The Negative Impact of Overly Favorable Tenant Laws on Small Businesses

More than four in 10 rental properties are owned and managed by individuals.

By Paul Smith Executive Director, Rental Housing Association of Utah

Tenant laws play a crucial role in ensuring fairness and protecting the rights of both tenants and landlords. However, when these laws become excessively favorable towards tenants, it can have detrimental effects on small businesses, particularly those owned by individuals or families, who rely on rental income to sustain their livelihoods. This article examines the negative consequences of overly favorable tenant laws on these businesses, providing examples and insights from industry professionals.

Striking a Fair Balance

Utah, known for its balanced approach to landlordtenant laws, serves as a useful reference point.

According to SparkRental.com, Utah ranks in the middle in terms of landlord friendliness. By maintaining a reasonable balance, Utah fosters an environment where both landlords and tenants can coexist harmoniously. However, in jurisdictions that heavily favor tenants, regulations can become burdensome, discouraging small, family-owned businesses from renting their properties. Balanced state laws protect and provide quick remedies for both sides. In Utah, we have achieved the following:

1. Landlords in Utah have the advantage of a groundbreaking law that allows tenants with eviction judgments for non-payment to petition the courts for expungement once the balance has been paid, effectively removing it from their record.

2. Tenants in Utah have the option of repair and deduct or rent cancellation if landlords fail to promptly address maintenance issues after being notified. This empowers tenants to take action when needed and ensures landlords maintain their properties.

3. Landlords who fail to send deposit refunds on time in Utah may face attorney’s fees and enhanced penalties, protecting tenants from unjust withholding of their deposits.

Lengthy Eviction Processes

One significant consequence of overly favorable tenant laws is the extended eviction process, which places an undue burden on landlords. In states like Vermont, where tenants are heavily favored, evictions can take a minimum of four to seven months to complete. This prolonged timeline leaves property owners in a precarious position, struggling to cover expenses such as property taxes, insurance, and mortgage payments, all while being denied rental income.

Impact on Small Businesses

According to the National Association of Realtors, 42 percent of rental properties are owned and managed by individuals, many of whom operate small, familyowned businesses. These landlords invest significant time and effort into painting, cleaning, and maintaining their properties, often juggling these responsibilities alongside other jobs. For them, rental income serves as a vital source of financial stability, supporting their families or helping to fund important goals such as their children’s education.

Misconceptions and Realities

Some argue that landlords have nothing to fear if they follow the rules. However, the experiences of industry professionals tell a different story. G. Brian Davis, a landlord and real estate investor, highlights how even when landlords strictly adhere to landlord-tenant laws, they can still face challenges. He emphasizes that being affected by tenant-friendly laws has led him to avoid investing in jurisdictions that prioritize tenant protection, regardless of the potential financial gains.

Conclusion

While it is essential to protect tenants and maintain a fair balance in landlord-tenant relationships, overly favorable tenant laws can have severe consequences for small businesses. Prolonged eviction processes and financial burdens can undermine the efforts of small property owners who rely on rental income. Striking a reasonable balance, as demonstrated by Utah, allows for the coexistence of thriving businesses and protected tenants. Policymakers should consider the broader impact of tenant laws and work towards creating an environment that supports the sustainability of small-scale landlords, who often play a crucial role in local economies.

Realtors®, It’s Time to Raise Your Voice for Consumers

If buyers were required to pay brokers, a series of hurdles would be put up in front of consumers.

By Katie Johnson

As members of the National Association of Realtors® (NAR), Realtors® are champions of homeownership, property rights and the communities they serve. And yet, in today’s world of technology, instant gratification and misinformation, local MLS broker marketplaces and real estate professionals can be taken for granted.

If you don’t educate your clients on the value you and local MLS broker marketplaces provide, consumers could miss out on the best possible experience they can have in navigating one of the most infrequent, complex and consequential transactions most will make in their entire lives.

So what can agents who are Realtors® do?

