10 Legal Mistakes Landlords Should Avoid
Most property owners are in the rental business to make money. They buy investment properties with the specific intent to create profit, yet many landlords make common mistakes that affect their bottom line. Being a successful landlord involves more than collecting rent payments.
State landlord-tenant laws govern many aspects of the landlord-tenant relationship. Failure to follow these laws can lead to severe repercussions. For these reasons, landlords should avoid common mistakes.
This article explores 10 common mistakes landlords make, along with tips on how to avoid these pitfalls.
Failing to Screen New Tenants Adequately
Thoroughly screening new tenants can help landlords avoid significant issues throughout the term of the lease, such as nonpayment of rent or damage to property. Currently, landlords have many tools at their disposal with which to screen potential tenants. For example, they can order a credit report to determine if the prospective tenant has a history of paying their debts on time.
Many landlords and property managers also rely on references to gauge how the prospective tenant will behave in a new rental. They can contact former landlords to learn if the prospective tenant paid their rent in a timely manner and took care of the rental property.
Asking Discriminatory Questions
Under the federal Fair Housing Act, a landlord or property manager cannot refuse to rent a property for discriminatory reasons such as:
- National origin
- Gender identity
- Sexual orientation
- Familial status
Landlords should avoid any questions or conversations that may suggest discriminatory intent. Tenant screenings, including rental applications, can include the following non-discriminatory things:
- Background checks
- Job history
- Past evictions
Drafting a Lease Agreement
A lease agreement is a binding legal contract. Landlords should refrain from drafting their agreements to avoid harming their interests.
A real estate attorney understands real estate law and can review the terms of the lease. This protects the landlord and helps them avoid common landlord mistakes.
For example, all leases should include the following:
- The amount of rent
- When rent is due
- Late fees, if any
- Term of tenancy
Illegal Provisions in a Rental Agreement
A residential lease agreement shouldn't include provisions that violate state or federal laws.
A landlord should avoid the following common mistakes:
- Placing discriminatory conditions in a rental agreement
- Requiring the tenant to waive the right to a refund of a security deposit
- Forcing a renter to waive their right to sue the landlord
Any illegal provisions may result in a lawsuit for monetary damages.
Failing to Make Disclosures to Prospective Tenants
Every state has different disclosure requirements for new tenants.
Standard disclosures include the following:
- Notice of mold
- Notification of known sex offenders living in the area
- For properties built before 1978, whether the rental unit contains lead-based paint
Not Using a Property Management Company
Managing a rental property involves more than generating passive income. Landlords have to screen new tenants, make repairs, and complete renovations. Trying to do it alone is often one of the biggest mistakes a landlord can make. With so many responsibilities, it's easy to miss something. A reputable property management company can help with many of these tasks.
A property management company can manage vacancies by screening potential tenants and checking their credit reports. They can also help the landlord set the best rental price for vacancies and take care of property maintenance. New landlords, in particular, should consider a property management company because they have the know-how. They understand local laws and can help the landlord navigate these laws.
Refusing To Make Repairs
Landlords must repair things like plumbing and electricity, even if the rental agreement doesn't define these responsibilities.
Most states impose state imposes an "implied warranty of habitability" on all rental premises.
A habitable rental unit provides the following:
- Clean water
- A structurally safe roof
If the landlord ignores the maintenance issues, the tenant can do one of the following:
- Fix the problem and deduct the cost from the rent
- Live with the problem and proportionately abate rent for loss of use
- Move out
- Report the violation to a state building inspector
Landlords should make these significant repairs within a reasonable time of a request to avoid a lawsuit against them.
Disregarding a Tenant's Right to Privacy
A tenant always has a right to privacy. In most states, a landlord must give a minimum 24-hour written notice before entering a tenant's rental unit. A landlord can enter, with notice, to do one of the following:
- Show the unit to a prospective new tenant
- Do repairs or fix maintenance issues
- Inspect the property
Notice is unnecessary during an emergency, such as a fire or burst pipe. A landlord may cooperate with legal authorities under a court-sanctioned warrant to enter the rental premises.
Ignoring Eviction Rules
The following actions can result in an eviction:
- Nonpayment of rent
- Failure to vacate the property after a lease agreement ends
- Violating a provision in the rental contract
- Causing damage to the rental property
Landlords cannot rely on self-help to evict a tenant; they must use the eviction process. The landlord must give the tenant a termination notice before starting the eviction process. If the landlord tries to remove the tenant without a court order, a court can award damages to the tenant.
Keeping Security Deposits
Many lease agreements require a security deposit to cover possible damage caused by the tenant. The security deposit can also cover the missing rent if a renter fails to pay. The landlord can use the security deposit to clean the property or fix damage caused by the tenant.
If the landlord uses the security deposit, they must do the following:
- Give the tenant a detailed, itemized list of deductions
- Return the balance of the deposit to the tenant
If the landlord fails to do either, the tenant can contact their local housing agency for help.
Still Have Questions? Get Help From an Expert
Rental property can prove to be an excellent real estate investment because it can generate consistent rental income. A real estate attorney can help ensure the rental property provides this income. If you are a landlord or considering purchasing a rental property, consider speaking to an experienced local real estate attorney first.
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