PM Lawsuits, ICE Subpoenas, & ESA Nightmares with Monica Gilroy

Don't ever think your documents can't be short, right? People feel like it's got to be inches and inches of paper. It does not have to be, friends. The Robert Locke model, right, that goes back many, many, many decades, keep it short, have a lot of addendums, but the actual lease itself, right, and the PMA itself are short. So don't be afraid of short documents, friends. Don't, it doesn't have to be 25 pages, you know? And don't, I'll say, I'll tell you one other thing I see. Some people feel they can't leave their state real estate association documents. No way. Those are good training wheels. Those are good starters. But when you've been doing this, at least when you get to 5, 6 years, you've probably written a whole list anyway of like addendums. When you get to be like 10 years out, 10 years in, go proprietary, write your own, right? Or hire somebody to do it. They get nervous. They don't— oh, I can't leave those. Yes, you can. Come on.

Welcome to Season 5 of Peter Lohmann's Podcast. This podcast is a show about all things residential property management, from property operations to sales and marketing to growing and managing your team. I'm your host, Peter Lohmann, co-founder of RL Property Management. For Season 5, I have an exciting new guest each week. We go deep into conversation about problems facing professional property managers and the best ways to overcome them. Thanks for listening. Now let's go. All right, friends, welcome back to the Peter Lohmann Podcast. I'm thrilled today to introduce Monica Gilroy with the Gilroy Law Firm. Welcome to the show, Monica.

Thanks so much. Glad to be here.

Yeah, I'm really excited to get into conversation with you. You are pretty well renowned in the property management space for your legal expertise and helping property managers stay out of or get out of Legal Hot Water. And I'd love to have you start by just giving maybe a 2-minute background on yourself, kind of how you got to where you are now running your own firm and what you specialize in.

Sure, absolutely. Well, again, thanks for letting me come and, and participate and talk to your audience. So I am located in Atlanta, Georgia. I've been a trial attorney for 33 years, always in the area of real estate. And about probably 25 years ago, the law firm that I worked at at the time introduced me to a lovely gentleman, very well known in our property management world, of Mr. Robert Locke. And so, yeah, with, yes, with his guidance and his energy, he has led me through the very twisted, at times, world of single-family property management. And so has introduced me to our friends in many of the trade organizations like NARPM, and also has really opened up opportunities for me to have my practice of about the last 10, 15 years, really concentrated a solid half of it on the property management world, both multifamily, single family. We have a lovely national practice. We help property managers and real estate investors from all over the country with problems they may have. My own, I've had my own firm now for actually 18 years this year, which is great. Congratulations. That's amazing. And that, yes, that was sort of accidental. I didn't set out to be my own boss, but circumstances required that at the time my partner and I split. That was in the, right in the beginning of the Great Recession. So as a real estate law firm, the fact that we're still here is awesome. But really everything we do here at the firm touches real estate in some capacity. But I have a real close heart for my friends in the, in the property management world and, you know, being able to help them with the situations they face nowadays. It's, it's a great part of what I get to do every day.

That's awesome. Well, you're, you're in the right place because you're speaking to probably 1,000 or more property managers. I want to start right into something that's top of mind here recently, which is ICE, Immigrations and Customs Enforcement, moving into— some have reported trying to get through using property managers and landlords to residents at various homes and apartments. So you wrote a great article, I believe that NARPM republished, or you wrote it for NARPM about how property managers can handle that. I wanted to just maybe have you summarize that and then has there been any latest guidance or have you actually heard of this happening or consulted anyone?

Yeah, so it's, yes, it's definitely still happening. I've had numerous calls.

Okay.

Yeah, I've had numerous calls since that article came out about people experiencing this. So, you know, the thing about ICE that's the most important for our property manager management friends is that they really do not independent authority. They may show up with what they call an administrative subpoena or an administrative warrant, but those really have no teeth. There's no effect to those. So what they're doing is really just, I think, you know, intimidating people. I've had one person call and say that they appeared in the office and scared, you know, the heck out of their little front desk receptionist. And, you know, they look very intimidating when they come in. But the reality is, is that you are not obligated at all as a property manager to respond or assist ICE with an administrative subpoena or administrative warrant. If they come back now with an actual signed document by a court or a judge, and probably most property managers at some point in their careers have, you know, seen probably a subpoena maybe for documents or, you know, but they may have a criminal warrant, they might have a civil warrant, they may have something like that, that's different. When it's signed by a judge, that's different. But even if it's signed by a judge, a manager still has the ability to push back a little bit and say, well, I, you know, I want to be sure I understand what this is and get clarity. The problem, Peter, with just going ahead and saying, oh sure, come in ICE, is that you are really putting yourself at risk as a property manager for invasion of privacy claims, but also dreaded fair housing claims. Because obviously if you're, if you are not 100% you're 99% sure as the property manager about, you know, the tenant or who else is in this residence and you in essence profile them, you're potentially discriminating based on country of origin, right? Or race, right? And those are obviously protected classes. We don't want to ever see us bumping up with those. So the advice I've been giving is just look very carefully, take a breath, do not be intimidated, feel empowered to say, no, I'm sorry, I'm not obligated to give you this. Because the flip side, the liability that's there is quite high. And I worry about that. If for some reason you do, you are faced with a legitimate warrant or subpoena, only give what's requested in there. Don't feel that you have to, you know, open the floodgates and deliver tons of extra information, right? Just be very narrowly focused., but we really, it, it's these ICE, these ICE encounters are again, good reminders why it's so important for property managers, especially our brokers and owners to have escalation policies. So like when the little lady at the front desk was very intimidated, she knew though, because of, you know, listening to things that she, the boss had told her, she immediately went and made a phone call and escalated it.

Yeah.

And that's what's so important, right? Is we don't, we don't want our first our first level of defense to somehow, you know, get, get us into hot water just because they haven't been trained and there's not an escalation policy.

So if they showed up with a legitimate subpoena, do I need to hand over things right then and there? I mean, isn't this something where it's like I have 7 days to, to, you know, to provide the requested information?

