Generational shifts changing relationships between landlords, tenants, HOAs

By MARK SANDLIN
Guest columnist

Monday, Aug. 29, 2016 — Everyone’s a critic in the information age. Businesses must navigate reputation management at a time when there are more platforms than ever for positive and negative reviews. The multi-family housing industry is no different, especially with the heavy demand for rentals.

MARK J. SANDLIN

Axiometrics, a real estate data firm found that the national occupancy rate for apartments was near an all-time high in May at 95.2%. CNBC speculated last year that “millennials, finally finding jobs and moving out of group or family homes, are pushing rental demand; downsizing baby boomers, many of them soured on homeownership by losses from the housing crash, are doing the same.”

With tech-savvy millennials in the marketplace, ApartmentRatings.com, Yelp, and others are a go-to resource for prospective renters. An online review or social media posting can set a tone, both positive and negative for customers considering a housing rental. Landlords and property management companies are allocating serious dollars toward reputation management, high ratings, and positive reviews.

Yet some in the real estate industry are taking ham-handed approaches in an attempt to squelch or silence negative reviews through restrictive covenants. Some landlords and property management firms have begun pushing original lease agreements and lease addendums with non-disparagement clauses. An extreme example is one Orlando-area complex that attempted to circulate a “social media addendum” whereby tenants would incur a $10,000 fine for posting negative reviews. In addition, the management company was seeking to force applicants to sign over all rights to photographs taken on the property.

As one can imagine, the reaction of tenants was not good. Residents criticized management with withering online reviews, and local and national news organizations flooded the company with calls. This was the exact opposite result the management desired. In the tumult, the company was forced to rescind the addendum. The complex now has a black eye of sorts on Yelp and other sites.

In another example of apartment management companies wading into restrictive covenants regarding social media, one management Salt Lake City firm circulated an addendum that required tenants to “Like” the complex on Facebook, or be found in breach of their rental agreement. The company also faced a firestorm and retracted the addendum.

While case law is still emerging on such non-disparagement or copyright transfers involving online reviews and content, judges typically have been hesitant to chill free speech and expression through such channels.

Still, lessees need to think twice before signing any documents and read the fine print on social media or non-disparagement clauses. While enforceability and intent are sometimes in question in instances of possible flagrant contractual overreach, entering into a legal arrangement brings responsibility and privileges.

Renters & landlords are not the only entities navigating new platforms.

For residential homeowners’ associations, social media sites offer convenience and connectivity for members. More associations are turning to online channels, but proper governance and procedures need to be in place before a board rolls these features out to members. Electronic notice and voting for meetings is increasingly common, but should not be confused with proper notification and posting of meetings. An association should define membership, privacy, access, and disclaimer requirements. A use policy, including a code of conduct that prohibits abusive language, is critical. There are often third-party administration concerns and copyright limitations with the big social networking sites. It’s important to consider these factors before choosing the right platform. Often an industry-specific site offers better tools than the bigger players.

Even if tenants or members haven’t signed new clauses that specifically address social networking or online communication, all parties should be well-aware that false statements of fact can be challenged as defamation in court.

Mark J. Sandlin is a Partner with Goldberg Simpson and part of his practice is in real estate matters Kentucky. He often advises Kentucky condominium and homeowner association boards of directors on a variety of legal issues. Sandlin also focuses on commercial litigation, foreclosures, bankruptcy, and title litigation. He can be reached at msandlin@goldbergsimpson.com

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