First, thanks to Chris for allowing me a guest post. I am a fellow Real Estate investor and spent seven years with REIN, so I really appreciate many of his insights in his posts.

This particular post is actually in regards to a post by Brian Persaud quite a few months ago in regards to Problem Tenants in Ontario. Its reading information like Brian’s, that really make me appreciate owning properties in Alberta. Similar to Ontario, making the wrong move with a problem tenant can be costly and can quickly evolve into even more lost money and extra stress.

Fortunately, for Alberta landlords though, there are some great laws and systems in place to make landlording considerably easier than most other provinces, in my opinion anyway. Two of the biggest positives for landlords here in Alberta are security deposits and a system for resolving landlord/tenant issues called the Residential Tenancy Dispute Resolution Service or RTDRS for short.

As a landlord, security deposits are a vastly superior option than tenants paying first and last month’s rent as they do in Ontario. Security deposits can be used to cover cleaning costs after tenants leave, or to repair any damages that tenants may have caused to the property. With the tenant understanding their deposit could be partially withheld it can work as a tremendous incentive for tenants to leave the properties in the same condition as they initially rented the premises.

In Ontario, any repairs or cleaning have to be added to the last month’s rent. This now puts the pressure on the landlord to try and collect additional funds from tenants. This can become an even more time consuming adventure than actually evicting a tenant in some cases. Of course, there are landlords who abuse security deposits as well, which bring us to my other favourite item about being a landlord in Alberta.

This is the RTDRS, which was introduced in Alberta around 2008. The RTDRS is a system designed to streamline the process of settling landlord and tenant disputes through the courts. This service allows landlords, and tenants, to bring their disputes to a less formal resolution using court appointed hearing officers. These hearing officers have the ability to make legally binding decisions regarding almost everything under the Residential Tenancy Act in Alberta.

This can range from setting eviction dates for tenants who have breached their lease agreement, to helping tenants recoup improperly withheld security deposits from landlords. All of this for just a $75 filing fee and in a much timelier fashion than the old very formal court system. Many hearings can even be arranged within about seven to ten days after the filings occur, which can shave days and weeks off the original process.

This simple system manages to work for both sides. Now there does seems to be a slight bias towards preventing tenants from being put out on the street, which no one really wants, but overall it’s still a very fair and impartial system that should be a model for many of the other provinces.

Ed Note: Bill Biko has been investing in Real Estate since 2003 and has become an expert at evictions due to his experiences owning multiple rooming houses. He can be found at www.AlbertaEviction.com and www.Investors.Housez.ca.

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There’s a cliche in the real estate business that you make your money when you buy. It sounds all fancy and sexy to say things like:

I bought a place 25% under value.

or

I never pay more than 75cents on the dollar.

For the rest of us in the real world, buying is only the start of a long, complex and often stressful road. Guys like Russell Westcott and Don Campbell will tell you to stop grinding down sellers, buy in the right areas and pay what something’s worth. Good property management, effective leverage and economic fundamentals will make you more money than you can shake a stick at.

Good Property Management is the new Black

The most often cited cause of stress, foreclosure or gross stupidity is failure to manage a property and tenants well. Failing to buy well only results in loss of a deal or tighter cashflow. Failing to manage well results in total loss of equity, damage to your property, lawsuits, negative cashflow, midnight moves, visits to the Residential Tenancy Dispute Resolution Board and swift consumption of your reserve fund.

Managed right you’ll have steady cashflow, reliable and respectful tenants, preventive maintenance done right and a fantastic asset for your exit strategy.

The Best Advice Around

I went shopping for condos last month in North Edmonton and stopped at a complex called Castlewood (circa 109st and 165ave, Google Map and Streetview). They’re two story complexes that are listed and seem to be 3-bedrooms. My Realtor is also very experienced property manager (he only does real estate sales now) and knew that the window in the third bedroom wouldn’t meet the safety standards. We automatically walked out of the complex because I won’t waste my time on units that don’t conform. I don’t want the risk.