Exactly. My advice is if you get a legitimate, any type of legitimate warrant or subpoena, First of all, definitely everyone should consult legal counsel just because you want to be absolutely sure. But yes, that's correct. They can't be demanding an automatic turnover. And usually you're given some amount of time to comply.

That's like, you know, guys, come back later. I'm going to lunch.

Like, yes, exactly.

Your role.

Yeah, 100%. 100%. And then again, you know, that's the importance of just looking at it real carefully. If it's— if they're only asking for, you know, one person who is a resident, don't give them everything about everybody else in that residence, right? Give it, you know, that, and that's again where I think people get intimidated and they're not, 'cause this is, you know, it's not every day. First of all, it's not every day that ICE would show up at your door, but it's really also not every day that a sheriff shows up or, you know.

Pretty rare, yeah.

It's pretty rare, yeah. You know, we see it a lot, like we see subpoenas a lot in the context of like divorces where like maybe the owner is getting divorced and they're trying to understand assets, but you don't see You don't see that much really. So that's why, again, yeah, really taking a moment to understand it is so important.

Okay. Yeah, that's really helpful. Thank you. Speaking of fair housing, I wanted to ask you about approving renters. So I've heard some very contradictory advice from various sources. Some people say when you receive a rental application, you should have a set of objective standards, this much in rent, you know, this much in income relative to rent. This minimum credit score, this, you know, criminal history requirements, and it's pass/fail, just completely objective, like a robot could do it. And then other people say, well, actually, if you look at the HUD guidance, you need to do it on a case-by-case basis. Otherwise you may accidentally get into some discriminatory action because of this, that, and the other. So I'm frustrated by this because I can understand the arguments for both sides. Like, hey, just tell me what to do, I'll do it. I just don't want to be in trouble here. What, what's your take on this?

Yeah, and I, and I agree. I mean, you know, we— with the exception of the emotional support animal directive we got in early 2020, you know, HUD does say a lot of different things at a lot of different times, similar to our friends at the EPA with lead-based paint. My general preference and my advice is that I, I like to tell people to have neutral criteria, right? Just something that is facially neutral. Have they filed for bankruptcy? Have they been evicted before? Yeah, what is their credit score? What is their income, right? Things that basically are blind to all the protected classes, right? And yes, there is that side argument of disparate impact, right? That we might have in some situations a neutrally faced question that somehow has a negative or disparate impact on a certain protected class. But from an onboarding perspective, usually those questions aren't going to hit into it as much, except for, of course, have you been— the question about a felony, right? That was sort of the heart of the disparate impact without not answering the first question. Disparate impact, though, as we know, Trump administration has basically put that onto the bookshelf as it relates to fair lending. So right now, it is not really being pursued at all from a fair housing perspective either. So we can, for now at least, that disparate impact is very politically driven. It rises and falls with who's in the White House. But no, I'm a big fan of the criteria that are neutral. And then yes, just like you said, like I had a fair housing case once actually where they were being accused of discriminating on, on a racial basis. And they, my client had just what you're describing, a checklist, right? They gave points like you got 2 points for this, 1 point for this, and then they added it up and, you know, if your points were over a certain amount, then you were approved, right? And we were able to show that to the HUD investigator to show that, look, you know, we did this for everybody, including the applicant who was claiming discrimination. And look at this, the applicant who came in right after her and was approved, who was actually of the same protected class. So it, you know, and we're like, okay, so, but that the HUD, when I met with that HUD officer, she said, that's great. That is exactly what you want. You want to show, you want to have, in fact, you don't want subjectiveness because that's where unfortunately someone's bias could come in. You know, like we talk all the time, Peter, about like, you know, the fact that same-sex couples are obviously protected by fair housing, right? And you may have an owner that says, I don't want a same-sex couple in my property. Well, That's why as a property manager, it's so important that you be the expert. You under— you explain to them, well, you can't discriminate based on that. But no, I'm— I would, I would absolutely say have the criteria so that the argument of subjectiveness can be taken out if you ever get hit with a HUD claim.

Yeah, we even take it as— so that's what we do. We have a set of objective criteria. We even take it a step further. The person who makes the decision never meets the applicant. And doesn't even know their name. So there's no possibility, oh, it's Rodriguez, so you declined it or whatever. It's like, you know what, they don't even know their name. They're just looking at a spreadsheet of this is the credit score, this is the income, this is the criminal history, this is eviction history, yes or no.

I love that.

Never met them. They don't know what they look like. They don't know what color they are. They don't know anything about them.

And they don't, they never see the ID. That was the other thing my client did. Never see the ID. Yeah, that was the other thing my client did where we got out of them is in addition to having just the numbers, We were able to show that we don't— the IDs aren't even— the driver's license isn't even part of it. So to your point, yeah, no name, no picture. So it truly is a blind approval. And that, that is very easy for a lawyer like me to defend in a fair housing situation. That's— it really is.

Great. Well, that's good to hear. The other big fair housing topic, of course, is ESAs. You knew, you knew we weren't getting out of this without talking about ESAs for a minute. We won't spend too long, but So emotional support animals, to me, I kind of feel like the ink is dried on this. Everyone understands it. It's clear to me about, hey, you can't call it a pet, you can't charge a fee. Although I know there was some news about that recently. But is there anything— I'm not going to do ESAs 101 here on this show. If you're curious about emotional support animals, there's about 10,000 podcasts you could listen to. Is there anything new or different or cases you've handled that might present some updated information or something that people may not know about?

Yeah, I can think of 3 things. Let's start with what you just mentioned. We do have a new case out of Louisiana and out of that federal judicial circuit where the judge basically said that, you know, if you— basically saying you can charge a fee, right, for an animal that's an emotional support animal based upon a lot of factors that the court found. There was a lot of celebrating going on, and I very quickly—

there was—

high-bashed that. I squashed it, and I was like, no, no, no, no, no. I said, this is not what we are— do not get excited about this. Number one, that judicial circuit, extremely landlord-friendly, right? Not tenant-friendly like, like my 11th Circuit here in Atlanta. And so I had— I've had— I had some clients say, I'm gonna do it, and I'm like, oh, be waiting for your phone call. You know, you're going to get— you're going to get in trouble.

So is this something where I could, like, incorporate my business in that judicial district so that all my landlords are heard in front of them or something?

