we keep it local to your client, or
your service area as well. And it'll be myself, you, Stephen Spierer, another real estate
attorney, individuals from the financial sector of things. So it's going to be a great
afternoon, very informative for the landlords. But for those that cannot attend, Mike, and in our
last few minutes here, what would you say top two, top three, to my comment earlier about best
practices, being intentional with your rentals, what's some advice you could give to landlords
as they're trying to navigate things and they're simply just trying to make a living being good
landlords. What are some tips of the trade? So, the three top things I would say right now,
look at your leases. I've been saying this for years. Check your attorney's fees provision.
Okay. If your attorney's fees provision in your lease is uncapped, you need to cap it right away
because that's what these nonprofits are looking for. That's the first thing they look at. And
this is from an eviction perspective and we'll get to a bigger picture in a second. So look
at your leases, get those caps on attorney's fees in place immediately. Everybody should be
doing that. And I'm still shocked at how many clients send me their leases and they're uncapped.
Number two is figure out, and this is not always easy, especially in the city of LA, but figure
out which ordinances apply to your building. Like I said, not always easy, but figure that
out. It'll be based on the city you're in, what year it was built, the number of units it is.
Number three is once you figure out which ordinance applies, because on one level or
another, at some point, every single rental property is going to be controlled by some sort
of a just cause ordinance, most likely. The city of LA is a perfect example. So once you figure
out which ordinances apply and there can be more than one that apply to your building. Then the
most important thing you can do, and this is what puts all landlords to sleep, is download
a current copy of that ordinance and read it. There are notice requirements that you have
to comply with. For example, in a lot of these jurisdictions, you have to put a notice
of the tenants rights up on the property. And if you don't do it, it's an affirmative eviction
defense to an eviction. Figure out what notices requirement, notice requirements there may be if
you serve a three day pay or quit. Did you have to register the property first? If you did and
it's registered, do you have to send a copy of that to the city? If so, how do you send that to
the city? By the way, do you need to include the proof of service when you send that to the city?
Figure out all these little red tape, ticky tacky requirements that have been implemented over
the last four and a half years and make sure, you know, look ahead strategically. Make sure you
are absolutely in what we call strict compliance. There is no fudging this. There's plenty of case
law out there that says because we're dealing with residential in most cases, housing, we demand
strict compliance. You can't say, "well, I sent off half of it and that's substantial compliance."
No, you have to be in strict compliance. So again, to recap, get your leases
reviewed, get a cap on attorneys fees in place immediately. Number two, figure out what
ordinances apply to your property. Number three, read the ordinance, download it. Do that at
least once every six months to a year, because they change like the city of Montebello and they
don't broadcast that, "hey, landlords, we just changed the ordinance. There's new requirements."
So every six months to a year, download it, read it, and figure out, create a checklist
for yourself. What do I have to do, and when? City of LA, they announced their allowable
increases. I believe it's in, what is it, April or May something like that. And your
property has, you've already had to pay your registration fees and you can announce your
serve your notices to the tenants for increases, create a checklist that's in chronological
order. And every single year, go through that checklist, know the ordinance, know your
requirements, make sure you're in compliance. And what I'll end it, that component of
this interview with is I'll say this, the fights that are taking place in court
right now, I've never seen before in my life, how many attorneys are coming at us, how hard
they're coming at us, how many motions for summary judgment we've had filed against us. In the end,
what I will tell the landlords is, If you're in compliance, the substantive state laws haven't
really changed that much. Okay? You can win. But what it takes to win is, this isn't like some
stepchild area of law anymore. Where you can wing it through this area of law. You have to be
in strict compliance. And if you're not willing to take the steps to understand what that means,
and to get your property in strict compliance, then, you know, reconsider how you're
approaching your real estate portfolio. Well, thank you, Mike. I know at our event,
you're going to do a much deeper dive in terms of, you know, what specific laws have changed
and how to address these and so forth. But for today's conversation, I think this is a good
start for the landlords. If I'm listening to this, I think you come to the conclusion that I
really am running a business as a landlord. It's no longer just buy the building. Now,
tenants, pay me my rent. It's the first, that's it, right?
Right. No. There's much more that it
takes today to win at a high level. That's right. That's exactly right. Kris, you
do it, you know, at the luncheon, you always put up this strategy. You've got your
pillars that you talk about. And, It's important for your members and clients to really digest what
you're trying to show them with those pillars. You can't come at this, even if you inherited
the property, you can't come at this going, "oh, I inherited this multimillion dollar asset. I'm a
multimillionaire now, and all I have to do is sit back and collect the money." It just doesn't
work that way anymore. It's a real full time job, business that requires a deep understanding
of that industry and systems and processes in place to make sure that you're in compliance.