Not two weeks later I saw this post on myREINspace. Here’s the important parts of the post:

We have three three-bedroom townhouses in a complex of 80 units. The owners of the Condominium received a letter stating that one of the bedrooms is not to be used for sleeping purposes. It is not safe because the window in that room is 9 feet from the ground and cannot be reached and opened from the inside without the use of tools or special knowledge.

We have contacted AHS for clarifications and for solutions that we could apply in our units immediately, since our tenants have been using that room as a bedroom. All our suggestions such as pocket door, or emergency ladder were declined….

Our plan is to work with a lawyer to file an appeal and at the same time work with the Condo Board to find a common solution. The Condo Board has not been very pro-active in this regard and transferred the problem to the owners, since “all owner occupied premises are strongly discouraged from utilizing the affected room for the purposes of sleeping.” However, the officer from [Alberta Health Services] left very clear that if they have an inspection and somebody is using that room for sleeping purposes in a rental unit, the owner and the Board will have to respond. It is a huge liability.

I don’t know if it’s the same complex, but there’s at least three others I’m familiar with that have the same problem.

And that one move earned Brent every penny of his commission.

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There’s no excuse for a real estate investor not to know the Law. In Alberta you can read it for free online, download it or get it shipped to you for anywhere between $2 and $6.

In Alberta there’s five documents you need to be aware of, the Residential Tenancies Act (the RTA) and four supporting documents. Each of them is a big potential pitfall if you’re not careful.

Obviously, I’m not a lawyer or professional and this is not legal advice. Go see a lawyer. Call the government.

1. The Residential Tenancies Act (The RTA)
   This is the real core to the laws which tenants and landlords have to live by in Alberta. The last time I counted its in 75 sections with a similar number of pages. I last read through the whole thing in 2007 after the changes to the Act (when they changed the limit to rental increases). I actually sat down the day it became law and went line-by-line between the old and the new versions to make sure we didn’t miss anything.There’s seven sections:

   Part 1 Periodic Tenancies
   The important sections here include termination and notice periods, implied periodic tenancies and notice of increase in rent. One important thing to note is that monthly notices must be served for the start of the month. That means that if you miss it, you may have to wait the notice period plus another 29 days until your notice is valid.Part 2 Obligations of Landlords and Tenants
   Locks, entry and notices, subleases and inspection reports. A couple of important quotes and notes:

   A landlord and tenant shall inspect the residential premises within one week before or after the tenant gives up possession of the residential premises and the landlord shall, forthwith on completion of the inspection, provide the tenant with a report of the inspection that describes the condition of the premises.

   Don’t miss this one. It’s your safety blanket for tenants who damage your properties. Go the extra mile and take photos/video.

   Except as otherwise permitted in this section, no landlord shall enter residential premises rented by the landlord without the consent of the tenant or of an adult person lawfully on the premises.

   There’s a lot of reasons why you can enter. It’s a powerful section and you should use it responsibly. One secret tip: when a tenant asks you to repair something, they’re automatically giving you or the repair guy to enter the premises. Every so often, you’ll hit a tenant who is asking for 24 hour notice, and they’re not entitled to it. If you’ve also tried to book trades, you’ll know how difficult it is to schedule repairs, and asking the plumber to serve a 24 hour notice is not going to work very well.

   Part 3 Remedies of Landlords and Tenants
   All the reasons you or a tenant can terminate a tenancy and how you deal with them. Read it, learn it and ensure you understand the meaning of the phrase substantial breach.

   Part 4 Security Deposits
   This part is boring, the important parts are in the Security Deposit Interest Rate Regulations. What you need to know is that right now there is no interest payable.

   The annual rate of interest for a year to which subsection (1)(e) applies is the rate that is 3 1/2% below the rate of interest that is in effect in December of the previous year for Alberta Savings Certificates or any security issued in that previous year to replace those certificates.

   Part 5 The Provincial Court
   This essentially only tells you that if you don’t use the RTDRS you should use the Court of Queen’s Bench. The RTDRS is a much better tool anyways.