Like, that's a really good point, actually, for the people in— I think it's the Fifth Circuit.

Yeah.

If they want to go for it and try it, go ahead. I still would not let them do it, but I certainly do not encourage anybody outside of that one judicial circuit to be thinking about that. And it, you know, we would need to see that over a variety of circuits. Is not one that's very landlord friendly. You know, it's sort of like, and this is no offense to our friends in California, but you know, California and parts of the West Coast have some very extreme laws as it relates to tenant protection, things like that, that we can't just follow that as the norm.

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So that's number one. Don't everybody get too excited about Louisiana.

Is it about the case though that we need, we need some trailblazers to try this and then bring it to the appropriate level of judge in their region before we start getting, you know what I mean? Like, we need some people to actually push and test and take these cases and appeal them. If we just keep, if we just keep leaning over, we're going to get steamrolled. We need to actually— does that make sense, or am I off?

It does. No, it makes, you know, it makes a lot of sense. And, and you're right, when I wear my, when I wear my trial attorney hat, I say, let's go, this is dumb, you know, let's figure it out. I think the difference is, is that like if we're going to talk about lead-based paint later, but like lead-based paint, we have some legitimate legal, like real problems with the EPA. The thing about HUD, though, is that this— the fair housing laws, body of legislation, statutes, they're older and they're more defined. And I find much more when dealing with HUD that they're all on the same page again as compared and contrasted to the EPA who is all over the place. So I agree with you from the perspective of yes, as an industry, because we are a very powerful industry. I heard a statistic when I was hanging out with our national friends at NARPM that 35% of America is a renter. That's huge. That's a huge number. And when you think about just property managers in general, we are representing a huge part of, you know, of these owners of these properties dealing with the tenants. So yes, there are some times that we do need to push back. I think it just would be on a topic-by-topic basis. This one, you know, because of the directive in 2020, which was great for the property management industry—

I mean, that really— that's all we really want is clarity, right?

It just— right. And that's, again, not to keep harping on the EPA, but like, we're not getting that from the EPA. But, um, But with this decision, you know, perhaps, well, that person obviously did, right? That landlord took it up. But you have to have both the wherewithal, the financial wherewithal, the, you know, this, the, and the reality of in certain jurisdictions, you may not get that result, right? Like I would be very fearful here in my 11th Circuit, Florida, Alabama, Georgia. I would not think we would get a very good result here. I don't think we'd get a good result in California, New York. So, this one circuit is there, but I do agree with you fundamentally. Of course, as an industry, especially of an industry of professionals who are licensed and, you know, we really know what we're doing, yes, absolutely, there's times we have to push back and stand up.

Got it. I think you said there was 3 things on ESAs.

Was that all of them? Let's see. So, there was the, that, well, the second thing I was gonna say is, is that, oh, I know, 2 things. Second thing I was gonna say is, is that I've, I I still get questions, even with some of the, they're not pets and all that, of what can we charge at the end? And you could always charge. Remember if the, if it's not a pet, it's a resident, right? If this animal is a resident, just like if the little kid crammed on the walls, you can charge if the dog scratched on the door, right? Or whatever. I still get that question a lot. Can I charge for the damage when they go? And the third thing I was gonna say is, is that I have seen a, a real, I don't wanna say explosion, that sounds too dramatic, but I've, I've seen people come in with one ESA and one regular animal, right? And so there's a lot of confusion still about, you know, can I limit the pets? Can I do this? And you've gotta go back to that, they're not pets, right? So if, but let me tell you about this one case, but still with emotional support animals and with disability, right? With the protected class of disability, reasonable accommodation is still the other side of that, right? That, that, you know, is it a reasonable accommodation to ask for a ramp to be installed at the expense of the disabled tenant, right? To be removed when the tenant leaves. Is that a reasonable ask? Of course it is. Versus real, real true case, a house, an elevated house, like in North Carolina, like if a flood was, if a hurricane was gonna come through, wanting a ramp or like a pulley built to pull the person up. Not reasonable, right? Because they're talking about infrastructure, things like that. So if you see someone, for example, and this was the case I had, they had like 5 emotional support cats, okay? All papered, all true. But then there were like another, like, I'll make this up, like 4 dogs or something like that. So like 9 animals, non-people living living in this, like, small house, all right? So the question posed was, come on, you know? And so I went back with, that is not reasonable for the size of the house, right? That is not a reasonable accommodation to have that many animals. So they were able to successfully say, look, I'm sorry, while we understand and we treat them as valid ESAs, I cannot reasonably accommodate 9 animals in a house this size. So I think we shouldn't lose sight ever of that flip side to disability, right, of reasonable accommodation. Is it— is this— am I being asked to do something that I can reasonably accommodate? And of course, that definition legally is in the eye of the beholder, right? But I think most of us, like the example I gave, of course it's reasonable to have her to put in a ramp at their expense that's going to be removed. I had another one where the company got sued because she wanted to— she was in a wheelchair and she wanted to have a little bench built in the bathroom so she could go from the wheelchair to the bench to the bath. And the property manager, you know, was just not as savvy as he should have been. He told her flat out no. And then it was a big, big case, and he paid a lot of money, big lawsuit, and he paid a lot of money just for telling her that no, she couldn't build this little bench, which again, that's a reasonable accommodation, and you can get in trouble for turning that down. So I think when our friends are listening to this, just, yeah, don't don't feel that you're completely at their mercy. You are empowered by virtue of the balancing act of reasonable accommodation too.

Got it. That's really good info. One more question on the fair housing having to do with waiving fees or late fees. I've heard some people say don't ever waive a late fee because if you waive it for some people but not other people, that's discriminatory. Is there any legitimacy to that?

I would say no. I think that waiving a late fee and how you deal with each tenant is gonna be a case-by-case basis. You know, the reason why you're waiving it might be because, you know, the mail was slow or it was, there was a snowstorm and that, you know, it didn't get there 'cause they refused to pay through the portal or, you know, you had a glitch in your portal. But no, I don't think, when we onboard tenants, right, that's where we need to treat them all equally, right? But when we're dealing with a tenant in a live situation, We, and I'll be honest, I see this constantly with the eviction cases that come through our office where, you know, they come, you know, they haven't paid for 4 months and then they say, well, you're only evicting us because, you know, we're disabled or something. And we're always, you know, the courts don't buy that, right? You're 4 months behind. I have a right under the contract we signed our lease to start an eviction proceeding when you haven't paid. So, you know, I think, But yeah, I'm fine with when you get into the tenancy, just taking it as you need to step by step, you know, pick case by case. Sure.

