Rental Housing Journal On-Site April 2016

Rental Housing Journal On-Site

April 2016

9. Grassroots Legislative Advocacy Update

3. Attract Tenants With Simple Eco-Friendly Upgrades

10. Top 10 Questions Regarding Music Licensing for Rental Properties

5. Common Tenant Complaints and How to Handle Them

11. Are You Investing in Real Estate to Go Green or Make Green?

6. Window Film - How Its Proper Use Can Help You Make Money 7. Increasing Your Property’s Bottom Line

14. How Wireless Security is Changing the Real Estate Industry

16. Ask the Secret Shopper – Children & Pets 17. Dear Maintenance Men – Maintenance Tools & City Inspections 19. Crowdfunding and Peer2Peer Lending For Real Estate Investors – The Disruptors We Want!

www.rentalhousingjournal.com • Professional Publishing, Inc 17,000 Papers Mailed Monthly To Puget Sound Apartment Owners, Property Managers & Maintenance Personnel Published in association with Washington Association, IREM & Washington Multifamily Housing Association

HUD Seeks to End Discrimination Against Tenants with Criminal Records

A Majority of Washington Landlord and Owners Have A No-Smoking Policy at One of Their Properties Statewide survey reveals that cost savings, tenant health are landlords’ top reasons to go smoke-free Frances Limtiaco, Washington State Department of Health

M

ore and more landlords are going smoke-free in Washington state. A recent survey of landlords and owners of multi-unit properties across the state revealed that 75 percent have adopted a no-smoking policy at one or more of their properties and 62 percent report having a no-smoking policy at 100 percent of their properties. The chief reasons why landlords adopt no-smoking policies are because it’s better for their bottom line and it protects tenant health.

By Evan L. Loeffler

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he U.S. Department of Housing and Urban Development (HUD) published guidelines in April, 2016, for the proper consideration of applicants’ criminal records when considering them for housing. HUD notes that because a disproportionate amount of people with criminal records are minorities, a blanket policy of refusing to rent to anyone with a criminal history may violate the Fair Housing Act. Much like the 1991 HUD memorandum regarding occupancy standards (the “Keating Memo”) this new doc-

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Landlords’ top benefits for going smoke-free: Cost savings. Ninety-six percent of landlords cite reduced cleaning and turnover costs as a benefit to going smoke-free. No-smoking policies cut cleaning and turnover costs—such as new paint and new carpets—associ-

ated with smoke damage. It can cost more than $3,500 to update a smokedin unit compared to less than $600 for a non-smoking unit. Going smokefree also protects the resale value of a property.

Preventing property damage.

No-smoking policies protect buildings from property damage and cigarette fires. Nearly four in 10 landlords surveyed reported property damage due to improperly discarded cigarettes, and nearly 15 percent report having had a cigarette-related fire at their property.

Protecting employee and tenant health. Adopting smoke-free policies can help protect employees and tenants from the harmful health effects caused by secondhand smoke. Today, nearly one-in-five of all deaths that continued on page 8

Market Off to Good Start

Seattle - The latest Apartment Insights survey shows rents increasing 1.7%. The vacancy rate fell to 4.21% according to Tom Cain of Apartment Insights. The data are from his Seattle firm’s 1st quarter statistics and trends on 50+ unit properties in the King/Snohomish market

Seattle 1Q16 Vacancy: 4.21% The vacancy rate for our nonrandom survey of conventional, stabilized 50+ unit properties in the King/Snohomish market is 4.21%. This is down from 4.32% last quarter. It was 4.46% continued on page 12

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

Attract Tenants with Simple Eco-Friendly Upgrades

By Scott Matthews, Director, Strategic Accounts, The Home Depot

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he multifamily housing industry is expected by many to continue growing throughout the year, which means strategic upgrades to your property can help prepare you for increased demand and set you apart from competitors.

Approximately 65 percent of renters consider energy-efficient features when deciding what apartments to rent, according to The Center for Climate and Energy Solutions. These upgrades will also cut operational costs associated with water usage, heating, cooling and other energy, helping both you and your residents save money.

Consider these simple, eco-friendly upgrades before the summer season begins.

Save Energy Seal and insulate: Sealing gaps and cracks will help keep money in renters’ pockets. Maintenance can start by properly insulating needed areas around windows and doors. Seal cracks and gaps with caulk, spray foam and weather stripping. This simple project can reduce energy bills by up to 30 percent and ensure that air remains inside the units.

Upgrade thermostats: Allow residents to moderate electricity and gas usage by upgrading to programmable and / or WiFi-enabled thermostats. The thermostat can adjust to their schedule

manually or automatically through a convenient app on their smartphone.

Tenants will save an average of 10 to 12 percent on heating and 15 percent on cooling bills, and you may be able to

offset part of your investment by taking advantage of rebates.

Switch to LEDs: Increase savings easily by converting to LED lighting, continued on page 8

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HUD Seeks to End Discrimination ...continued from page 1 ument provides general guidance for how to consider whether a housing policy violates federal law. The memo is not law in itself, but it interprets how the law may apply to certain situations. As with any new guideline, the legal ramifications will develop on a case-by-case basis as matters are heard in court and the guidance is considered.

According to the new guidelines, turning down tenants solely based on their criminal history may violate the Fair Housing Act. While the Act does not list people with criminal records as a protected class, HUD notes that minorities have disproportionately high rate of arrests and convictions. For this reason, while in some cases a landlord may refuse to rent to a party with a criminal record, the policy should not be applied automatically without further consideration.

The guidelines note that there is a difference between an arrest and a conviction. An arrest may occur if a police officer forms the belief that someone needs to be detained for their own safety, for the safety of others, or for the investigation of a crime. A conviction may occur only after a party has been formally charged with a crime and had an opportunity to defend himself or herself in a court of law. A judge or a jury must determine that it is beyond a reasonable doubt that the individual committed the crime. Both arrests and convictions may appear on a criminal history.

HUD takes the position that a policy of excluding individuals because of a prior arrest without a conviction is discriminatory. Quoting the U.S. Supreme

Court, HUD states, “[t]he mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct.” In other words, an arrest is not, by itself, proof of a crime. A housing provider who categorically denies housing to a person because of an arrest on their record violates the Fair Housing Act. Convictions, on the other hand, are different. HUD states in the memo, “In most instances, a record of conviction (as opposed to an arrest) will serve as sufficient evidence to prove that an individual engaged in criminal conduct.”

Even so, a blanket policy of excluding all people with a criminal conviction probably violates the Fair Housing Act. The landlord with a policy of excluding applicants with a criminal history must be able to point to a “substantial, legitimate, nondiscriminatory interest” served by the policy. The landlord must also be able to prove that the policy achieves those goals. A housing policy must take into consideration the nature and severity of the crime, and the amount of time that has passed since the criminal conduct occurred Whether the discrimination is accidental or intentional, during screening or just at the inquiry stage, the landlord or property manager is still at risk of a discrimination lawsuit. The best practices are: • Do not impose blanket bans on renting to those with criminal history or arrest records.

• If there is evidence of a conviction, consider the nature and severity

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of the crime and how long ago the criminal conduct took place.

• Ensure everyone who interacts with applicants is trained well on current Fair Housing policies.

• Keep screening policies pertaining to arrest records and criminal history specifically related to safety of persons and property.

