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tenants lease-cancellation rights

Home Properties pledge gives
tenants lease-cancellation rights

In a move one company official predicts “will shake up the industry,” Home Properties of New York Inc. plans to roll out what might be a real estate first–a written promise to let dissatisfied tenants out of leases.
The no-questions-asked promise is good only for the first 30 days of a lease.
But among seven other points in a customer-satisfaction pledge that will be tacked on to the firm’s leases starting tomorrow is a promise to let tenants who need to break a lease, for reasons beyond their control, to do so on 60 days’ notice.
The document also guarantees speedy response on maintenance problems and promises tenants will be treated “fairly, honestly and courteously by caring and qualified people.”
Tenants who are not fully satisfied can get rent rebates, the pledge states.
The oath will apply to current tenants and new ones alike, said Amy Tait, Home Properties executive vice president.
The firm owns nearly 5,000 rental units in multiunit complexes in suburban Rochester, Buffalo, Syracuse and New York City.
Real estate insiders variously hailed Home Properties’ new guarantee as a blow struck for tenants’ rights and as a misstep that could put the firm in a legal quagmire.
The pledge is a marked departure from the industry norm for tenant guarantees.
Usually, residential rental agreements are tightly worded contracts designed to ensure tenants pay rents and pay for damages they might inflict on leased property, while holding landlords as harmless from liability as legally possible.
Home Properties’ standard lease form, which is long on tenant rules and obligations but silent on terms under which it may be canceled, is no exception.
Tait said Home Properties has no plans to alter its standard lease, but will attach a copy of the new guarantees to it.
Leases notwithstanding, the pledge promises little that reputable landlords do not routinely grant, said Stephen Natapow, president of Natapow Management Group.
Even the agreement to let tenants out of leases for good cause is “pretty much standard practice,” he said. But putting it in writing is a mistake.
“It’s not doing the industry justice,” Natapow said. “I’m in total disagreement with making it easier for people to get out of a lease.”
Most leases are written to favor landlords, Natapow conceded. Even so, “what a lease does is protect the tenant and the landlord.”
Natapow owns and manages a number of large, residential complexes in the Rochester area, controlling some 2,000 rental units.
By making it easier for tenants to move, such guarantees could destabilize housing complexes and thus degrade quality of life, he said.
Others lauded the pledge as a major advance.
“Sounds good to me. It’s about time somebody gave tenants some flexibility,” said Lyndley Pryor, executive director of the Housing Council in the Monroe County Area Inc.
The Housing Council runs a referral service for apartment seekers and offers counseling services to both sides in landlord-tenant disputes.
The majority of tenant complaints the agency fields deal with alleged landlord failures to remedy service and maintenance complaints in a timely fashion, Pryor said.
“In that sense,” he noted, “(the pledge) speaks to a very important issue.”
At the same time, it could raise legal questions.
“My concern is whether it could be considered as part of the lease,” Pryor said. “Home Properties could be setting themselves up for legal problems.”
“It’s not a black-and-white issue,” said attorney John Crow, director of Underberg & Kessler’s real estate department.
“I would be more comfortable if it were spelled out in the lease. If I were advising a tenant, I’d tell them to ask that (the pledge) be added to the lease.”
Tait said the pledge has been months in development, but Home Properties had not considered its legal ramifications. Since the firm intends to honor the pledge, it expects no legal problems, she added.
Home Properties developed the seven-point pledge as part of an effort to create a brand-name identity, Tait said. It will be featured in radio, newspaper and direct-mail advertising.
Formerly known as Home Leasing Corp., Home Properties converted to a real estate investment trust last year, completing a $100 million initial public offering in June.
REITs repackage real estate as liquid investments by selling shares in developments such as housing complexes, shopping centers and hotels or in mortgage pools. Federal rules require REITs to return 95 percent of profits to investors as dividends.
Home Properties paid an initial cash dividend of 26 cents a share for the partial quarter ended Sept. 30, 1994, and 0.4125 cents a share for the quarter ended Dec. 30.
Since its IPO, Home Properties has upped its apartment-complex holdings from 15 to 21 and is in the market for more, Tait said.
The pledge and accompanying ad campaign are companion efforts to help boost the firm’s market share, she said.
Future inducements to tenants could include Home Properties stock-purchase offers, Tait said.


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