Okay. I wanted to ask you about when we are on the receiving end of a legal letter or even a lawsuit, and this happens, you know, if it hasn't happened to you yet, it will. You're going to get a tenant or even an owner who either sends you a letter or actually files a case against you. Now, when that happens, we have a couple options and I've tried a few of these. If it's a letter, I've, I usually just throw 'em away, to be honest. I don't even really read 'em because I find that you, you know, 90% of the time that nothing happens. And then if they file, it's like, okay, you have my attention. I'll take a look at what you have to say. So I guess my question is really having to do with insurance. Because it seems to me that all of my, you know, insurance and my general liability insurance and everything, they want to know anytime I get a letter or anytime there's a case filed against me. But sometimes they want to settle when I don't want to settle, and that makes me mad. Or sometimes I just don't want them to know that I'm necessarily getting these letters because I feel like it's going to affect my premium. What's the guidance here?

Best practice? Yeah, that's a really great question. So in terms of what do you do when you get a letter, I agree with you that, you know, we certainly may glance at it if it's, especially if it's just from a tenant, right? You know, just yesterday talking with a property management client of mine and you know, the lady wrote in, in the, I'm sure you've seen it, I'm sure all the listeners have seen it too, but the explosion of ChatGPT that people are using is, I wanna like pull my teeth out. It drives me insane. Mm-hmm. You know, quoting these things like, oh my gosh, stop. But yeah, like you're gonna take a glance as an ex, as a property manager and know this is ridiculous, right? And put it to the side. I think it's a letter from a lawyer. Definitely just don't trash it. Read it. Now, it may be that there's nothing to it. In every state in the US, when you get a legal correspondence but you don't respond to it, you're deemed to have still received it, right? So some lawyers love to make a big deal later if they sue, like, well, I sent Miss Gilroy a letter, or I emailed, you know, you know, Miss Gilroy 2 months ago and she never responded. Well, maybe the reason I didn't respond is because it was so stupid what you were asking for, you know. So there, if it's a right, I mean, sometimes it's so dumb.

Yeah.

And I saw your letter, I'm gonna say I don't have it right here, but like literally I just took out of my bag like something this thick that came from a lawyer. I was like, come on, like there's no problem that's this thick in a letter, you know. So, so I think if it's a lawyer, I would probably take just a little deeper glance. Obviously, a lawsuit's different, right? Because you never want to fall into what's called a default judgment where someone gets a judgment against you. But I hear you on the insurance piece, and I think that, and this is true, like, this is advice I give myself as a business owner too, right? Because anybody who's in, in business, to your point, is gonna get sued at some point. It's just, it happens being a business owner. You as the business owner need to make a financial decision as to, do I think this case— could this case actually have liability, right? Could there— if there's even a tiny little bit that's true about this, right? And then there's some category of cases that you're— which means, I should say, you're going to turn it into your E&O, right? But there's some category of cases that should always go to your E&O mold, right? Number one. Number two, and I see I had like 4 of these come across just this week alone. Some ridiculous, you know, last-minute statute of limitations slip and fall. You know, I fell down the stairs. Well, you never told me, Miss Tenant, you fell down the stairs. Those should go to your owners, right? General liability first, because the owner— I'm sure everybody's PMA says the owner has the responsibility, not you. But I also suggest in a slip, any personal injury, to also turn it— just turn that into your E&O, but say to the E&O, I've turned this into the other party's or the owner's general liability. You do though, don't have to turn everything over because you're right, a certain number of claims every year, you may see a premium increase, right? So it's really up to you as the business owner to assess, do I turn this in? Do I not? Now in terms of the insurance company settling and you don't want to, some policies, Peter, have what are called hammer clauses, hammer like a hammer, which basically is a clause that says that you have to agree as the insured party unless it's not reasonable, right? So if, you know, if they're asking if part of the settlement is, you know, something really crazy, like you have to take out a billboard and apologize to this person, you're like, I'm not going to do that, right? They, they can only put the hammer clause down on you and force you to do it if they have that language. Most, you know, policies though, really, I do a lot of work with the title insurance industry too. That's the other side of my practice, like title insurance policies. Those policies are written similar to E&O policies where the insurance company has the right to settle, litigate, you know, whatever they deem is best. But they should, you know, remember though, every state in, in, in the country has bad faith insurance laws too. So you shouldn't ever be feeling like your insurance company is acting in bad faith towards you. Like if you're, if they're not listening to you, you know, that kind of thing.

I don't think they're acting in bad faith. It's just, I understand how it makes sense financially for the insurance company to settle in some cases., but I need to uphold a local reputation of kind of being a hardass that doesn't settle and that doesn't play games with tenants who just want to file stuff. So it's like our interests are opposed there. It's not that they're acting in good faith, it's just not in my best interest.

I totally get it. And that is, but see, that's an important thing to think about. Like the reputational aspect of it is maybe I don't turn this one over. I mean, the, you want to use your E&O for things that could lead to a crazy bankruptcy, six-figure, right? Six-figure judgment from some crazy jury who just doesn't like the color shirt you're wearing today, right? Or they don't like me, your lawyer, because my hair's too long or whatever, right? So you have— that's where your business acumen is going to be okay. In fact, I have a client who regularly does this, right? This one goes to E&O. Like, the one that he turned over recently, he did it because the lawyer on the other side we know is going to just jack the fees up. She's just known for that, right? But then another one came in that was just stupid, and so they didn't turn that one in, right? Because the amount they're going to pay me is probably minimal compared to what a premium increase could be. So I think that's— I always think you should just use your best business judgment to decide which ones do you turn in, which ones you don't. But, you know, the reputational part is very important. I would feel very— I think you should speak up and say that, to say, you know, look, I, I understand you want to do this, but I really, I don't want this. Or, or being sure if they do settle something you don't want that it's completely confidential, there's a non-disparagement clause. You know, that's the other problem with our technology these days is you settle one thing, everything I settled these days I have to have non-disparagement because otherwise they're going to go online and say I just sued so-and-so and gave them a one-star review, and then that is just like poison for your all's industry. You can't have those bad reviews.