The policy must distinguish between criminal conduct that indicates a demonstrable risk to resident safety and property and criminal conduct that does not.

and court costs, so it is well worth the effort. If in doubt about a policy, contact your legal resource for help dealing with tricky questions related to this new HUD guidance and the Fair Housing Act. Evan L. Loeffler is the principal attorney at the Loeffler Law Group PLLC in Seattle, Washington. His firm’s practice emphasizes landlord-tenant relations. www.loefflerlawgroup.com

• Obtain and use a standard screening policy in compliance with Fair Housing and HUD regulations, and apply it equally to anyone who applies.

You may want to consult an attorney or housing specialist to develop a rental criteria relating to criminal conduct.

Keep in mind that HUD has not stated that criminals are a protected class.

HUD recognizes that housing providers have an interest in providing safe housing to all their tenants. These new guidelines do not require landlords to rent to convicted felons, but do require landlords to examine the criminal history (if any) of its applicants with more care than before. Naturally, there will be applicants who refuse to provide details about their criminal history or provide inaccurate information revealed by a screening company. An incomplete or inaccurate application may be denied.

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

Common Tenant Complaints and How to Handle Them

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eing a landlord inevitably includes dealing with tenant complaints. Managing those complaints promptly and effectively is essential for your relationships with the tenants, the security of your property and last but not least – for your landlord’s reputation. If you approach the problems in a professional manner, you are definitely going to lessen the chance of some legal issues as well.

Here are the 4 most common tenant complaints and a few useful tips on how to deal with them. Some of them can occur during the tenancy period, but others you can easily foresee and handle in advance.

The property is not clean enough Absolutely no tenant will be pleased by the thought that they will have to start cleaning the property from the

very second they move in. In fact, few people will be willing to rent a place where domestic cleaning hasn’t been done since forever. So it is a great idea for you to give your rental property a good cleaning before the new tenants come and avoid starting your relationship making the wrong impression.

In case you are not capable of taking proper care of the hygiene, maybe you should hire a professional cleaning company at least a week before the scheduled moving day. Make sure no stains and dust will greet your tenants as they go through the door.

Something does not work properly Appliances and facilities just stop working sometimes; it happens no matter that no one wants it. Test all domestic appliances in advance to prevent complaints from your new tenants. In

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case the same person has been renting your property for a certain period of time, make sure you respond immediately to their signal. A clogged sink or an oven which cannot heat may be or not be your tenant’s fault, but you have to handle the matter in both cases. Check the issue as quickly as you can and make an appointment with an expert if you are not capable of dealing with the problem by yourself. Warn the renter when to expect a plumber for example and pay for the service. You can figure out who is financially responsible after the specialist has done their job and things are under control again.

Pest complaints Regardless of how clean the tenant keeps your property, unfortunately pests can always invade it due to many reasons other than irregular cleaning.

If the adjacent apartments, for example, have been infested with mice or bugs, this can turn out to be a great problem.

As a decent landlord, you should react immediately to such complaints. The best thing you can do when it comes to pest control is to hire an exterminator to handle the pests in your property. It will be wise of you to schedule a second appointment after 7 – 10 days and thus ensure the safety of both your property and tenants.

Inoperative keys If you are not a first-time landlord, you should not at all be surprised by such a complaint from your tenants.

Keep an extra set of keys at your disposal for emergency situations. Should you find that the lock is hard to open, it would be wise to change it as soon as possible or you may have to change the whole door if somebody gets locked inside eventually. Buying an installing a new lock promptly will make things much easier for you and your tenants.

Do not forget to change the locks every time when a tenant ends your contract is an additional security measure.

Doing your best to help your tenants will always be appreciated, so do not hide when they complain about something. After all, renting a property is a kind of a job and you will have to do it well if you want to get your rent on time.

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Rental Housing Journal On-Site is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in Investing & Real Estate Investor Quarterly

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Rental Housing Journal On-Site

Window Film

How its proper use can help you make money

By Cliff Hockley, President, Bluestone & Hockley Real Estate Services

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t’s somewhat of a secret that window film has more than one application.

If used correctly and installed by a professional, window film can deliver huge savings to building owners, especially in warmer climates.

Over ten years ago we purchased a small office building to move our business into. We moved in March, and as spring transitioned into summer and the sun came out more often, our space started heating up. The air conditioning system (about 6 rooftop and ground based split units), could not handle the load and labored to cool down the building. The employees complained about the heat, and the high electric bill added insult to injury.

Installing new HVAC units would have been very expensive and the roof was not designed to support the additional weight. We looked for another answer and found one at the booth of a window film vendor during a vendor open house hosted by the Institute for Real Estate Management.

Their display was very simple. It consisted of a piece of glass with window film on one half of the glass. A heat lamp was positioned on one side of the glass and two thermometers were positioned on the other side, one parallel to

6

the clear glass and the other one next to the glass covered in the film. It became clear in a moment that the window film reduced the heat load significantly.

According to tests conducted by window film manufacturers, the film reduces heat loads from 25 to 85 percent.

(Results vary depending on manufac-

turer and type of film; research products carefully to identify the best film for your need.)

The location of the window film is also a factor. Installing film on windows that face east, south and west are typically more effective than on the shady north side of a building, and if

your building is already well shaded, window film may not help at all.

Of course window film can be used in residential (single family and multifamily) applications as well. Say you wanted to renovate an apartment comcontinued on page 22

Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

Increasing Your Property’s Bottom Line

by Tami Cox

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wning and managing multi-family properties has its challenges. Two of the most important - keeping residents happy so they keep paying rent (aka - your direct revenue stream and job security) and simultaneously pleasing the property owner (which almost always results in what shows up on the bottom line each month and at the end of the year). In this article, we won’t be covering resident relations, but will be focusing on shining in the owner’s eyes and increasing your property’s bottom line. Whether you work for the owner or are the owner, consider these tips to decreasing expenses and increasing revenue - resulting in a healthier NOI come year end.

Outside Services In the day in the life of property management, any number of things can go wrong! They can also go right. Smooth operations don’t necessarily equate to a profitable property. One of the key areas to look at is how much you are spending in outside services. This means your maintenance team, plumbers, electricians, groundskeepers, painters, carpet cleaners, and so forth. Having good quality people you can rely on and trust is important. But also, having those same people reliably deliver services

get stuck in long term contracts in the event something goes wrong and I’m not happy with either the service or the end price showing up on the bill. The larger the property (in units), the easier it is to slip on these expenses because gross revenue coming in looks good as a big round number. But when you start deducting everything coming in, it may not look so good any more.

at a price your current revenue stream can afford and support on an ongoing basis. I like to get at least three quotes for every project or service job I’m planning to give to someone. That way, you have a better chance of knowing what rates and pricing is competitive in the market for whatever service you need.

Now, if you lock in great pricing for your “go-to” people, and you work well

together - perfect! Keep it moving that way. But if performance is down and the cost is too steep, it may be time to start looking for someone new. By the time you add up all the labor, material costs, taxes to services rendered it’s possible to have bitten off more than you can chew! If so, dial it back and implement some immediate changes. I like to keep my options open, and not

Maximize Rents Collecting rent on time from every resident at your complex affects cash flow and is vital to the financial health of your property. But it’s not just collecting that rent and depositing it in the bank that counts. It’s how much you collect (along with your vacancy rate) that is significant. This is where we look at factors that can draw greater rents to a property that may be underperforming financially. So how can that be accomplished?

