Editorial: The Financial Strain of Too Much Regulation

Editorial: The Financial Strain of Too Much Regulation

Los Angeles Boasts the Most Challenging Regulatory Environment for Housing Providers

 By Kari Negri, Chief Executive Officer, SKY Properties

Los Angeles is widely regarded as one of the most challenging cities in which to own multifamily property, due to high operating costs, limits on rent increases, and rising property taxes, among other factors. Property owners and managers are increasingly burdened by a growing number of regulations and requirements, and laws—often passed without practical, common-sense input from those who actually operate and maintain these properties. Each year, owners are forced to push back against more legislation just to keep property ownership viable.

At the same time, the system has created too many opportunities for tenants to abuse their living situation. Evictions have become increasingly difficult, allowing tenants to remain in units without paying rent and permitting a “3-Day Pay or Quit” notice only once the balance equals, as proposed by the County Board of Supervisors, at least 2 months’ rent in some areas. Even then, once an eviction is filed, tenants frequently prolong the court process, effectively buying additional time in the unit without payment with shady lawyers lining up.

Look at this example of a law firm solicitation tenants have been receiving in the mail or having posted at their properties:

We have seen this firsthand at my property management firm, SKY Properties. In one recent case, we were accused of uninhabitable living conditions based on a photo of a mouse under an oven—an oven that did not belong to us. The mouse was later revealed to be fake, but the tenant claimed the “mouse flu” and the insurance company paid them $85,000.

Against this backdrop, you can imagine our reaction to receiving a letter from Arzoomanian Law Firm in Glendale inviting residents to a free consultation to determine whether they had a case against their building owner. The mailing was sent broadly across Los Angeles—to homeowners, property owners, management company executives, and on-site managers alike. Make no mistake: this was a selfish and blatant attempt at a money grab, carried out with little regard for residents and entirely at the expense of property owners.

While tenant-direct outreach by law firms is not new, what stood out in this instance was the dollar amounts they used to entice the residents:

Source: https://arzoomanianlaw.com/uninhabitable-living-conditions

Lawyer solicitation letters like this, that boast what someone could make by suing their property manager, is worrisome at best, because even the most attentive management of a building doesn’t negate the inherent bias in the courts against property owners and property management that seemingly always favor the tenants, and often despite hard evidence to the contrary.

A relatively new state law now requires management to document the state of the apartments that they manage, with photos prior to move-in, prior to move out and to show repairs have been made. But we have taken this a step further by taking photographs of the rental unit’s condition every six months. While this may be a little extra work, it actually works in favor of management and owners (finally!), as it protects us against ploys like the one Arzoomanian Law Firm is trying to pull.

For years at my property management firm, SKY Properties, we have implemented semi-annual walk-through inspections to check on the status of our units, and we carefully document the state of each unit and record maintenance work that needs to be done that has gone unreported. This has saved us many times against legal claims as well as disputes over move-out charges.

At SKY Properties, we are well prepared to stop any bogus claims against our clients’ buildings, but such schemes from Los Angeles Area law firms are not to be taken lightly. Documentation is always of the utmost importance here at SKY Properties, and we continue to be diligent.

Kari Negri is the Chief Executive Officer of Sky Property Management and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles. For questions, you can reach Kari at Kari@SKYprop.LA.