So it's— yep, that is such a great point. And let me highlight that if you ever make an agreement with an owner or a tenant for anything, include a non-disparagement clause, whether it's an early release from a lease, whether it's, you know, you're agreeing to waive the termination fee for your owner, write up a little agreement, include a non-disparagement clause. At the very least, you're going to avoid a negative Google review or worse. Hey, Peter here. I want to share with you guys a new tool that we're using at my management company for leasing. It's called RentEngine. You may have heard of them. They're a newer product in the marketplace and they facilitate self-showings and agent showings at all the properties that we manage. We typically have anywhere from 25 to 40 rental listings things live at any given time. And since making the switch to RentEngine in, I think it was springtime of this year, our leasing timelines have dropped significantly. Not only that, but we're actually saving a bunch of money compared to the solution we were using beforehand. My team absolutely raves about RentEngine. We've used a couple other solutions, but ever since we made the switch, my team just can't shut up about how much they love using RentEngine. I've been recommending them a lot recently to other property managers. Heard nothing but good things. Basically, this is a sort of AI-first leasing platform. It's kind of the first of a new generation of software that's just coming available for property managers. You can actually go into the software and see the AI responding to all the tenant inquiries, both over text message and email as well as voice calls. So I've been really impressed with what they're doing, and the proof is in the numbers. Our leasing timelines are better than ever, our days on market is lower, and our owners are really happy because frankly, we're just getting their properties leased out really fast. The team also has talked about how much they really like their lockboxes. They're incredibly tough, they're basically unbreakable, and with the company we were using before, before, we were having a lot of problems with battery life and people breaking them open or having trouble getting them open even when they were trying to legitimately use them. So I encourage you to check them out. I'll drop a link in the description where you can book a demo with their team. I wanted to ask you about, could I put a non-disparagement clause right in my PMA or my lease, or is that going to be slapped down by the whatever that federal law is?

No, uh-uh. I think you'd be totally fine in any context, state or federal, because these are both, you know, especially your PMA, right? Because those are two equally pair— in the eyes of the law, those are two equally smart parties, right? There's no one who has a higher, you know, knowledge of the situation. Both two sophisticated parties, right? And I have no problem putting that in from the beginning. I also have no problem putting in from a lease, and here's why. Because anymore, even though a tenant may not understand the lease as well as you do, they all understand what the reviews part are, right? So they may not understand what that entire agreement clause mean, right? Or choice and venue. But let me tell you something, they're gonna know what that means. And so I would talk about going to bat for something, I'd go to bat for that because that is a true monetary impact, those reviews on the property managers. And so asking for it from the beginning, or sometimes people, I've seen it written where they say, If you have a problem before you post anything, right before you review me, here is the process you need to go through. So at least you're showing— you're not saying you can't say anything negative never again. You're saying, look, here's how we handle things that would lead you to posting something negative. And that to me is 100%. I'd go to the mat on that one. All right. Yeah, you're good because you're showing them, you're giving them away, you're giving them a a cure, right? And if they're not paying attention to that, then mm-mm, doesn't work.

I thought there was some sort of federal law about you can't prevent online consumers from leaving online reviews or something like that.

I would have to think long and hard about that one. I'm not, I'm not sure. I don't think so. I mean, I mean, I mean, you know, I mean, that to me is, it's, I mean, I could see if someone's making like a First Amendment argument, something like that, but it's, there's a lot of different aspects to this. You know, you can't, you know, reviews that are truly false, right? Holding a property manager, you know, I have, you know, if it says they're frauds, right? Well, they've just accused you of a crime. So that's defamation, that's libel. So, you know, that's actionable. You know, you could sue for that. And, you know, and again, in every state in the US, they all have what are called, you know, defamation per se, P-E-R-S-E, right? Two words, meaning that if you are a professional, right? And something is negatively said about your professional acumen or your professional services, You don't even have to prove how much you're damaged. You can just say, I've been damaged $1 million, right? So if someone says Monica Gilroy is a liar and a fraud, well, I'm an attorney, right? I'm in a profession and I could sue them for that and say, you've just cost me $10 million, right? So, so, so the words, so I'll, I'll take a peek and see if I can find a law like that. But I'm, my, my thought is, is that, is that, you know, is that consumer protection wouldn't necessarily outweigh you know, what two parties can contract to do. 'Cause that's important. I also read just this morning that the CFPB, the Consumer Financial Protection Bureau, is basically, they're gonna shutter it soon. So when you think about the rise of the consumer these days, right? I mean, we're not in a very consumer-friendly world right now really. So it may be that as property managers, you know, definitely trying to have that language in and have it be enforceable is the right thing to do.

All right, I did some quick ChatGPT. Okay, I hope you'll forgive me.

I will. It's okay, just don't write me a letter.

Start— put it— I won't write you a letter. So the Consumer Review Fairness Act, CRFA, is a federal law passed in 2016, makes it unlawful for businesses to include gag clauses in their contracts to try to stop consumers from posting negative or any reviews. The FTC is the one who enforces this.

Okay, so, okay, so there, so there is the law. But the second part is the most important part, right? The FTC would have to come in and get you. So it wouldn't be an owner, like if you have that in there and the owner and you agree to it, right? The owner can't say later, wait a minute, that violated the law. Only the, there's no private cause of action to complain about that right now. Could a court find that maybe that paragraph isn't enforceable? I'd argue that only the FTC could. So I'm still a fan for— I see it a lot. I review a lot of PMAs and leases every month, and I have no problem putting it in, especially with your owners. But I think with your tenants, do it, but have that, that ramp-up thing, because the FTC has many things to do better than coming and knocking on your door, Peter, and saying, oh, I see that you, you have a clause in there.

You're a little management company.