Part of it has to do with local market conditions and the time of year, we’d be foolish to say otherwise. But the other parts are having a unit that is desirable to live in in the first place, along with good old fashioned salesmanship - a warm personality and an on your game continued on page 18

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No-Smoking Policy ...continued from page 1

Eco-Friendly Upgrades ...continued from page 3

occur in Washington are caused by cigarettes when accounting for secondhand smoke. Almost all landlords surveyed know that breathing secondhand smoke is either somewhat or very harmful and nearly 94 percent cite protecting their employees’ and tenants’ health as a benefit to going smoke-free.

which uses approximately 84 percent less energy than incandescent bulbs and lasts 25 times longer. Install LED lighting in interior fi xtures, pathways, hallways and parking garages. Also consider decorative LED options for communal areas. LED technology is integrated in a variety of lightbulbs and fi xtures, allowing for an easy transition and customization for the property.

Invest in HVAC: Switch to high-efficiency, ENERGY STAR®-certified units and reduce air-conditioning energy usage by up to 50 percent. Maintain the longevity by cleaning the evaporator coils and drain channels to prevent potential clogging. These practices will reduce unnecessary wear and tear on the AC unit. Take extra steps to improve the air quality for residents by having maintenance change air filters regularly, at least every 1-3 months.

Smoke-free policies are comprehensive The smoke-free policies that landlords have adopted are quite comprehensive. Among landlords who have a no-smoking policy in place, more than nine in 10 report that their policy includes both tobacco and marijuana.

Furthermore, the majority cover all inside areas of their buildings—95 percent cover common indoor areas and 88 percent cover private units. More than 76 percent of policies include common outdoor areas like pools and playgrounds, and 65 percent include decks and porches.

Market demand for smoke-free housing is high—and free resources are available to support policy implementation While the percentage of landlords who have adopted a no-smoking policy is positive news, more than 400,000 renters in Washington are still potentially exposed to the harmful effects of secondhand smoke within their apartment building because their landlord hasn’t adopted a no-smoking policy. In Washington, the demand for smokefree housing comes from landlords and tenants alike. About 92 percent of all renters prefer smoke-free hous-

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ing, including 75 percent of people who smoke.

With a few simple steps, landlords and owners have a unique ability to help create happier and healthier apartment communities—all while improving their bottom line. Visit the link below for more information on how to implement a smoke-free policy. ht t p://w w w.doh.wa .gov/ Youa ndYourFamily/HealthyHome/SmokefreeHousing/Landlords There’s also evidence that no-smoking policies help tenants quit tobacco.

If your tenant is looking for information about free quit support, resources are available at www.quitline.com or by calling the Washington State Tobacco Quit Line (1-800-QUIT-NOW, 1-877-2NO-FUME in Spanish).

For more information, contact Frances Limtiaco, Washington State Department of Health, at Frances.Limtiaco@DOH.WA.GOV.

Conserve Water Tend to the bathroom: Reduce water usage by updating toilets, showerheads, faucets and additional bathroom accessories with WaterSense-labeled products, which are approximately 20 percent more efficient. Excessive water usage can be a sign of leaky plumbing, so inspect plumbing fi xtures for leaks annually to avoid water damage and potentially high out-of-pocket costs.

Update water heaters: Upgrade water heaters to newer units that are compliant with more energy efficient standards that went into effect in 2015 – some of which can have the output of a 50-gallon unit with the footprint of a 30-gallon unit. This is an excel-

lent option when hot water is needed and space is limited. Insulate the water heater with a blanket for extra savings.

Maintain the landscaping: Maintain a green space and reduce water usage with a low-water-use landscaping or xeriscaping plan. Mulch and drought-tolerant plants, such as coneflowers, daylilies or butterfly weeds, can help reduce and / or minimize excessive watering.

Adding decorative gravel and well-aerated soil will enhance a walkway or landscape bed, while also conserving water and adding nutrients to the green space. Improve water efficiency even further with smart irrigation technology. Smart controllers can reduce annual bills as much as 15 percent by watering plants only when necessary.

By Scott Matthews, Director, Strategic Accounts, The Home Depot

Scott is responsible for managing national accounts and e-commerce while overseeing business-to-business relationships. During his 25 years at The Home Depot, he has served in a variety of roles and capacities, including Regional Pro Sales Manager, District Manager and Store Manager.

Rental Housing Journal On-Site · April 2016

711 Powell Ave. SW, Suite 101 Renton, WA 98057 (425) 656-9077 • (425) 656-9087 (fax) admin@wmfha.org

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Executive Director - Jim Wiard Treasurer - Sheri Druckman

Board President - Brett Stevens Vice President - Becky Sanders Vice President of Suppliers Council - Rob Pendleton Immediate Past President - Kris Buker

Secretary – Laura McGuire

Grassroots Legislative Advocacy Update

he Washington Multi-Family Housing Association supports our members through formal and grassroots advocacy efforts. We are the eyes, ears and voice of the industry locally and at the federal level.

As an affi liate of the National Apartment Association, we have opportunities to become involved on various issues throughout the country. Policies emanating from both Washington, D.C. and our state capitol will play a key role in either assisting or hindering our industry from being able to continue to provide safe and decent housing to America’s workforce and to help create vibrant communities.

Together with NAA, WMFHA invests in political capital, or how well we, together, influence decision-making with the resources we use to advocate and encourage our state legislators, local elected officials, and Congress to address the long-term needs of the apartment industry.

WMFHA was heavily involved in this year’s state legislative regular session. The regular session was short; 60 days short. The Governor called a special session immediately after the end of the regular session, requiring legislators to hash out an agreement on a supplemental budget. They did so in about 20 days.

The supplemental budget includes a $125,000 line item to compensate landlords up to $5,000 for damages and/or unpaid rent caused by a former housing choice voucher tenant. To claim the compensation, a landlord must obtain a judgment in the county where the property is located.

During the regular session, legislators passed what is commonly referred to as the Omnibus Landlord Tenant Bill (Senate Bill 6413). The bill is the result of a compromise between landlords and tenant advocates after more than five years of stalled legislative action.

Most importantly, the bill provides an increase in time a landlord has to return a security deposit and accounting from 14 to 21 days. This substantially increases the time a landlord has to obtain vendors and repair any damage caused by the former resident before providing an itemized list of deductions and any remaining balance of the security deposit to the former tenant. This was a huge win for landlords across the state.

The bill also provides landlords the option of accepting a comprehensive reusable tenant screening report. Tenant advocates have previously floated similar legislation for at least the previous five years, each time proposing that acceptance of comprehensive reusable tenant screening reports be mandatory.

This new law makes acceptance of the comprehensive reusable tenant screening reports discretionary but does contain two mandatory provisions landlords must affirmatively take.

screening reports. The law already provides that prior to accepting any information about a prospective tenant, a landlord is required to notify prospective tenants what information may be accessed by the landlord, what criteria may result in denial of an application and what consumer reporting agency is used, in order for the prospective tenant to obtain a free copy of the consumer report. The law will now require landlords to include in the written screening criteria whether they accept a comprehensive reusable tenant screening report. There is a penalty associated with failing to identify whether a landlord accepts a comprehensive reusable tenant screening report.

