REDBOOK Blues – Party Time

Eviction moratoriums, rental assistance, inspections, due diligence, and budgets, if you are like me, you cannot wait for 2021 to be over! So to help you make it one more month, I thought we would have a little fun. I will give you a Holiday Quiz about four common operational challenges that occur around the Christmas season: referral fees, parties, decorations, and guests.

The quiz works like this: if you agree with the scenario, give it a Merry Christmas but, if you disagree, give it a Bah Humbug! It’s that simple.

As always, I am not an attorney. The following information is based on industry best practices and provided for educational purposes. Be sure to test the below against the REDBOOK, and if you need legal advice, be sure to contact one of AATC’s attorney members. Let us see which of these opportunities get a Merry Christmas and which ones get a Bah Humbug!

Challenge # 1: Resident Referral Fees. Most of us, residents included, could use a little extra cash during the holidays. We all have gifts to buy. Unfortunately, the COVID pandemic has added financial stress to many of us and our residents. A $5 McDonald’s gift card is nice, but Tiffany’s robin-egg little blue box is even nicer.

Some multifamily housing companies use this need-for-money by offering our current residents cash to refer a friend to our properties. This marketing effort is mutually beneficial. You lease vacant units during the slow period of the year, and your resident gets extra holiday spending money. You have done something nice for your current residents that increases retention.

It is a win-win-win, right?

Wrong!!

The Texas Real Estate Licensing Act (TRELA) directly prohibits the receiving of a referral fee by an unlicensed person (with the exception allowed for merchandise of $50 or less under Texas Real Estate Commission (TREC) rules). The rule effectively opens the door for owners and management companies to pay anyone referral fees in the form of merchandise (or gift certificates for merchandise not redeemable in cash) valued at $50 or less—but not payment in any other form.

However, TRELA indirectly prohibits the payment of referral fees to third parties. Therefore, when an owner or unlicensed management company pays a referral fee, he is aiding the third party to violate criminal law. Consequently, the owner or unlicensed management company is vulnerable to prosecution under the Penal Code for aiding and abetting another to commit a criminal offense.

Bottom line; do not pay residents for referrals. It is a Bah Humbug!

Challenge # 2: Party Time. I know it is tempting to have a “Corona Beer” themed Christmas party this year! Onsite resident parties are a great way to build community, show residents you appreciate them, and get to know folks in a more relaxed environment. Staff parties are also a fun and fantastic team-building activity. Parties are great, but alcohol can be a challenge.

The REDBOOK cautions that if you serve alcoholic beverages, proper procedures should be put in place to ensure that persons who drink will not become intoxicated, that persons who drink will not cause problems for other residents in the community and that minors will not be served. The REDBOOK also recommends that you serve alcohol; it is always advisable to retain an independent contractor’s services to take responsibility for serving drinks.

Let us be honest. Some multifamily owners/operators expect their supplier partners to pick up the cost for resident and staff parties. Our vendor members are generous and are always looking for a networking opportunity. Be respectful of your product and service providers. Show your suppliers some holiday cheer by inviting them to party, not their expense account.

Is partying like a rock-star, or at least a rental property owner/operator, acceptable?

Yes. Your holiday parties can be safe and enjoyable by taking the proper precautions and making reasonable decisions. Merry Christmas!

Challenge # 3: Decorations. This is Texas; we leave our Christmas lights up year-round! So we encourage our residents to get into the Christmas spirit by putting up Christmas trees and decorating their homes. But residents must follow your community rules and policies and paragraphs 19, 20, and 25 of the TAA Lease Contract.

Natural Christmas trees can be a fire hazard. Placing wreaths and lighting on building exteriors and railing are also hazards. December is a great time to remind your residents about your community policies and procedures regarding Christmas decorations.

So, are decorations okay?

Yes. Christmas decorations are fun, joyful, and beautiful if done within the rules. Excellent communication leads to incredible decorations! Merry Christmas!

Challenge # 4: Guests. Again, the pandemic has led to an increase in unauthorized residents. Folks are couch-surfing, doubling up, moving in with family, etc. This influx is in addition to annual holiday visitors. Whether it is family visiting from out-of-town or children on school vacation, the number of people living at our properties increases during the holidays.

More people mean more issues. Parking, overflowing dumpsters, and amenity demand are the biggest challenges during holidays, particularly this year with staff shortages.

December is also a great time to remind your residents about Paragraph 2 and Paragraphs 19 & 20 of the TAA Lease Contract. Paragraph 2 stipulates the number of days a guest may stay without prior approval. If a resident knows that their guest(s) will be staying beyond the days agreed to in Paragraph 2, they must get prior written permission. Paragraphs 19 & 20 state that the leaseholders are responsible for their guest’s behavior.

Last question. So, do you give extra guests a Christmas mitten Up or Down?

Yes, to guests. Make it a Merry Christmas! Holidays mean family and friends are getting together.

December is busy working onsite, from parties to decoration and referral fees to guests. However, I hope you and your colleagues will take a few moments to express your appreciation to each resident who honored their financial and lease commitments this year. Yes, they were supposed to pay their rent, but saying thanks is a good idea anytime, especially this year. I also encourage you to share sincere thanks to your colleagues and suppliers; our industry not only survived in 2021, but we thrived.

Have a very Merry Christmas!

John Gillespie, WAK Property Management, is the AATC Government Affairs Committee Chair.