And if they did, so then— and if they did, you take it out, right? It's not, you know. Yeah. But, but as it relates, especially we can't ever forget that with these owners, these darn owners, these are two sophisticated parties contracting. And as long as everybody understands it, that's it. That's how a court interprets a contract.

So is the court, isn't there something though where it's like, because we're the ones that wrote the contract and it's our area of expertise, the court's gonna find that although we're both professionals and we're both nominally business owners because they own a rental property, they're still going to find that we are the more sophisticated party or something like that?

I'll answer that two ways. Yeah, there is, there is a concept called that you, you, if a document is deemed to be unclear, ambiguous, right? Of a court, because we look, we look to see the four corners of a document. Is it clear and unambiguous? If a court finds it is ambiguous, yes, there's a legal concept where you construe the way you read it against the drafter, right? So in other words, I draft it, you don't, right? That's why you see in many, many leases, especially like a lot of our real estate association, land association, you know, like the, the Texas Real Estate Commission or Georgia Real Estate Commission forms, language that says this is not to be construed against either party, right? That's very common language. In fact, that's a really good tip and takeaway. All of your leases and PMAs should have a simple clause that says this document is not construed against either party regardless of who is the scrivener who wrote it, right? But so that's the first part of that answer. The second part is in a court, right? When they're looking at is something ambiguous or not, you only, that's the only time then that you look at, okay, well what do the parties know, right? So there, there, there are times when it can really backfire against an owner because the judge will say, just like you said, the judge is gonna say, oh, well, you know, you have 15 rental houses, you don't understand this. I will say though, in my experience, you do have to be careful when you're in a court situation if it's you and the owner sitting on the same side of the table, right? I've told that story a zillion times. I won't tell it again 'cause probably half the people know it. But we, you know, I had a case where the owner refused to make some repairs, right? And the property manager basically acquiesced, just said, well, owner's not gonna do it, we're not gonna do it. The judge literally looked down from the bench at my clients and said, you are the professionals in the room. You should have told that owner, no, you're doing it. And if you don't, I do it. And you are the ones that I'm holding responsible because you're the licensed people that knew you needed to fix that. So when we're in situations where it's some core function that we do as property managers, You're 100% correct. The courts definitely will look much more with more scrutiny as to the owner and the, and the, and if there's ambiguity.

Yeah, right, right. Exactly. Lesson is don't leave anything ambiguous.

Don't leave anything ambiguous. Right. That's right. That's right. And you know, there used to be this thing, and it probably still exists, I'm sure it does, where you could put a document in and it would tell you at what grade level it was written at, like comprehension level. Right.

And so like a lot—

Microsoft Word has that, I think. Yeah. Right. Because a lot of The, like the Georgia Association of Realtors forms, right, are written at like an 8th grade comprehension level. And so it's kind of an interesting tool. If you ran your PMA through it, it probably isn't going to come out super sophisticated because much of what you're putting in there isn't complicated. You know, I'm leasing your house, here are my fees. That's it. But the construe against the drafter language towards the end with all your other kind of legalese, really a good tip because then you would never have someone say, well, she wrote it, he wrote it.

Yeah. I know we're kind of jumping all over the place, but I want to make sure we hit on a few different things. How about these drive-by ADA website lawsuits? Is that still going on?

Can Trump please put a stop to that? I mean, I thankfully have not seen those as much, but yeah, they were super annoying. And the ones about your website and all that stuff, I have not seen as much of those. We actually had a really notorious law firm here in Georgia, here in Atlanta actually, that was bringing those. And they, they wouldn't even— like, they were the ones doing it on their own, you know? And then they would find a disabled plaintiff and the court— go to the website. Yeah, yeah, right, exactly. And the court literally, like, sanctioned them. And one court actually told the lawyer that he couldn't even ever appear in front of him again. Like, he was, like, banished from the courtroom.

Oh, I love this. I would love to read an article about this because I remember when this was really going on and it was— everyone was talking about it, and I had friends who were getting hit with these suits and having to settle for tens of thousands of dollars. It was horrible. And I was like, there's no justice in this world anymore. I was getting so worked up. So I would love to read or see something about, you know, what you just said about them getting shut down.

That'd be— I will, I'll send that to you. Yeah, yeah. But thankfully, knocking lots of wood here, I have not seen— I have not seen those in a while. And I think it's for that exact reason why these lawyers got shut down, is because it's, it's not helping anybody but the lawyer, right?

It was really a laugh test. Yeah, it doesn't pass the laugh test.

It's ridiculous. Yeah, they're absolutely— they were just frivolous from their inception. So yeah, 100%. So good. Yeah, I'm glad that one's gone away.

So, all right, let me ask you another really random one. This is personal for me. Years ago, probably 8 years ago, We, I read somewhere, it could have been online or my friend, my friend and I came up with this idea that you're gonna love this. It's like, hey, we're not gonna rent to attorneys.

Oh, I have a client who refused to do that too.

Yeah. So 100%. And I think we had on our website and our application was like, we don't rent to attorneys, law students, paralegals because it felt really, we got taken to the mattress by a law student or an attorney, I forget. Because basically they have no cost to defend or cost to prolong the case, whereas I'm having to pay through the nose. Even if it's frivolous, they can draw it out and draw it out and draw it out. So I was like, you know what, we're just going to avoid this whole problem. So anyway, what happened was I got in an argument with someone on Twitter about this, and they went on the web, my website, screenshotted it, shared it, and progressive attorneys from all over the country started to pile on to this Twitter fight and were threatening to sue me and saying that I was— this is illegal, you can't do this, you're in big trouble now. And it got so bad I had to close down all my online accounts for a few days and pretty much go into hiding. I removed that clause from my website. It's no longer, no longer a policy because I got so scared about it. But just out of curiosity, I always wanted to get your take on this.

Well, I'll tell you, I mentioned it at the beginning, but Robert Locke had the same exact policy.

I might have gotten it from him, to be honest.

