10 Ways for Landlords to Avoid Tenant Legal Claims
While many people look to rental properties as a long-term investment and a reliable source of additional income, being a landlord is a complicated endeavor that can greatly increase your chances of being sued.
Landlords must uncover and analyze vulnerabilities and take proactive steps to minimize the potential for being sued by tenants and prospective tenants. If you employ fair, consistent and legally compliant business practices, you can substantially mitigate your risk.
1. Have proper insurance: Maintain sufficient insurance on your property at all times. Besides insuring for property damage, you need to be sure that you are protected against lawsuits brought by a tenant. A tenant can sue you if you do not follow proper eviction procedure, if you make illegal entry into a rental unit, or if a person on the premises is injured because of dangerous conditions. Liability insurance will cover the cost of litigation and will pay the damage award if you are sued.
Be aware that your basic dwelling policy will probably not provide adequate liability insurance. Discuss with your agent if you should purchase umbrella insurance. Umbrella insurance can extend liability coverage up to $1 million or more.
2. Make sure the property is safe and in good condition. In many states landlords are legally responsible for any failure to keep tenants safe from dangerous conditions on a rental property. Be familiar with state and local health, building and safety codes and stay compliant. Learn the basic legal requirements for repairing and maintaining a rental property and follow them. Listen to tenant repair requests and make repairs as soon as possible. Also, be sure to regularly make inspections on your own and promptly inform tenants and others of potential hazards. If a tenant is injured or sustains property damage due to a hazard that the landlord is aware of—but did not warn the tenants–the tenant may be able to sue for compensation.
3. Remove environmental hazards. Environmental hazards that can be present on your property—lead paint, radon, carbon monoxide, etc.—should be removed as soon as they are discovered. Require tenants to report to you any leaks or water damage in order to avoid mold. In addition, properly maintain all heating systems and appliances, and install carbon monoxide detectors. Comply with all federal asbestos testing requirements.
4. Keep the property safe from crime. Courts have found landlords partially responsible for crimes that occur on their properties if they did not provide adequate security. Comply with any local laws regarding safety precautions on rental properties. Also, be sure to carefully screen potential tenants and employees.
5. Do not discriminate against current or potential tenants. The Fair Housing Act prohibits a landlord from refusing to rent a property to a tenant for reasons of race, religion, gender, national origin, disability or familial status. Asking questions about any of these factors is prohibited, and can result in a lawsuit or an investigation by the U.S. Department of Housing and Urban Development (HUD). A tenant or potential tenant who believes that his or her civil rights have been violated can sue you, and even if you are innocent, it will cost you time, money and energy to fight the allegations.
It is vital that you learn the basics of fair housing laws, and remember to treat everyone the same. For this reason you must also be sure that your property is accessible to disabled tenants. Your property must comply with the Fair Housing Act’s “design and construction” requirements, which are applicable to multifamily buildings that were designed and constructed after March 13, 1991. Seriously consider all requests from a disabled tenant or prospective tenant to make modifications to the rental unit. Reasonable requests (bath grab bars, lower cabinets) should be granted.
Keep a detailed log of all accommodation requests and your response.
6. Utilize careful, consistent business practices. Use a written lease or rental agreement that is state approved or written by a real estate attorney. Enforce all lease clauses consistently. Create rules that all tenants must follow, such as a list of prohibited items and behaviors (trampolines, water beds, above ground pools) and enforce the rules consistently. Do not include any illegal provisions in your rental agreement that could lead to you being sued.
7. Always make appropriate disclosures to tenants and prospective tenants. Failure to disclose important information about the property, such as the presence or suspected presence of mold, can lead to a lawsuit. Other vital disclosures include information about a sexual offender living in the area, recent deaths that occurred in the unit, and whether a unit built before 1978 contains lead-based paint.
8. Never violate a tenant’s privacy. You are required to give 24-hour notice before entering a rental unit. After providing notice, you can enter the property to make a repair or inspect the unit.
9. Follow all legally required eviction rules. Eviction is a legal action by a landlord to remove a tenant from a rental property. Each state’s laws regarding eviction are different—be sure you are familiar with your state’s requirements. You must go through the appropriate legal process before you remove a tenant from your property. Otherwise, the tenant may have a legal right to recover damages from you.
10. Always return the security deposit or provide documentation of repairs. After a tenant moves out, you can use the tenant’s security deposit to make repairs to damage that he or she caused. You must provide the tenant with an itemized list of repairs and their costs, and you must return any unused portion of the security deposit to the tenant. If you fail to do so, the tenant can sue you for damages.
What are some of the precautions you have taken at your rental property to protect yourself from lawsuits? Have you even been sued by a tenant? What did you learn?
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