THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, October 8, 1994 TAG: 9410060367
SECTION: REAL ESTATE WEEKLY PAGE: 02 EDITION: FINAL
COLUMN: ABOUT THE OUTER BANKS
SOURCE: Chris Kidder
LENGTH: Medium: 96 lines
For some vacation cottage owners, Outer Banks properties are investments, used only sparingly for family retreats. For others, cottages are second homes from the start, shared for a brief season with renters for a little extra cash.
Either way, if properly managed, vacation cottage rentals can be winning propositions for owners as well as renters. Both enjoy the convenience and luxury of homes away from home.
You might think being an absentee landlord sounds risky or hard work or both. You'll be pleasantly surprised to learn that local real estate companies have this vacation rental business down pat. You can find companies that will run the whole show for you: renting the cottage, collecting the rent, managing maintenance and repairs, providing monthly financial statements.
But if you think you being an absentee landlord is a snap, think again. Finding a good rental property, understanding the market and then hiring the rental company you want to trust with your investment takes time.
In last week's column, we looked at things homeowners should consider when choosing a property management company.
But selecting the right management company isn't enough. Before you sign a property management contract, you should know what North Carolina real estate laws apply to you, the property owner, and to your real estate agent.
The legal staff at the North Carolina Real Estate Commission knows of no rental guide spelling out legal responsibilities for vacation cottage owners. Based on conversations with the commission's staff, rental agents and cottage owners, the following subjects seem to be a couple of the most misunderstood.
As a cottage owner, you need to understand the legal concept of agency. You are the client. When you sign a contract for a real estate broker to manage your vacation property, that broker is your agent: he or she works for you.
The broker signs contracts with renters (renters are the real estate agent's customers) on your behalf.
Copies of contracts must be delivered to you within five days unless the broker: (1) has your permission to enter into and retain the rental agreements; (2) executes the agreements on preprinted forms approved by you; (3) provides copies of the unaltered agreements promptly upon request (renter information cannot be blocked out); and (4) gives you a summary of rental activity within 45 days.
You'll find that vacation rental companies follow the procedures outlined above because of the large number of weekly rental agreements they handle.
I've heard from cottage owners who claim their rentals companies will not provide copies of contracts when requested; or, when they do provide copies, block out customer information. This is against the law, said Tom Miller, chief legal counsel for the real estate commission. ``If the agent provides a copy of the contract, it must be unadulterated.''
As a cottage owner, you need to understand that hiring a property management company doesn't preclude your liability for property damage, theft or personal injury.
Although contracts give property managers, their employees and their customers access to your property, should anything go wrong, the buck stops with you and your insurer.
A reader called last week asking if property management companies are responsible for thefts that occur while a cottage is in their rental program. He wanted to know if employees had to be bonded.
I called Tim Cafferty, president of the Dare County Board of Realtors and property manager for Kitty Hawk Rentals. ``Every agency works differently,'' he said.
North Carolina law does not require bonding. Most rental companies do not bond their own employees. Most cleaning companies do. If a rental company hires another company to clean cottages, the cleaning crew is probably bonded.
Bonded or not, establishing who stole the salt shaker is the hard part, says Cafferty. Some rental companies have cottage-by-cottage check lists for small appliances and other necessary items but there's no way to check every cottage for every item each week.
Most thefts aren't discovered until cottage owners arrive on the scene, said Cafferty, and they rarely involve large items. ``It's more irritating than anything else,'' he said.
Cafferty said his company handles about 6,000 rental contracts a year and has only ``18 or 20'' instances of theft. ``When you consider the amount of rentals, theft is a very infrequent problem.''
Hiring a property management company that collects security deposits from its renters is one protection, said Cafferty. Most companies charge an additional fee for handling the deposits and the detailed follow-up inspections.
But security deposits are more useful for damage, he explained. It's easier to prove than theft.
The North Carolina Residential Rental Agreements Act limits security deposits for week-to-week tenancies to two weeks' rent. The law requires deposits to be kept in an insured trust account and refunded or accounted for within 30 days after termination of a lease.
For more information about North Carolina real estate law, contact the North Carolina Real Estate Commission, P.O. Box 17100, Raleigh, N.C. 27619, or phone 919-733-9580, by CNB