You probably did. Now, I don't know that he had it on his website site, but it was literally a factor. And for him, it was exactly what you said. If you were ever going to have a fight down the road, there were no costs, right? But also, number 2, they came in with the red pencil and they were redlining everything. And, you know, and I've always said to the property managers, don't allow any redlines. Just don't, right? Don't. I don't, I don't care. Your form is your form. But yeah, that's no, that's a terrible story for you though. I don't like that because you had every— no, there's nothing illegal about that at all. You're not saying I will not lease or rent to disabled attorneys, right? Or to, you know, women attorneys, right? You're not doing anything like that. So no, and it makes complete sense. And I always say to my property manager friends too, you know, if you get, like we were talking about the letters, you know, if you get some letter and you cannot figure out like why your tenant in Ohio, you're getting a letter from some lawyer in like, you know, Wisconsin or Michigan or maybe even farther away, New York. That's a relative, right? That's probably their dad or it's their cousin or, you know, it's people who have lawyers in their families always use them when they need them. So it's another way to kind of think about, is this legit? Like, no, that, that lawyer in New York is not going to come down to Ohio and do whatever the letter is about. But no, that's terrible that that happened to you, that people would get so upset. But no, they— I would have defended you, my friend, because you have every right to do that.

That is okay. I'll give you the funniest. So they were kind of twisting themselves in knots on how to defend their position on this, and I had one of them say, well, in your jurisdiction, source of income discrimination is a thing, and you're discriminating against our source of income because we're attorneys and that's how we make our income.

Not all attorneys make a lot of money. I mean, not all attorneys make a lot of— yeah, that's stupid. That's dumb. Yeah, that's really dumb. That's just You know, like, I personally don't like lawyer jokes. I just never have. I also don't like lawyer shows. Like, when everybody was watching Suits back— first of all, I don't like Meghan Markle, but even aside from Meghan Markle, I'm like, I don't want to watch a show like that, right? But some people take that way too far. You know what I mean? Like, just get over yourself. He can do that because there is a legitimate business reason you can point to for it. And but more than that, it's not a basis for any type of discrimination, not even source of income. That's silly. A law student wouldn't have any income, right? A paralegal isn't going to make— I mean, that's silly.

That's dumb. Yeah. So speaking of source of income, so we, we have a couple cities here where I manage properties in central Ohio that have passed the source of income discrimination protection. So, so basically we have to take Section 8 is what that really means. And I wanted to ask you about some of the nuances here. Because what, of course, you know, that dealing with these housing authorities is a nightmare. And we have all kinds of things that happen when we do accept Section 8. There's massive delays in getting the tenant moved in. There's massive delays in funding. Sometimes they come back and they want to negotiate the rent that we had posted the property at. Sometimes they'll fail it on an inspection for an illegitimate reason. So if we were to decline to move forward in those scenarios, could we be then found in violation of this? Like, just because we have to accept their source of income, does that mean we have to go along with every, every piece and part of all of the other agencies' requirements?

That's a really, really good question. I got to ask you, is Cuyahoga County one of the ones you're dealing with?

Is that—

No, that's up north.

Okay.

I was going to say, you know, Cuyahoga County is so notorious for everything, everything else that comes up. So what I tell people is, is that, you know, if you are not managing any currently operational Section 8, like in other words, if this property is not already a Section 8 property, I have always given the advice that you can decline because I don't think source of income should mean that you're converting, you know, a property that isn't already Section 8 into Section 8. And then so that's one piece of advice I give. Then the second piece is to your question is I've, I've told people, yeah, that it's not— it's just not feasible to do this, this, this, this, these other requirements that either the local housing authority is imposing or HUD is imposing. And that, you know, again, the— it's also you have to always think of business. Who could complain?

Right.

So it would be the tenant. Right. So if the tenant is trying to negotiate a rent down that, you know, to make it fit into a box, or if, you know, HUD is requiring all this extra work to be done, or the agency is, I think there is an ability legally to push back. I do, because source of income, again, just like anything with fair housing, has to be looked at in totality, right? So we don't necessarily have a, like, reasonable accommodation as articulated with source of income as we do, like for example, with disability. But there's a lot of accommodation that goes along with that. But I am, I feel very strongly that if your property is, if someone comes and says, I have Section 8 and you don't have any in your portfolio, I have pushed back successfully saying that you don't have to then take, you know, make a property Section 8. The other thing I'll say, and this may sound bad, but it's just the reality, is that if somebody comes in your criteria and their source of income is there, you're probably gonna fail 'em for something else, right? They probably have a bad credit score or they may have had a bankruptcy or they may have had an eviction. So you can deny them, right, on another one of your, like we were talking about in the beginning, neutral criteria, not even worrying about where their source of income is from, right? With Section 8. Now let me ask you this. Are they taking that in these counties to also mean like, is it just Section 8 or is it like, you know, VA or disability income? You know, sometimes, sometimes like the West Coast, right? They have source of income has been expanded to include if your money comes from the Veterans Administration, if your money comes from, you know, disability. Is it like, is it more like Section 8 focused out there in Ohio?

No, it's more, it's more broad than that. It's more neutral. Yeah, I mean, we're here in Columbus, we're, we're pretty blue. And so I, I tend to be pretty careful about these things. So for example, if somebody comes with a Section 8 voucher, I don't look at their credit score because to me the credit score is related to ability to repay or ability to pay. Okay.

Fair enough.

That's good practice. Okay. As a third party. The other thing I worry about with this is we've been moving more and more to the left with the local magistrates and the cases. So I, I want somebody to push the limit on these things, and maybe I will a little later in life, but I'm just not, not excited about experimenting in this particular area right now.

And I was going to say, in that, going back to our discussion about, you know, just how do we deal with lawsuits, that's exactly the analysis. You're not saying you're afraid to do it, You're just not doing it now. You're reading the room, right? You know that you have judges that might, you know, go a certain way and obviously you don't want, you know, the reputation factor of you never want Channel 2 running down the driveway, you know, Mr. Lohmann, Mr. Lohmann, do you want to talk?

I remember what I was going to say about source of income. I heard someone say that like, because now this includes, like you were saying, disability or Social Security, Well, now you can't charge a late fee because we normally charge a late fee on the 2nd, or it might be the 3rd now. It's like, well, those checks come on the 2nd, so you can't charge a late fee on the 2nd because that's discriminating because their source of income is like this convoluted thing.

