10 Common Mistakes That Cost Landlords Money and Cause Legal Trouble

Most property owners purchase rental property to make money. True, investment properties can generate significant profit. Yet many landlords make common mistakes that hurt their bottom line. After all, 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. Keep reading to learn 10 common mistakes that landlords make that cost them money and expose them to legal liability.

If you need help navigating a legal issue regarding a rental property, consider consulting a local landlord-tenant attorney. Rules vary by state (and even city), and an expert attorney can advise on how to best protect your business and avoid issues. 

Mistake #1: Failing to Screen New Tenants Adequately

Thoroughly screening new tenants can help landlords avoid significant issues throughout the lease term, such as nonpayment of rent or property damage. Landlords currently have many tools 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 whether the prospective tenant paid rent on time and took care of the rental property.

Mistake #2: 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:

• Race
• Religion
• 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
• Income
• Job history
• Past evictions

Mistake #3: Drafting a Lease Agreement Without Legal Help

A lease agreement is a binding legal contract. Landlords should avoid drafting their own agreements to protect their interests.

A real estate attorney understands real estate law and can review the lease terms. 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

Mistake #4: Including 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.

Mistake #5: 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

Mistake #6: 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 your business run smoothly and reduce your stress. Many successful rental property owners also have expert legal help on their side. Find an experienced attorney near you.

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 and handle 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 landlords navigate them.

Mistake #7: Refusing or Delaying Repairs

Landlords must repair things like plumbing and electricity, even if the rental agreement doesn’t define these responsibilities.

Most states impose an “implied warranty of habitability” on all rental premises.

A habitable rental unit provides the following:

• Heating
• Plumbing
• Clean water
• A structurally safe roof
• Electricity

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 after a request to avoid a lawsuit.

Mistake #8: Violating a Tenant’s Right to Privacy

A tenant always has a right to privacy. In most states, a landlord must give at least 24 hours’ 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.

Mistake #9: 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 follow the eviction process in the city or state where the rental is located. 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.

Mistake #10: Keeping Security Deposits When You Shouldn’t

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. They can even file a lawsuit.

Protect Your Business and Avoid Mistakes: Get Legal Help

Rental property can prove to be an excellent real estate investment because it can generate consistent rental income. A local attorney can help ensure the rental property provides this income. If you are a landlord or considering purchasing a rental property, consider getting legal help first. This can help you avoid major issues later.

FindLaw’s directory of landlord-tenant lawyers can connect you with qualified legal help near you. Because state law is relevant, your attorney should be licensed in the state where your property is. Enter your city or ZIP code for a list of legal professionals in your area. Your search results will also show important details about prospective attorneys, like ratings, areas of practice, and whether they offer free consultations.