REDBOOK Blues – Holiday Harmony

by John Gillespie, WAK Management 

Last month, we addressed the challenges AATC members face dealing with a roommate. This month we’re going to explore four common, operational challenges that occur around the Christmas season:  referral fees, parties, decorations, and guests.  Let’s see which of these opportunities get a Merry Christmas and which ones get a Bah Humbug!

As always, I not an attorney.  The following information is based on industry best practices and is only provided for educational purposes.  Be sure to test the below against the REDBOOK, and, if you need legal advice, be sure to contact one of AATC’s attorney members (https://web.aatcnet.org/Attorneys-Legal-Services-Program).

Challenge # 1:  Resident Referral Fees.  Most of us, residents included, could use a little extra cash during the holidays. We’ve all got gifts to buy. A $5 McDonald’s gift card is nice, but a robin-egg blue, little box from Tiffany is even nicer. We use this need-for-money by offering our current residents cash to refer a friend to our properties.

This marketing effort is mutually beneficial. You lease vacant units during the slow-period of the year. Your resident gets extra holiday spending money. You’ve done something nice for your current residents that increases retention. It’s a win-win-win, right?  Wrong!!

The Texas Real Estate Licensing Act (TRELA) directly prohibits the receiving of a referral fee by an unlicensed person (with the exception allowed for merchandise of $50 or less under Texas Real Estate Commission (TREC) rules). The rule effectively opens the door for owners and management companies to pay anyone referral fees in the form of merchandise (or gift certificates for merchandise not redeemable in cash) valued at $50 or less–but not a payment in any other form.

However, TRELA indirectly prohibits the payment of referral fees to third parties. Therefore, when an owner or unlicensed management company pays a referral fee, they are aiding the third party to violate criminal law and therefore the owner or unlicensed management company can be prosecuted under the Penal Code for aiding and abetting another to commit a criminal offense.

Bottom-line; do not pay residents for referrals. It’s a Bah Humbug!

Challenge # 2:  Party Time. Onsite resident parties are a great way to build community, show residents you appreciate them and get to know folks in a more relaxed environment. Staff parties are also fun and fantastic team-building activity. Parties are great, but alcohol can be a challenge.

The REDBOOK cautions that if you serve alcoholic beverages, proper procedures should be put in place to ensure that persons who drink will not become intoxicated, that persons who drink will not cause problems for other residents in the community, and that minors will not be served.  The REDBOOK also recommends that if alcohol is served, it is always advisable to retain the services of an independent contractor to take responsibility for serving drinks.

Let’s be honest. Some multifamily owners/operators expect their supplier partners to pick up the cost for resident and staff parties. Our vendor members are generous and are always looking for a networking opportunity. Be respectful of your product and service providers. Show your suppliers some holiday cheer by inviting them, not just their expense account, to the party.

By taking the proper precautions and making reasonable decisions, your holiday parties can be safe and enjoyable. And your supplier partners will be cheerful! Merry Christmas!

Challenge # 3:  Decorations. This is Texas; we leave our Christmas lights up year-round! We encourage our residents to get into the Christmas spirit by putting up Christmas trees and decorating their homes. But residents must follow your community rules and policies and paragraphs 19 and 25 of the TAA Lease Contract.  

Natural Christmas trees can be a fire hazard. Placing wreaths and lighting on building exteriors and railing are also hazards. Christmas decorations are great if done within the rules. December is a great time to remind your residents about your community policies and procedures regarding Christmas decorations.

Great communication leads to great decorations! Merry Christmas!

Challenge # 4:  Guests. Whether it is family visiting from out-of-town or children on school vacation, the number of people living at our properties increases during the holidays. December is also a great time to remind your residents about Paragraph 2 and Paragraphs 19 & 20 of the TAA Lease Contract. Paragraph 2 stipulates the number of days a guest may stay without prior approval. If a resident knows that their guest(s) will be staying beyond the days agreed to in Paragraph 2, then they must obtain prior written permission. Paragraphs 19 & 20 states that the leaseholders are responsible for their guest(s)—family, friends, etc.—behavior.

Extra folks mean extra vehicles. More cars and trucks on property mean less parking spaces.  Less parking means more potential conflicts. Paragraph 21 of the TAA Lease Contract allows you to regulate parking. Be sure that you remind your residents about your guest parking procedures. Politely remind your residents that unauthorized vehicles and those parked illegally will be towed.  Reindeer towing Santa’s sleigh is the only towing that residents should be concerned about during the holiday season.

Holidays means family and friends getting together.  Merry Christmas!

Handling referral fees, parties, decorations, and guests in a professional manner ensures holiday harmony for your onsite teams and, more importantly, your residents.

John Gillespie, WAK Management, is the AATC Government Affairs Committee Chair.