What Property Managers Need to Know When Working with Military Service Members

May 24Amanda Farrell Amanda Farrell

Active Service Members and Property Managers

 

As a property manager, you’ll be faced with some clients who need special accommodations due to extenuating circumstances. Some management companies may see this as an opportunity to appeal to a niche market while in other cases you’ll be bound by law to meet these accommodations.

 

For United States service members, property managers serve an important role in helping them to manage their property while on active duty. For property managers with service members as tenants, it’s also important to remember the Service member Civil Relief Act (SCRA) gives these tenants a right to terminate leases early under circumstances that would otherwise constitute breach of contract.

 

Property managers should familiarize themselves with the the SCRA in order to better serve their clients.

 

Here are some things property managers should keep in mind whether they are managing property on behalf of service members or if their tenants are in the military.

 

Managing property for Active Service Members

Real estate is a great investment for almost anyone. For service members and veterans there are additional benefits to buying real estate.

 

VA loans are originated by private lenders, but the Department of Veteran Affairs backs the loan. Eligible borrowers are required to live in home for one year, but they can also buy up to a four-flex with each purchase.

 

Important factors to know about VA loans

  • No down payment
  • Mortgage rates lower than traditional bank financing
  • Private Mortgage Insurance isn’t required
  • More lenient debt-to-income ratio is used to qualify borrowers
  • No credit score minimum
  • Must live in the home as primary residence for a year
  • If a new military assignment is given before the one-year requirement, a service member may purchase again within a year of the previous purchase at the new assigned location
  • There are loan entitlements of either $36000 or 25% of the loan amount to go toward a down payment. Anything over the entitlement limit must be covered by the borrower.
  • Loan limits apply. The loan limit is the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment.
  • There is no cap for how much a service member can borrow, but the limit is the amount of liability the VA will assume in case of default.
  • When purchasing multi-family unit, the value of for one-unit is applied for the loan limit.

 

While VA loans are more generous than other conventional and FHA loans, a home loan is still consider a liability, so those in the military should weight carefully the pros and cons based on their specific circumstances.

 

Some states are more desirable than others for military members to buy real estate. States with low property taxes and areas where renting often cost more than a mortgage are good indications that buying may be worth it.

 

Ways to market your property management services to Military families

If your company works in a state with a major military deployment hub, this is a great potential client to pursue. For Realty companies that help service members find their home, it’s easy to pivot into becoming the property manager after building that rapport.

 

For other property management companies look to gain this clientele, here are some things to consider:

 

  • 24/7 online account access
  • On-call property managers available whenever needed to answer questions
  • Clear up front pricing with a veteran discount available
  • Video documentation of the condition of the home in addition to traditional written reports
  • Monthly reports of expenses and revenue

 

Highlight the value of working with your company. The stress of maintenance, finding new tenants, writing leases, and managing showings isn’t an easy task for anyone, especially someone who is assigned to a new location or deployed. Working with a professional property manager helps put minds at ease.

 

Because most military families are buying near the base, it often makes sense to turn that house into income instead of selling. Another military member or family is often the perfect tenant for these homeowners.

 

 

Managing tenants that are active service members

The Service Member Civil Relief Act provides military members certain rights as tenants. The contractual obligations to the United States military outweighs the contractual obligations to a land lord. As a result, this act and other laws are meant to accommodate the service members in their civil affairs while answering the call of duty. As the U.S. Supreme Court eloquently stated, these laws are “to protect those who have obligated to drop their own affairs to take up the burdens of the nation.”

 

Under section 535, a military member has the right to terminate a lease should they receive reassignment order after signing. The extent and nature of this right to terminate is often a source of contention between land lord/ property manager and their military tenants. Before the SCRA, it was known as the Soldiers’ and Sailors’ Civil Relief Act. In 2003, there was a title change and major overhaul expanding and clarifying the circumstances under which a lease can be terminated.

 

When and how can a service member terminate a lease?

The SCRA gives service members the right to terminate a lease executed prior to military service. It also added the right to terminate a lease after military service where (a) the tenant thereafter received permanent change of station orders or (b) received orders to deploy in excess of 90 days.

 

Termination of lease due to change of station or deployment

The date that the orders are to be executed is irrelevant. What matters is the date that the orders are received. The tenant may not terminate the lease after the receipt of permanent change of station orders or deployment orders under the SCRA.

 

The tenant is also required to present the proper paperwork to terminate the lease with a timely manner. The date to initiate the termination begins when the orders are received and, theoretically, the military tenant may terminate a lease several months, even years prior to the date that the orders are to be executed.

 

Termination of lease due to discharge

There are also specific rules regarding termination of lease due to discharge. For most military members, they will complete their enlistment successfully with an honorable or general discharge. Only these two administrative discharges give rise to a lease termination right under the SCRA. For those with an honorable discharge or who are discharged “under honorable conditions,” a certificate stating this will be issued.

 

The other two types of discharge are Under Other Than Honorable Condition and Uncharacterized. There is no right to terminate for these last two. Should a tenant not have an honorable discharge certificate, the type of the discharge will be indication on the form called DD Form 214.

 

The SCRA also has specific rules on how landlords or property managers may dispose of the personal property of a military tenant or enforcing a storage lien without a court order. Should a property manager take any action known to be contrary to the SCRA, it is a criminal offense punishable by a fine and up to a year in jail.

 

Be sure read more details of the SCRA and the rights and related procedures here.