2. Landlords must indicate on their property’s website home page whether they accept comprehensive reusable tenant screening reports. Just as any property’s website is required to include the Fair Housing logo, the home page of a property’s website must indicate whether they accept a reusable tenant screening report. WMFHA recommends the required language appear with or near the Fair Housing logo on each property’s home page.

Finally the bill provides a method for a tenant to limit dissemination of a prior unlawful detainer action upon a motion to a judge and a showing that an unlawful detainer action was not filed with good cause, including procedural and factual defects in the underlying cause of action. This bill was signed on March 29th by the Governor and will go into effect on June 9, 2016.

As the multifamily industry begins to digest recent Guidance published by the Dept. of Housing and Urban Development (HUD) pertaining to tenant screening and an individual’s prior conviction history, Seattle moves fullsteam ahead with its own legislation to limit a landlord’s use of criminal convictions in tenant screening.

It is yet to be determined what this proposed legislation will look like, but according to the City, the proposed legislation is on track to be presented to the City Council later this year.

HUD guidance abolishes blanket exclusions for individuals with a criminal record. This means that any policy that automatically denies a prospective tenant residency based on their prior criminal history could result in claim and finding of discrimination.

The HUD guidance also limits the use of arrest records (as opposed to conviction records) in any tenant screening process and implies that a denial on the basis of a prior arrest, without a conviction, may result in a finding of discrimination.

These new remarks by HUD in response to disparate impact theory 1. Landlords must indicate in their could have a devastating impact upon screening criteria whether they ac- the housing industry, as we contincept comprehensive reusable tenant ue to grapple with the need to protect Rental Housing Journal On-Site · April 2016

residents and staff and to provide safe housing for our many renters.

WMFHA staff and board members traveled to Washington D.C. last month to visit with our Members of Congress. During meetings with Senator Maria Cantwell, Sen. Cantwell expressed her passion to urge Congress to increase federal resources for affordable housing through expanded funding of the Low Income Housing Tax Credit (LIHTC) program.

Senator Cantwell called for a 50 percent expansion of the LIHTC and reforms to better target the lowest income populations with LIHTC projects.

Cantwell’s proposal would finance approximately 400,000 additional units of affordable housing nationwide over the next decade, with approximately 35,000 units in Washington State (roughly 4,200 more units than is possible under current levels of LIHTC financing).

Since its creation 30 years ago, the LIHTC has financed nearly 3 million homes across the United States, leveraging more than $100 billion in private investment. It has developed 75,400 affordable housing units in Washington State, and supports approximately 70,000 jobs each year in Washington State.

As more and more people move to Washington State to enjoy the economic diversity, outstanding lifestyle, good job opportunities and desirable climate, that increased demand for rental housing has created a supply-demand crunch that has lead to housing affordability concerns.

More development of housing of all types is needed to keep up with that demand. Public policies that discourage new development of housing are counterproductive and can add to the housing shortage.

WMFHA continues to assist and support public policy while representing the interests of our members and the residents we serve. We thank all of our members who provide guidance and their grassroots advocacy support.

For more information about the Washington Multi-Family Housing Association, our educational opportunities, networking events or legislative efforts, or to sign up for membership, go to www.wmfha.org or call us at 425656-9077.

9

Rental Housing Journal On-Site

Top Questions Regarding Music Licensing for Rental Properties

By Amanda Hyland

I

f you manage a property where music is played in a common area like a clubhouse, pool or fitness center, you need to be aware of copyright implications. As a copyright attorney, I have helped my property management clients comply with public broadcasting licensing requirements, which can be surprisingly complicated. Here are some of the most common questions and answers.

Q: What is copyright?

A: The Copyright Act gives artists, authors, composers and publishers the exclusive right to reproduce and publicly perform their work. A small business, including an apartment management company, that plays music using any type of device engages in a “public performance” under the terms of the Copyright Act. Therefore, unless the apartment complex is exempt, it needs permission to play the music. If work is reproduced or publicly performed without proper permission, the conduct may constitute copyright infringement and subject the infringer to damages.

Q: I got a letter from ASCAP. What is ASCAP? A: ASCAP, BMI and SESAC all are “Performing Rights Organizations,”

definition, a sound recording is performed publicly when played “at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” There are certainly arguments that common areas within an apartment community are not “public” for purposes of creating public performance liability. No court has ever published an opinion ruling on the question of whether community rooms, swimming pools or exercise areas are “public.” Pending resolution of these questions, most property managers choose to pay the PRO fees in order to avoid the risk of being sued and held liable for copyright infringement.

or “PROs,” that collect copyright royalty income on behalf of songwriters and music publishers when a song is publicly broadcast.

Q: I already subscribe to ASCAP, but now I got a letter from BMI? Aren’t we covered already?

A: Most songwriters are members of one of the three PROs. Accordingly, a subscription to one PRO provides a license to some, but not all, of the music

that would be played on a radio. If you need one subscription, it’s likely you need all three.

Q: Is our clubhouse really “public?” Aren’t these private areas not subject to public performance requirements?

A: The copyright laws give copyright owners the right to control public (but not private) performances of copyrighted material. According to the statutory

Q: Do I need to worry about these issues if we exclusively use Pandora at our pool and in our gym? We never use the radio.

A: Pandora has partnered with Mood Media to provide rights to Pandora music such that the business owner does not need to separately obtain PRO rights. If you obtain a license from Mood Media, you should not need a separate license from a PRO for Pandora music. continued on page 21

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

T

Are You Investing in Real Estate to Go Green or to Make Green?

here are countless ways to make your rental properties more energy efficient. High efficiency appliances, high efficiency heating and cooling systems, solar, the list goes on and on. Most of you probably did not purchase investment real estate with the intent of saving the planet. One big question that you need to ask yourself when making your property greener is “How is this going to make me more green ($)?” Any money that is spent improving your property should increase the overall value or lower your monthly expenses or both.

Are you looking to increase the value of your property? According to a reputable local appraiser there are very few green upgrades that will increase the value of the property itself. “Vinyl windows may be one of the best upgrades you can make,” said the appraiser “tenants like them because it saves money on heating. Plus it will add to the appraised value.” I asked her to what level solar panels, tankless water heaters, and high efficiency furnaces add to the value of real estate. Her answer was “none”. Every buyer expects appliances, furnaces, and water heaters to be in working order. It does not matter if they are high efficiency as long as they work.

Appliances and heating/cooling systems may not add value to your property at sale but may add value to your bottom line. The potential savings on owner paid utilities such as gas, electric, and water/sewer might make some “green” upgrades worth the investment.

As a landlord you should consider investing in upgrades that either make or save you money. If you are paying the utility bill for units being heated during Oregon winters, putting in a high efficiency furnace might be a good long term investment for you. If you do not pay for the utilities, you will be spending money on upgrades that will only save tenants’ money unless you plan on passing that expense on to the tenant in the form of a rent increase or utility bill back.

Most small plexes are not separately metered for water and sewer and the owner is likely responsible for the water/sewer bill. If that is the case making small changes like low flow toilets, low flow shower heads, and low flow faucet aerators could save you a substantial amount of expense on your water bill over time. Another consideration is low maintenance landscaping. Grass may look good but does come with added upkeep. Look at your annual landscape expense for the last few years. You may find that lower maintenance landscaping which consists of native plants, shrubs, and trees will save you money over time.