I wouldn't— I don't buy that one because, because they, you know what I mean? Because they know when the rent is due, right? And if they, they need to manage their money better, right? You know, source of income, I think, is at the core of it, they're just trying to really help more, make more Section 8 availability. It really goes back probably to more like affordable housing, things like that. But yeah, I don't, I don't buy that about not charging late fees. Yeah, that one I don't think would hold water because, because the actual tenant knows when the rent's due and they need to manage money to be sure. That's what I say.

Yeah. Yeah, 100%. Is there anything property managers are afraid of that they shouldn't be? Or vice versa, that they are not afraid of and they should take a little more seriously?

That's a fantastic question. I think I got to talk about lead-based paint because that's my new soapbox these days. So I think we need to be very afraid of the EPA because right now the EPA is out of control. They, you know, I think we all know that a few years ago we had these two very clear frequently asked questions that were part of the materials, right? And the way that the law around lead-based paint disclosure for realtors and property managers was written, it required some clarity. So EPA gave us two very nice FAQs. One basically said that we as property managers did not have to have any form of certification, right, in remediation, so long as we used somebody who was remediated, who, who was certified, right? So we didn't have to be certified or trained, and we were not liable as PMs again, so long as we had used the someone who was qualified. So those went away. And in recent dealings with the EPA, I've worked very closely with NARPM on these issues and have had actual conversations with the EPA. Someone at the EPA posed to me, well, Ms. Gilroy, You're asking for a clear line. You're asking for just something really clear so that you know exactly what it is you're supposed to do. And you know how later you come back with the best retort you could have thought of? The next day it struck me, I should have went back to that gentleman and said, sir, you had given us that bright line, that clear line. Those FAQs said, as long as you use somebody, I don't have to be licensed to remediate. And I can't get in trouble.

And so the EPA removed—

they removed those FAQs. They're gone, right? So the problem is we now have EPA investigators all over the country with different criteria. I have represented people all over the country in lead-based paint audits, right, where the fines over here could be $20,000, the fines over here could be $1,200. There is no rhyme or reason. And NARPM in particular is working very strenuously to get, in essence, just turn back the hands of time, put those FAQs back, or have clarity as to our liability and our necessity to have to be having the licensure. People are buying property companies, management companies, Peter, left and right, and they're not probably drilling down and looking at those files they're inheriting, right? But part— if someone was buying a company today and they came to me and said, I want to buy a company, I'd be like, go look at every single, you know, lease. Be sure they're completely filled out. Be sure they're legible, that the initials are all there. And I would recommend to everybody listening that they do their own little internal audit of their leases to be sure that everything is compliant and that you have given them The brochures, because those two FAQs that were removed, right? They didn't impact the onboarding part so much, but people do get in trouble for not having the initials when they onboard and giving them that brochure. It's the time when they're making repairs or renovations or painting, right? There's a brochure, or we're not, I was gonna say it's not visual, but there's a second brochure that most people aren't even aware of that is called the RRP, Renovation Repair Painting brochure. And it's a different brochure you have to give out to your tenant before any type of repair is made. Oh, property managers didn't even know. I held it up once, Peter, and someone's like, I've never seen this, Monica. Why they've never seen it? Because their, their licensed contractors were giving them out, not them. But the EPA is just— everyone needs to be on high alert because You have to— I would, I recommend everybody just, like I said, do a little spot, you know, audit because they are coming fast and furious. Nothing is slowing them down. So that to me is something everybody should be extremely concerned about because there's just not any clarity for our industry right now on that. And then the other part of it was things that they are worrying about that they shouldn't be. I think a lot of people going back to like ESAs and all that, everybody understands that, you know what I mean? And they also understand it's okay to say no if you know know that it's a fake letter, right? Like, you know, that someone was telling that story, right, about, you know, that the doctor had been— was a legitimate doctor, but she had been dead for like 5 years and someone was still sending the letters, right, under her letterhead, right? So I think people should not be afraid. I think people worry way too much sometimes about— that's the ESA and that kind of stuff. And, you know, you— this industry is empowered. You're smart, you know that, you know? I'm trying to think if there's anything else. I mean, the lawsuits I see, you know, fall into owners getting mad about something. I know something that they worry about and they really shouldn't is don't ever think your documents can't be short, right? People feel like it's got to be inches and inches of paper. It does not have to be, friends. The Robert Locke model, right, that goes back many, many, many decades. Keep it short, have a lot of addendums, but the actual lease itself, right? And the PMA itself are short. So don't be afraid of short documents, friends. Don't— it doesn't have to be 25 pages, you know?

And don't—

I'll tell you one other thing I see. Some people feel they can't leave their state real estate association documents. No way. Those are good training wheels. Those are good starters. But when you've been doing this, at least when you get to 5, 6 years, You've probably written a whole list anyway of like addendums. Yeah. But when you get to be like 10 years out, 10 years in, go proprietary, write your own. Right? Totally. Or hire somebody to do it. But they get nervous. They don't, oh, I can't leave those. Yes, you can. Come on.

You know better. Yeah. Well, this has been great, Monica. I, I love chatting through these topics with you.

Oh, thank you.

I do too.

Yeah.

Do you have a newsletter or what's the best way for people to keep up with kind of your work?

That's, that's a great question. We don't have a newsletter at this time, and the website does have a great property management page with Lots of information forms and that's the website is just www.gilroyfirm.com and then the backslash would be property management. I've been trying to post more on LinkedIn where I'm going and what I'm doing, but I am a frequent speaker and teacher. So if you just, if you wanna come and hear me speak or you'd like me to come and speak to your organization, I do that now. I, I'm happy, happy to come out and do that for folks. But that's probably the best way is, you know, just go to my website, check it out, see what we've got there in terms of materials and other information you might like. And then just keep an eye out for me, you know, put me, put me in, see where I am next. I'm heading to Orlando next week, but over this last year I've been many, many, many places, different states, and I've just got an invitation yesterday to go to another state. So I'm always happy to come and talk about anything everybody, anybody wants. So, and thanks for having me. This was wonderful. Very, really a nice conversation. So.

Really appreciate it.

Thank you so much.

This is great. Appreciate you coming on and see you around at the property management circuit.

Absolutely.

Thanks so much. All right. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.