Well, thank you, Mike. Thank you. We look forward to having you at our event and we will talk soon.
Thank you, Kris. I appreciate it. I hope you found today's video informative. And I
want you to take away, if there's one word, it's the word intentional. We have to be intentional
with our multifamily investments. I'm an investor just like you. I'm not excited that it's taking
that much more time to manage my properties as I self manage. I'm not happy that it's that much
more tedious. I'm not happy that even one of the cities that I own in is one of the cities that
we're discussing that has a local rent control ordinance in place. And that has impacted
my strategy with that particular property. But that's the reality. We can complain, we can
blame, it's not going to change anything. It's the reality. And if we want to win at a high level, if
we want to continue to build our financial legacy to Mike's point, we have to learn those particular
laws that we fall under or the ordinances that we fall under, our properties fall under. Or if
we're potentially going to purchase a property, what specifically is the ordinance of that city?
And I think it's even worth scheduling some time, you know, pick the legal professional of your
choice. I think Mike Brennan's a great choice. But some of you maybe use Dennis Block or some
of the other firms that are here local. I've done some work with Dennis Block as well. The
bottom line is. Have them take a look at your lease, your addendums. Are you, is your lease
bulletproof? Does it speak to all the changes that have occurred over the last three or four years?
Are you using all the additional addendums that are in place rather than just the two, three
page AOA form? There's a lot more that goes to renting to particular tenants. And are
there maybe some stop measures that you need to put in place? Are there some notices
that you have to give to your tenants in terms of the laws, regulations of the property?
Mike mentioned putting a cap on the attorney's fees. This way, you know, if you don't have a
cap, essentially what that means is they can, the lawyer on the opposing side can bleed you for
all you're worth. Because there is no cap versus if you had a $500 cap, a tenants landlord
takes a look at that and says, "well, gosh, I can only make $500 here, potentially, maybe
this isn't a case that I want to take up." So there's much more to that. I know Mike has
drafted his own lease that you can contact his office and request, you know, to sit with
him and go through that and compare his lease to yours. What's missing where,
you know, what gaps need to be filled. But the bottom line is, my perspective on
apartments hasn't changed. I believe they're a great investment, it's just our approach.
Our approach of managing these particular, of our multifamily properties. Our approach
of continuing to build a portfolio, if you're on a path of growth, as my wife
and I are. Okay, then things have changed. And even, I've been in the industry now 17 years
and even in the short time that I've been in the industry, things have drastically changed from day
one stepping into my broker shoes to where things are today. And so that's reality. Sure, there's
people to blame and you can complain. It doesn't matter. The reality of it is, let's deal with
things as they are, see the picture as it is, not as we wish it would be, and be proactive.
November this year it's a big vote. We got a vote no on 33. That would be very devastating
for that to pass, for landlords. Spread the word, with other landlords, investors you know. And
really spread the word even with those individuals that maybe don't own investment real estate so
that they can understand that it does nothing to speak to, I think, what is on everybody's mind
and that's housing and homelessness, you know, none of us like to see that. But these laws,
these measures do nothing to fix that problem, and so, it's no on 33. Yes on 34. Let
that be our, you know, our mantra as we march forward here to the ballot boxes.
And with respect to our Apartment Owners' Educational Luncheon, this is a private event.
You'll know you're invited because you either receive an email from me, with respect
to the event or a direct invite by mail. Because you own one multifamily property in the
geographic region that my team and I service. For those of you that are maybe outside
that area, I would just say, again, find a group of professionals that you can turn
to, whether they be real estate attorneys, accountants, and so forth. Even a good
broker in your area that hopefully is educated in these areas and works, you know,
sees himself as an advocate for landlords, not just someone who collects commissions.
But, you know, build your team, have those research, because that's essentially what
this event is. It's my team that I present to our clients and potential clients, that those
individuals that Kris looks to when I need advice or that help me through the process of my own
properties, that's essentially what this event is. The best of the best of who I know and the
landlords get to come for free over the course of a few hours, get updated what's changed year
over year. And then they can come to our events once a year and that should keep them informed.
But it's not, even that is not a one stop shop because the idea is then from there to engage
the professionals that speak at the event to, to address any needs that they may have.
I hope today's video was informative. If you like the content, please give our video
a like. Share the video with other landlords that you know. If you have not subscribed yet,
please subscribe to our channel so you receive those alerts when we release new content.
And we're going to continue to share that information that speaks to multifamily
apartment ownership. We're going to share tips, strategies, and insights, and the network
of professionals that can help you build your financial legacy in multifamily properties.
And until next time, this is Kris German, wishing you positive cashflow, tenants who behave, and
much protection from Uncle Sam. Till next time.