Think about your short and long term financial goals and ask yourself if making “green” improvements to your properties is putting more “green” into your pocket.

Chris is Small Plex Broker at SMI Commercial Real Estate, LLC . Please contact Chris if you would be interested in receiving SMI’s free bi-annual newsletter which includes the most comprehensive rent and vacancy survey in the mid-valley, the SMI Apartment Update.

503.390.6060. Chris@smicre.com

Rental Housing Journal On-Site · April 2016

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Rental Housing Journal On-Site

Market Off to Good Start ...continued from page 1 a year ago.

King has a vacancy rate of 4.23% and Snohomish County a 4.13% rate. King County can take sole credit for the overall vacancy rate decrease, since the rate in Snohomish actually increased a tenth of a percent. The overall vacancy rate which includes properties in leaseup fell from 6.83% last quarter to 6.34%.

Four submarkets are just under 3%.

These include Des Moines, North King County, Tukwila, and the area north and east of Everett.

On the high side, Seattle’s U. District popped up to 6%. This is due to one property with half the units undergoing a major renovation. Four submarkets are in the five percent range. These are Bellevue East, Eastside South, Downtown Seattle and South Lake Union.

Incentives Rental incentives dropped $3 this quarter to $12 per month. In the two-county area 19% of the properties are offering incentives, down from 20% last quarter.

Absorption: +1,792 Overall, there were +1,792 units absorbed this quarter, up from +1,614 units in the fourth quarter. A surprising number were in the Seattle First Hill submarket, which absorbed 476 units.

Rents: $1,485 per Unit $1.78 per Square Foot Rents climbed $25 to $1,485 per month and $1.78 a square foot, an increase of 1.7% over the last quarter.

Over the past 12 months rents increased 10.7%.

Last quarter we pointed out that

rents dropped an average of $59 per unit in four out of the five most expensive submarkets, indicating price resistance. Overall rents increased $9 in the fourth quarter. These submarkets are the downtowns of Seattle and Bellevue, Seattle Belltown and Sammamish-Issaquah. All but Belltown saw an increase this quarter, but rents in all of these submarkets are still below the level of six months ago.

Rents in the Seattle U. District submarket showed the greatest increase.

But this must be discounted because a large newer property with high rents moved from lease-up to stabilized status, and skewed the results upward.

Rent levels accelerated in the Eastside North and Eastside South submarkets.

Located on either side of Bellevue, rents here increased 5% and 6.1%, respectively.

New Construction There are currently 21,633 units under construction, about the same as last quarter. It’s 2,100 units more than a year ago. Fift y-eight percent of these are in the city of Seattle, 24% on the Eastside, 11% in South King, and 7% in Snohomish County.

There are 13,140 units that have either been built or are under construction for completion in 2016. On the surface it looks like it could be the record-breaking year we expected for 2015 which didn’t happen. But with the construction delays we have been seeing, it’s certainly not a sure thing.

Featured in the photo, the 219-unit Reserve at Renton opened this quarter. It is managed by Indigo Real Es-

tate Services.

We have preliminary information for the next two years. We are tracking 12,337 units that are scheduled for a 2017 completion. For 2018 the number is 4,182 units.

The grand total for all of the units in various stages of the pipeline is 60,717, slightly less than last quarter, but up from 53,790 a year ago.

Observations First quarter results indicate that 2016 will be another strong year. Rents are up 1.7% and the vacancy rate dropped to 4.21%.

It seems certain that the number of new units that will actually be completed this year will exceed last year’s 9,000 units. This will take some of the pressure off rent increases. But as we saw last year, our vibrant growth enabled the rental market to flourish despite the competition from all these additional units.

We found an interesting statistic that speaks to Seattle’s growth potential this year from job search site, Simply Hired.

It found the number of job openings in the greater Seattle area increased 3.85% month-over-month in February, making it the second-hottest job market in the country.

Another set of February statistics about the single-family market bode well for the apartment industry. These are from a Seattle Times analysis of data from the Northwest Multiple Listing Service. The gauge of supply hit its lowest level since at least 2003. King and Snohomish each had less than a month’s supply in February.

This tight supply among other factors caused home prices in the city of Seattle to surge 24% to $644,950 in the past year. Seattle condo prices leaped 33.4%.

Home prices rose 19.8% in King and 8.8% in Snohomish County.

In past cycles of rapid rental growth, the lure of home ownership caused tenants to leave the rental market. This would tend to lessen the demand for apartments. The current environment of high home prices and low inventory will keep more pressure on rents.

Last quarter we expressed concern about where the market might be headed in light of a surprising decrease of rents in the high-priced submarkets. In light of what has happened this quarter, our concern has been assuaged.

For decades Tom Cain has supported a variety of industry organizations and events with his data and expertise as a foremost expert in the apartment industry. His company surveys the five counties in Central and South Puget Sound.

This article highlights survey results that subscribers can access from an online database of all 50u+ properties.

Apartment Insights also provides customized rent reports and market reports. www.apartmentinsightswa.com 206-632-2220

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

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Rental Housing Journal On-Site

How Wireless Security is Transforming the Real Estate Industry

T

he real estate industry has long been faced with a problem: “You can’t be everywhere at once.” It feels impossible to monitor your property and staff, without forgoing your other tasks. But now, with new wireless technology there is finally a solution. A professionally monitored wireless security system gives real estate professionals essential insights into their units.

More and more real estate professionals are using wireless alarm systems, to protect vacant homes, keep an eye on their staff, prevent water damage and provide extra value to their tenants.

Keep an Eye on Vacant Properties: When you’re not around, what’s happening to your properties? You hope that the answer is “Nothing”, but you worry. What if someone has broken into your home? Between squatters and copper thieves, there are many reasons to be concerned. Copper theft can cause tens of thousands of dollars in damage.

In the old days, a wired security system was the only option, but the contract and need for a landline phone usually made this a non-starter for a vacant property. With a professionally monitored wireless security system at the property, you can keep this worry at bay. When your property is monitored, if you ever have a break-in, the police

14

will be on their way immediately. The siren will sound, and the would-be-burglars won’t have time to steal from you.

And when you’re selling the property, a security system is an easy way of letting realtors in and out. You can set up a specific PIN for them, and you’ll be able to see when they come, and how long they stay! With a home security system, you’ll know that the property is

protected by more than just a lock box and a lock.

Know when your maintenance staff comes and goes: With an alarm system, you can create custom PINs that will let you know when contractors enter and exit. Many of the property managers we spoke with told us that they use this feature to

make sure work that needs to get done gets done. Know who has come and gone from what apartment or home easily. You can make sure that your maintenance needs are addressed, that your staff is doing its diligence, and just in case, you have a record of it all! continued on page 20

Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

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Rental Housing Journal On-Site

SK THE SECRET SHOPPER Children & Pets M

any apartment communities strive to create a welcoming office environment in order to put prospective residents at ease.

From aromatic scents and freshly baked cookies to a warm fire, these comforts communicate a feeling of “home.” However, when managers have an office connected to their apartment or even inside their apartment home, sometimes the lines between the professional office and an employee’s personal space can blur.

Q

I supervise several apartment buildings in which many of my managers work out of an office attached to or inside their apartment. Some of these employees have young children and pets.

