Mike Moon got quite the shock when he found out what his tenants were really doing in his rental property.
In late April, more than 300 law enforcement officers — from around 10 federal agencies — zeroed in on Moon’s property in the wee hours of the morning.
During the raid, officers seized cocaine, pink cocaine and meth. They also detained over 100 people and arrested two people on existing warrants.
DEA Special Agent in Charge Jonathan Pullen told reporters at Denver7 that many of the folks they detained will face federal immigration charges. The Drug Enforcement Administration claims the property was being used as a nightclub illegally. Additionally, it is now linked to gang activity, drug trafficking, violence and prostitution.
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What was the landlord’s reaction?
“They were supposed to be out of here by the end of this month,” Moon told reporters. He also expressed shock and said he feels dumbfounded after learning what his former tenants did on the property.
Moon said that the contract on the lease specified that the space was to be used for events like weddings, quinceaneras and birthdays. The lease has strict terms, and tenants weren’t allowed to serve alcohol on the property.
Additionally, the lease was about to expire, and Moon said that he had been planning a renovation conversion project for the past 18 months.
When asked about the fact that tenants let this activity take place, Moon told reporters that he was shocked considering “the political environment and all the news that’s happening around the country that they thought that this was even a wise idea to do something illegal like this.”
What rights do landlords have when tenants misuse the property?
Landlords have legal protections in Colorado, as tenants do.
According to state statutes, tenants need to adhere to any lease agreements set by the landlord, assuming it doesn’t break any type of fair housing laws.
For example, if a tenant “commits a material violation of the rental agreement,” the landlord has the right to evict them. In Moon’s case, the tenants used the property for illegal purposes. Plus, they didn’t adhere to what the property is to be used for as an event space.
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In this case, the landlord will most likely need to provide evidence that the tenant is violating the lease agreement. The law stipulates the landlord must give a “Demand for Compliance or Right to Possession” notice in writing and state a certain timeframe in which to fix the lease violation or to vacate, usually within three business days.
However, there are cases where landlords can exercise the “no fault” law (as opposed to “for cause”), where they can evict a tenant simply by not renewing the lease. Moon, for example, told the tenants he’s taking back the property to convert it for other means.
Since the tenants were using the property for illegal activity, Moon may also have a right to evict them or call local authorities.
How can landlords protect themselves?
Experts often tell us owning rental properties that cash flow are a sound investment. But this assumes the tenants hold up their end of the agreement, and aren’t a nightmare to manage.
The best way to protect yourself as a landlord is to be proactive — in other words, before taking on a new tenant.
When putting up your rental property, screen tenants judiciously and go on more than simple “gut instinct”.
Review tenant applications carefully and ask for information such as their business license and registration (in the event of renting a property for commercial purposes). Interview the applicants in-person, request references, and background checks. You can also get business credit reports and look at past business tax returns to see if they’re able to pay rent. Even if all these pieces are in place, it doesn’t mean it’s an automatic green light.
Working with a real estate or business attorney may be worth the investment when it comes to drafting a lease agreement so you’re well-protected in the event you need to evict your tenants.
These professionals can help you be clear in your expectations for your tenants, including having them agree to periodic inspections. A well-drafted lease agreement can also protect you and ensure you understand what your responsibilities are as a landlord.
Spotting red flags and communicating with the tenant efficiently can help to mitigate any bigger problems down the road. Some of these could include if a tenant is too aggressive in their negotiations, or being vague about the intended use of the property. If any of this sounds like simply too much to manage, you may want to consider investing in rental properties without the responsibility of being a landlord.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