   Part 5.1 Residential Tenancy Dispute Resolution Service (RTDRS)
   This part isn’t very interesting, but the RTDRS site and the application forms are quite good.

   Part 6 General
   This is a little boring too, but it details notice information, offenses, limitations, and some other small items.

   Part 7 Transitional Provisions, Repeal and Coming into Force
   And this area will let you know how often the legislation has been updated.

2. Residential Tenancies Ministerial Regulation
   The RTA is the meat and potatoes of the law, and it’s not complete without the Ministerial Regulations. That’s the gravy which actually spells out some of the details like notice periods, limits on raising rents and details for what notices have to say. There’s also a couple of templates there.
3. The Voluntary Code Of Practice
   This isn’t something I’ve read in detail, but there are some good ideas. If you want to play it straight, and avoid nasty things like your late fees being overturned by a judge or RTDRS mediator, use this. One great thing is the links to legal cases. In particular, check out the case of Cracknell v. Jeffrey (2001).
4. Security Deposit Interest Rate Regulation
   Again, right now there is no interest payable for security deposits as far as I know. Here’s the quote:

   The annual rate of interest for a year to which subsection (1)(e) applies is the rate that is 3 1/2% below the rate of interest that is in effect in December of the previous year for Alberta Savings Certificates or any security issued in that previous year to replace those certificates.

5. Residential Tenancies Exemption Regulation
   This is only a couple paragraphs, and unless you have a hospital, a cancer treatment center or a property in Banff, it likely apply to you.

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No, I’m not saying that property management rocks. In fact it quite often sucks. What I’m saying is that there are rocks (noun) for property management, and for everything you do in life.

There’s a great video of Stephen Covey putting rocks, sand a pebbles into a jar. The only way it’s all going to fit is to start with the big rock first. If you do that one thing, everything else will fit.

For property management, I have a very simple rock.

We provide homes for people.

Everything else I do fits into that somehow. In particular, it’s the one thing that gave me a 100% success rate when taking cases to the Residential Tenancies Dispute Resolution Service (RTDRS or just DRS). We’re providing a home for someone, and if we as investors, landlords and property managers take that to heart, we’ll understand how all the other people fit into the picture, as well as running our own business in a more sustainable, more ethical way.

When I take an issue with a tenant to DRS, no matter how poorly they’ve behaved or how much rent they owe, I walk in the room knowing that we’re providing them a home, and we’ll give them a fair chance to make it their home. There’s a basic, universal set of rules people will agree on, and if everyone understands my Rock, we’re all much more apt to obey the rules.

My Secret to Winning at RTDRS

People are allowed to stay, provided they agree to pay. That’s what the rock looks like when I’m in the hearing room. I don’t have any hard rules about when they have to pay, as long as it’s reasonable. Usually it involves making bi-monthly payments on their pay period, as much as they’re comfortable paying often about 130% of their monthly rent. That gets most people caught up in 2-3 months. I ask for an order stating that, as well as a Cinderella order stipulating the payment of monthly rent on time for as long as the hearing officer will give it.

That’s really it. Once they’ve agreed to pay on time, we’re all in an agreement that meets the rock. We provide a home for them, and they agree to make reasonable payments. It’s crystal clear what will happen if they don’t pay; they’ll have to leave. Because we have an order, once they miss a payment, even by a day, I call a bailiff company and they go get possession, usually the same day.

Until I realized that my rock was why I always ‘won’, we’d always struggled with making evictions and making tenant behavior issues into a win-win situation. We were good at getting rid of non-payers and handling a large number of units, but it wasn’t usually a positive experience. After I started explicitly saying ‘we provide people homes, and we want to give them a fair chance to stay’ we would actually have people apologize as we’re moving their stuff out and we’re changing the locks.

We went into the hearing room having treated them as real people, better than they expected. Most tenants go into the process expecting a landlord who is going to try everything they can to have them kicked out. When they find kindness, compassion, and someone who is willing to treat them as an equal, they treat us as real people.

Our tenants are happier, our owners get more consistent cash flow and I get a little job satisfaction.

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