Often when I call these properties, I hear a dog barking or a child crying, and not always in the background. Sometimes I am even put on hold while the manager deals with an urgent child-related matter. I am concerned about these situations and how they are affecting residents and prospective renters. However, I’m not quite sure how to deal with this issue since these managers have a personal residence attached to or combined with their office.

A

You have a valid concern and it needs to be addressed. Yet, much respect and consideration are required when dealing with people regarding their pets and children. - ESPECIALLY their children! However, your employees must be made to understand you have certain expectations regarding office protocol during business hours. If your employees are regularly allowing their children or pets to be in the leasing office during these hours, then this is a disruption to the leasing process and an inconvenience to your residents or prospective renters.

Regarding pets, this could end up becoming a liability for your company, community and/or owner. Many peo-

ple have pet allergies and/or phobias.

When someone is looking for an apartment, they do not expect to enter a leasing office; which is a “place of business,” and find themselves confronted by a dog. They also aren’t thinking they have to be prepared with a medication to counteract their body’s response to an extreme cat allergy. They are expecting a professional business setting where they plan to get information about renting an apartment.

As with any other office policy or procedure, something in writing regarding these issues will help your employees know what the expectations are. It might seem like “common sense” to you for your managers to keep their personal lives separate from their pro-

fessional lives. On the other hand, when people “live where they work,” it’s not always easy to keep the lines clearly defined; these managers have an obligation to their families as well as to their residents and employer.

No matter what type of situation you are dealing with on site, it’s important to keep the lines of communication open.

This will ensure the onsite managers understand your expectations and help reassure them you are committed to providing the support they need. That way, they can handle their responsibilities at work, as well as at home, and put appropriate distance between the two.

After all, employee turnover can have an even greater impact on the dynamics of your community and bottom line, than apartment turnover.

If you are interested in leasing training or have a question or concern you would like to see addressed, please reach out to me via e-mail. Otherwise, please contact Jancyn for your employee evaluation needs: www.jancyn.com ASK THE SECRET SHOPPER Provided by: Joyce (Kirby) Bica Former owner of Shoptalk Service Evaluations Consultant to Jancyn Evaluation Shops E-mail: shptalk2@gmail.com Copyright © Joyce (Kirby) Bica

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

DEAR MAINTENANCE MEN Maintenance Tools & City Inspections

By Jerry L’Ecuyer & Frank Alvarez Stucco & wood siding is especially susceptible to damage when using a power washer. Use the lowest setting and wide spray nozzle to avoid damage.

Lightly mist stucco surfaces if cleaning is your objective. Keep nozzle adjusted to spray not stream and approx. 2’ to 3’ away from the surface.

As with most things, proper training will help insure safe usage of power tools.

Dear Maintenance Men: I am going to university and want to use my DYI skills to supplement my income. Being that I live in a college town, there are a lot of rentals aimed at students. Since students are sometimes hard on their living quarters and move a lot, I figured there might be a maintenance market for repairs and making rooms and rental units rent ready. I don’t have a lot of money to invest in tools and want your recommendation for the minimum I might need tool wise to get started?

Bryan Dear Bryan: Good thinking Bryan, you might just be on to something; students can be a bit hard on rental units! Keeping in mind that as a college student yourself, you have limited funds, so other than a cordless drill, we will leave power tools out of the picture. The majority of the repairs will involve drywall, plumbing and cleaning. Other than light bulbs, leave the electrical to the pros.

Basic Tools • Retractable utility knife • 5 in 1 paint scraper • Drywall saw • Drywall mud and tape • Bucket • Hacksaw • Claw hammer • Tape measure 25’ • Caulking gun • 6 way screwdriver • Adjustable wrench • Channelock tongue & groove pliers • Small hand snake for bathroom sinks.

• Toilet plunger • Broom and dust pan • Gloves • Flashlight • Safety glasses • Step stool • Cordless drill/screwdriver This is a limited tool set used for light duty work. Try to buy quality tool. Many can be found at garage sales for a fraction of the retail price. With these tools, you will be able to change a faucet, repair drywall holes, unclog bath sink drains, caulk bathtubs, haul trash etc.

Dear Maintenance Men, I am planning major remodel work to my 4plex and need some advice. My contractor has told me not to worry and he will have everything under control but I know that city inspections can cause serious delays if we are not ready for them or do something wrong. I am not an expert or experienced in construction, what should I watch for as far as the actual inspections are concerned?

Bob-

Bob, It is not often we are able to share our experience on the actual General Contracting and building side of our business so, thank you for your question.

We have listed the top reasons why professionals do not pass inspections taken from a 2015 JLC (Journal of Light Construction) survey.

Foundation: Improper reinforcement or support of rebar Wall Framing: missing fire-blocks, hold down straps etc.

Floor framing: missing anchor bolts, sheeting nails missing joist.

A rental yard will often use the best and longest lasting machines. Most times these companies can provide you with the best information on the products in regards to maintenance, wear & tear, life expectancy and performance.

In regards to workers safety, look at the operators manual for the best advice on personnel safety wear and use.

These machines can produce a very powerful jet of water capable of ripping through clothing, skin and even break small bones. You should always wear goggles, leather gloves, and steel toe leather work boots with nonskid soles.

Bio: Please call: Buffalo Maintenance, Inc for maintenance work or consultation.

JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company www.BuffaloMaintenance.com www.ContactJLE.com www.Facebook.com/BuffaloMaintenance

Trusses: bracing not installed, improperly connected to wall plate Roofing: over driving of nails in shingles, missing nails, incorrect felt Window and Door: improper flashing, inadequate fire rating, improper weather stripping Handrail: Improper height or spacing Plumbing: missing nail plates, improper pipe support Electrical: missing grounds, GFCI protection, labeling of circuits Decks: deck not built according to the plans, improper handrail installation

Dear Maintenance Men: I have been contemplating the purchase of a high pressure sprayer for my employees to use in maintaining and cleaning around my apartment buildings. Because these pressure washers produce a powerful stream of water, I am worried about my employees hurting themselves or damaging the building.

What size machine do you recommend and how safe are they to use? Should I rent one first?

Julia Dear Julia: As with any large ticket items it is always prudent to “try before you buy”.

Fortunately there are a variety of rental places to choose from which carry all sizes, makes and models.

Rental Housing Journal On-Site · April 2016

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Rental Housing Journal On-Site

Increasing Your Property’s Bottom Line ...continued from page 7 professional approach that nails it when it comes to leasing.

First, the unit itself. It’s not just about doing a turn, where a little paint and cleaning are enough anymore. If you have an established property, chances are pretty great you’re competing in your local market with brand new developments that have a “newness” you don’t. Residents like shiny and clean and smelling good and new, in addition to everyday function, location, amenities.

Amenities actually have far less impact that they used to. Residents care about them, but not as much as they do about the unit they live in and call “home”. Let me ask you, what are you doing to make it feel like home to a prospect? Their home, not yours. Go shopping. Buy some simple staging items to spruce up the kitchen counter. Get a plant, a place at, some candies, make it look like an inviting presence which you then leave behind as a house warming gift. Put your sign in sheet next to it with your business cards. But the core of the unit has to “sing” rent me! Is it spotlessly clean? Did you replace anything old and worn out? Spend the money and upgrade all the appliances to stainless steel. Mist resident prefer the stainless.