First, articulate your value to ensure everyone, especially your clients, understands what you do. Be an advocate for local broker marketplaces and how the way commissions are paid create competitive, efficient markets for small businesses and ensure equity, transparency and market-driven pricing for home buyers and sellers. And, support the use of buyer-broker agreements to increase transparency on compensation and educate clients through every step of the process.

Articulate your value

When I was initially interviewing for my National Association of Realtors® job 15 years ago, I had only worked as a litigator until that point, so the NAR hiring attorneys thought I didn’t have the proper background in contracts required for this entry level role. Not so fast, I told them, as I went on to explain that my litigation experience taught me that every word matters.

In litigation, we fight about what is said in negotiations and what is written in the contracts. Courts bend over backward to interpret the meaning of words in statutes. And one misspoken word can completely derail any possible resolution.

My experience as a litigator was actually the best preparation for a contract attorney because I learned how important it is to speak clearly, convincingly and concisely. It’s one of the most important aspects of both leadership and legal strategy — and for anyone trying to clearly explain their value proposition. No one has more facts, stories and testimonials to back up their value than you. As you set out to clearly articulate it to the world, remember that every word matters.

Real estate professionals navigate complex legal details and contracts. You understand and provide guidance on the financial aspects of the transaction, like mortgage rates, closing costs and appraisals. You uncover key community elements such as property taxes, neighborhood property information and price trends. There’s so much breadth and depth to what you do in all those areas. And let’s face it, you often become confidants, and sometimes even lifelong friends, of the clients you serve.

How are you telling that story? Look for every way you can share all that, from moments like your first interaction, to your bios and materials you provide, to how you tell stories of your value through others who can share their experiences.

Advocate for local broker marketplaces

Local MLS broker marketplaces create accessibility and ensure equity. They provide comprehensive and reliable information and data. With the listing broker paying the compensation of the buyer broker, they ensure buyers do not have to go out of pocket for professional representation.

And a bonus: Local broker marketplaces level the playing field for all types and sizes of residential real estate brokerages.

If buyers were required to pay brokers, a series of hurdles would be put up in front of consumers. Buyers would have to come up with the additional funds needed to compensate their broker at closing, making it significantly less likely that first-time and other aspiring buyers could afford a home. Or the alternative, potential buyers would be forced to forego professional representation and handle the transaction on their own – a daunting task for even experienced buyers.

At the same time, veterans would be disadvantaged because the Veterans Administration does not allow veterans to pay real estate commissions when using VA loans.

These lesser-known aspects of local broker marketplaces allow them to seamlessly and significantly do the good work of ensuring transparency and efficiency and equity for home buyers and sellers. It’s important that people who don’t work in our world every day understand that.

Use buyer-broker agreements

Buyer-broker agreements are important, full stop. They promote transparency and are crucial for consumer education during this critical purchase. They increase transparency by making clear to buyers how much their agent expects to be paid. They also serve as a natural opportunity for buyer agents to educate consumers both on how compensation is typically paid and why listing brokers making offers of compensation to buyer brokers benefits both buyers and sellers. Not to mention they protect you, too.

Every real estate agent can and should use a buyerbroker agreement. It benefits the consumer. It lends clarity, which benefits you. And if you’re not in one of the 12 states that requires buyer-broker agreements and you ever have a chance to advocate for them, I suggest you do.

There is so much good that the Realtor® family and local MLS broker marketplaces can do in raising your collective voices. It goes to the old saying: A rising tide lifts all boats. In this case, the boats are consumers and their trusted advisors.

The value real estate professionals provide consumers, guiding them through one of the most important decisions of their life, cannot be understated. Just with agents who are Realtors® alone, there are 1.5 million people who embody all that is being done to ensure generational wealth through homeownership, while abiding by NAR’s Code of Ethics and exhibiting their commitment to the highest professionalism in the industry.

That’s a story worth telling. And we in this industry know how much local broker marketplaces and buyerbroker agreements enable those opportunities for consumers.

At the end of the day, Realtors’® membership in NAR demonstrates their commitment to consumer advocacy. You lead as entrepreneurs, small business owners, experts and community advocates to protect consumers and create wealth.

There’s really no better story to tell than that. And there’s no better voice to give life to that story than you.