What does the 2013 Charlotte Rental Registration Ordinance mean for Property Owners?

Hopefully, this will be the last time I'm writing about this rental ordinance for awhile. If you don't feel like you need to understand all the details, but want to understand the potential impact, here's the executive summary:

1) Everyone has to register a rental property
2) There's nothing a property owner or property manager can do to GUARANTEE that your property will not make the list of properties In Need of Remedial Action (INRA)
3) The cost of making the INRA list is substantial

If you want more details, read on.

Charlotte City Council approved a new version of the Rental Registration Ordinance on May 29, 2012. Under the new ordinance every Residential Property Owner must register with the Police Department (CMPD) and provide the following:

1. The address of the property
2. The name, business address, personal address, phone number and email address of the owner.
3. The number of units on the property.
4. Proof of registration must be posted in a conspicuous place accessible at all times to the tenant.

Each quarter CMPD shall determine the Disorder Risk Threshold for each Residential Rental Property Category during the previous calendar quarter. The Disorder Risk Threshold is the Disorder Activity Count for the Property that is at the 96th percentile of properties in the Category. The Disorder Activity Count is a calculation that represents the amount of activity occurring within a specified time period in or on the property.

If a property has a Disorder Activity Count that falls above the Disorder Risk Threshold, the Owner will be notified of a Mandatory Initial Meeting. At this initial meeting the police official and the Owner will review:

1. the data that established the Disorder Activity Count
2. Any relevant evidence provided by the Owner to dispute the data.
3. Whether or not the Owner should have known that the Disorder Activity was occurring on the property.

If it is found that the property falls above the Disorder Risk Threshold, then the property will be designated In Need of Remedial Action (INRA). The Owner and police official shall develop and sign a Remedial Action Plan, the Owner will pay an administrative fee ($335 as of this writing) and the property will be set for a 3 month review date. See our blog on the Remedial Action Plan for the requirements of this plan.

As of this writing it is unclear what the penalties will be for non-compliance, although non-compliance will be considered a misdemeanor.

So what does this all mean for Rental Property Owners? In a nutshell, CMPD believes it is the Owner's responsibility to ensure that tenants behave properly and, furthermore, don't call the police when there is a problem at their home. Unfortunately, there is no way for anyone to guarantee that a property won't exceed the Disorder Risk Threshold. A property owner should understand the risks and costs of administering this program and factor this into their investment return calculations.

An experienced property manager can mitigate the risk factors and tell you which neighborhoods are likely to have properties that may fall under this program. Again, this doesn't mean that you shouldn't own homes in these neighborhoods, but you must be aware of the impact of this ordinance and its effect on your returns. Inexperienced owners and managers may decide that the impact of these programs isn't worth the risk. This may create an opportunity for experienced investors who understand the Ordinance and are proactive in working with the local police officers. Please contact Alarca Realty at info@alarca.com if you have further questions.