White can be okay, but still look dated.

Black, makes the room look small and closed off. Go the extra mile and get an interior designer in to help you spec out the unit turn with the goal of maximizing rents with a new lease. Don’t lock in a one year lease that’s going to end at a time of year undesirable for leasing.

Be open to adjusting the lease term to say 7 months, or 10 months. Whatev-

18

er works so you expire at peak leasing times. The exterior has to be impeccable as well. Always have your cleaning crew on top of every detail when you’re about to lease a vacant unit. It matters. These are just a few of the things you can do aesthetically to improve your units in such a way as to draw bigger rents.

Then there is salesmanship. Who you put to the task of making that first impression and communicating with prospective new residents will either advance you or kill you! The longer a unit sits vacant because it doesn’t get leased is money out the door and off your bottom line. Find great people (or a great person) to do your leasing and reward them generously for doing so. This keeps motivation high and keeps your property showing green! Don’t assume the best person for the job is the property manager. Not always true. It could be one individual you know who has a talent for such work and all they do for you is lease. It doesn’t have to be that way. I’m just saying that who you choose

for this particular role in the operations and management of your property is absolutely key!!! A good “sales person” can convert features to benefits in ways that are received well during a showing.

I like to say, if the deposit is getting collected and the lease inked on the first visit - you’ve got a strong closer. Getting them approved and issuing keys as well for immediate move in is icing on an already sweet cake. A rock star leaser can do that. Find that person! They are one of your property’s most valuable assets. A person with good salesmanship abilities can also drive rent rates up a notch, and every dollar counts on you year-end statement. Completely affects your overall property value. My suggestion - when you find that person, bonus them well. Give them that “carrot’!

A well prepared unit along with an exceptional leasing professional will directly impact your bottom line.

Organization and Due Diligence This last point I’m going to mention

has everything to do with organizational skills, keeping the property books in order, knowing where to find things, staying on top of the numbers and how your property is actually performing month to month. Don’t wait until the end of the year or tax time to get your ducks in a row and see how it all turns out. Can you spell disaster? No, someone should be assigned the task as scrutinizing the income and the expenses each month, and looking at what can be changed or adjusted for maximum productivity and profit. If you don’t know your numbers, or if they aren’t accurate - how can you manage your property effectively and make money?

Are you using the right software program to help you with this? How long has it been since you even looked at new software options out there (with so many talented computer geeks coming up with amazing programs!) that could be better for your property manage to and portfolio tracking tasks. Or are you continued on page 20

Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

Crowdfunding and Peer2Peer Lending For Real Estate Investors The Disruptors We Want!

I

f real estate investors weren’t choosing crowdfunding and Peer-2-Peer lending over the alternatives of Wall Street and Big Banks this article would end right here. But it doesn’t. Crowdfunding and Peer2Peer lending are the future of the independent real estate industry for one very simple reason that Wall Street and Big Banks cannot fathom. It’s what people want.

Here’s a quaint idea that I believed as a freshly minted college graduate, and that some companies like Google or Uber deliver on a massive scale.

The customer is King. Another way of looking at it is if people are flocking to the competition, then that means they don’t like what you have to offer in comparison to your offering. Beyond obvious, yes?

This then begs the question, “What do people want”? When it comes to investing it’s been assumed for decades that people only want higher, safer returns and that’s it. For a while there, it was assumed to be irrelevant how these higher, safer returns are delivered, nor was anyone really asking “Is that really what we’re getting”? It’s when we begin to question this system that the bankers and Wall Street scratch their heads and

stare at us as if we’re crazy, laugh, and walk off; they cannot comprehend why we’d be saying something like that.

This was brought home to me in an experience I had taking the ridesharing

company, Lyft. I wanted to test it to see what all the ruckus was about and when I did, it changed my life forever. I had never had been offered, nor taken anything more than, a ride home in a taxi

cab. I assume this was another taxi cab.

It wasn’t. It was a ride home, at 1/3rd off in a clean, well-maintained minivan continued on page 23

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Rental Housing Journal On-Site

Wireless Security ...continued from page 14

Increasing Your Property’s ...continued from page 18

still on a dinosaur system, because it’s just what you’ve used for years? That dinosaur could be costing you money!

Then there is the person who is actually putting the numbers in. Is it getting done regularly, on schedule, and is it accurate? Or are things falling through the cracks? Again, good people are an asset to you. Value and appreciate them. Train them. Create a positive work environment that makes them want to dig into those numbers and crunch them for you! Lunch now and then, Starbucks, cookies, a gift card of appreciation. I see this people side of your business (because your property is your business) as due diligence. Things you need to do to arrive at a specific outcome. That outcome is profitability. We’re all about the bottom line, but what are you doing to improve it?

Taking these things into consideration for each of your properties will become like second nature once you get the system in place. Whether you win one property it multiples, it’s your system that you must improve to create assets that perform well. There are many

other factors I could elaborate on, but these are some of the basics that I hope will give you a fresh perspective and jump start to putting a finer pencil to that operating statement. The one that can get you more money to buy the next property, when you need it. Because you will have proven you know how to not just repay debt service, but take a multi-family property and improve its performance over time with your top rated management skills. Investors and partners will love you, and so will your bank account!

Tami Cox is a Business Consultant and Commercial Real Estate Lender that has been working with investors and business owners for over 16 years - helping them become more profitable, grow, reach their business goals, and improve their bottom line. You can learn more about her services at www.sizzlinghotbusiness.com or reach her by phone at 952-4910030.

If you and your renters agree, you can also set up a specific maintenance PIN. The maintenance PIN can be added for all units and will not be able to be seen by the tenants. Consequently, you can use the same number for each property, without security risk, by adding a maintenance PIN.

water can cause $11,000 or more worth of damage. Water damage is expensive and time consuming to repair, but water sensors let you know as soon as they detect even a small amount of water.

This way you can prevent any damage from happening and move on with your day.

Stay on top of your pipes and plumbing: New wireless security systems, let you monitor the environment in your properties. Worried about freezing pipes? No need with a freeze sensor.

You’ll be able to access the temperature at the property remotely, you never need to stress, or get in your car and drive down to check the property out.

Assurance at your fingertips.

And it’s not just the freezing pipes that a security system helps you combat. Never worry about whether or not the pipes burst, or if a washing machine is leaking. To the average apartment,

Provide Extra Value to Tenants: With wireless security systems, once you buy your system, they belong to you. Therefore, you can do anything you’d like with them. This includes providing systems to your tenants. It’s easy to transfer ownership. Alternatively, many property owners and landlords rent the security system as part of the apartment. You can either have the tenant subscribe to the monitoring service, or you can take care of this for them! Your tenants will love the extra security that comes with your homes!

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Rental Housing Journal On-Site · April 2016

Rental Housing Journal On-Site

Music Licensing for Rental Properties ...continued from page 10

Q: What about Spotify? Or Apple music?

A: If you have not negotiated a license specifically for business use of the music, such as through Mood Media, you probably need a license. In fact, some exemptions that pertain to radio transmissions do not apply to streaming music. Any public performance of music by using streaming services requires a license.

Q: I heard that there are certain exemptions for businesses that only play the radio. If I only play the radio, do I need to pay any PROs? A: If you are playing music from the radio, including satellite radio like SiriusXM, your property might fall into an

exemption. As noted earlier, streaming music does not provide any exceptions.

Q: How do I know if I fall into the radio performance exemption?

A: Congress exempted certain types of businesses from compliance with the copyright laws, so long as certain conditions are met. Areas less than 2,000 square feet are exempt. Areas larger than that are exempt if ALL of these requirements are met: (1) No TV is larger than 55 inches, (2) there is no more than one TV in any room, (3) no more than four televisions are in the establishment, (4) no more than six speakers are in the establishment and (5) no more than four speakers are in any room.

Q: I’ve decided to pay ASCAP the licensing fee. How do I know if I’m getting a fair deal? Can I negotiate with the representative for a lower rate?

A: Apartment complexes are charges fees based on the number of units in the community. These rates are set by the courts and are the same for everyone.

For example, for 2016 ASCAP charges $351 annually to provide a license for a community with less than 150 units, and $421 to provide a license for a community with 151 to 500 units. Discounts are typically offered to property managers who enter into licenses for multiple communities.

Q: I received a letter from BMI demanding that I pay fees. Can I ignore it?

A: Yes, but you are putting your company at risk of getting sued for copyright infringement. Although it is not necessarily likely that a lawsuit would occur, it would expose the infringer to significant risk. The law allows the copyright owners to sue for statutory damages in a range between $750 and $30,000 per individual copyrighted work infringed, i.e., for each song played. The liability to the property management company will be much greater in court than the licensing fees the PRO requested.

I have helped clients with other challenging questions as well. For example, some property owners are concerned about fee calculation on properties with high vacancy rates. Other owners are concerned about public areas that are not used. Another interesting question is what to do when the cardio equipment in the gym features individual televisions. Do these count towards the four televisions? These are all tricky questions without black and white answers. Consult an attorney before entering into a licensing agreement or deciding that no agreement is necessary.

Amanda Hyland is an attorney with Taylor English Duma LLP in Atlanta. She counsels clients on a variety of intellectual property matters, including trademark registrations. She may be reached at ahyland@ taylorenglish.com.

Efficiency is easy Puget Sound Energy’s Multifamily Retrofit program can save you time, energy and money. Get started today.

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pse.com/multifamilyretrofit Rental Housing Journal On-Site · April 2016

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Rental Housing Journal On-Site

Window Film ...continued from page 6 the film and replace it rather than installing a new window.

The film offers the added benefits of heat load protection (these windows are on the south side), and privacy.

The window film is dark and reflective which makes it difficult to look into the space, (preventing a thief from “casing the joint” by looking through the windows.)

plex in Phoenix and the windows are 25 years old. Rather than buy new windows, you can use window film and market the advantage of lower electrical bills to potential tenants. Owners of residential buildings in hot climates are responsible for maintaining the air conditioning units, so reducing the solar heat load with window film makes a lot of sense since it relieves stress on air conditioners.

Secondary benefits of window film Although reducing a building’s solar heat intake is the primary purpose of window film, it has other advantages as well. It relieves the stress and resulting wear and tear on the cooling unit, and reduces the need for individual fans, saving energy and money. Most of these films also almost completely (up to 99

percent) reject UV rays, extending the lifetime of carpeting and furniture in addition to mitigating the harmful effects UV rays on people. As the technology as developed, many film manufacturers have marketed other dual benefits their product.

Security and windstorms: The 3M company has developed a film series that will work effectively in wind storms of up to 185 miles per hour and will resist breaking and entering, if installed by an experienced and certified installer. This micro layered technology is typically blast and tear resistant (see their website for examples).

Anti Graffiti / Surface Protection Series: 3M also offers products that are graffiti and scratch resistant. They can be either 4 or 6 millimeters thick and offer protection from taggers in high

risk areas by using an invisible sacrificial layer to protect glass from acid etchings, scratches and tagging. This layer can also protect window surfaces from regular wear and tear.

This product solved a recurring tagging problem we had at a commercial building we manage in a high risk area.

Vagrants had repeatedly defaced the windows using keys and other materials. We replaced the windows twice before discovering this window film.

That was eight years ago. The surface is scratch resistant and has held up well.

Though there is evidence of attempts of attacks to the surface since the installation, the perpetrators eventually became frustrated by the lack of results that they stopped attacking the building altogether. If, perchance, they have some success, we can always strip off

Saving you money In select situations, window film can be used to reduce heat load, the stress on HVAC systems, electrical bills, glare and crime. It also distributes light better in some applications. As you troubleshoot operational problems and/or attempt to reduce energy needs, consider the use of window films as an economical alternative to window or cooling unit replacements.

Note: There are any more uses of window films. In a future article we will address how window films can be used decoratively or to increase privacy in the interior of buildings with glass walls.

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Rental Housing Journal On-Site · April 2016 7/23/15 1:28 PM

Rental Housing Journal On-Site

Crowdfunding and Peer2Peer Lending ...continued from page 19 we must change. We must deliver more of what people want. Much like Lyft has done with the rideshare industry, real estate borrowers and lenders are turning to Crowdfunding and Peer-2-Peer lending to deliver more of what people want. Does the current establishment understand and welcome it with open arms? Of course not. Wildly disruptive? Yes. A threat? Yes... to the old existing order and an exciting alternative for the end users. We, who can stand a little of the uncertainty that comes with the end of one age and the beginning of another are looking at an amazing opportunity.

By Scott Whaley, President REIFA

with a dental hygienist young mother of two named Denise. We chatted. I learned about her and this new way of earning extra money for raising her kids and taking care of the family a few hours at a time. In that one ride my satisfaction level with Yellow Cabs service dropped about 95% and I haven’t taken another cab ride since.

The thing is, it was more than a cab ride. It was not simply the one way delivery of a service to a customer. It was two-way. It was an interaction that made me feel like something more than “fare”. It was a ride home with another human being, who was willing to treat me as if I were a friend; we were both there to help one another, not just give to take. On top of that, the differences like speed of delivery and the personal knowledge I gained from her profile

provided me with a connection that was unprecedented in the “cab ride” scenario. I knew more about her as a person than I will ever know about any of the previous cab drivers I never knew nor will remember.

When people became aware of Uber they compared that to Yellow Cab. Yellow Cab declared bankruptcy in San Francisco two months ago. Why? Not because they are bad at what they do.

They went bankrupt because the new way of getting rides made the old way totally unacceptable, unpleasant and costly. I believe this is what we are experiencing in the real estate investing and funding industry.

Crowdfunding and Peer-2-Peer lending give people more of what they want.

They want to be treated with respect.

They want to be connected. They want

the freedom to choose. They want to be knowledgeable. Intelligent. In charge.

For this reason, people are rejecting being treated as if: all they care about is money, that they are helpless creatures, that they are devoid of the capacity to learn and that they lack sound judgement. That’s what the current model is telling us.

Technology has opened up avenues of connection and options of communicating never before dreamed of. It is massively disruptive to established, commonly accepted beliefs, systems and structures that never contemplated the possibility of the level and depth of interaction and communication available to each and every one of us at almost zero cost!

The technology revolution has already dictated that to stay competitive

Discover all of the new technologies, strategies and ways of investing and getting funding with this new business model that has been sweeping through all industries. Now, it’s our turn. Check out REIFA and #REIFACON at www.reifacon.com or www.reifa.org.

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