With landlords, staying out of legal trouble is a lot less costly and aggravating than getting out of legal trouble. Here are ten preventive measures that can help you avoid lawsuits and defend yourself when such lawsuits are unavoidable.
Act beyond reproach
Complying with the law is the bare minimum. To stay out of legal trouble, act ethically — above the law and beyond reproach, such as:
Screen applicants using only those characteristics that matter
Treat residents with respect and consideration.
Focus on customer satisfaction by putting the residents’ needs before your own.
Treat contractors, employees, and other personnel the way you would like to be treated.
Work only with contractors, employees, and other personnel who operate ethically.
Screen applicants carefully
To avoid trouble, keep potential troublemakers out of your rental units.
Substandard renters can hurt your business in several ways:
Through lost rent and the time and aggravation of collecting rent
By damaging your property and increasing your maintenance and repair costs
Through the loss of good residents
By introducing a criminal element to your property that increases your exposure to lawsuits
Through the time and expense of getting the bad renters to leave
By giving your rental property a bad reputation that keeps potentially good residents from applying
Keep abreast of changing laws
Laws are subject to change at all levels and ignorance of the law is no excuse for breaking it. One of the best ways to keep abreast of changing laws is to join a state or local apartment association that informs members of legislative updates. If you can’t find a state or local apartment association, head to the National Apartment Association’s website and search for an affiliate.
Write a solid rental contract
Your rental contract establishes the resident’s legal rights and obligations. Review your rental contract carefully and have a qualified local attorney review it to make sure the contract terms are clear, correct, and comprehensive, and that they comply with federal, state, and local laws.
A resident who violates the terms of a rental contract that are clearly presented in proper legal language will have a difficult time proving her case in court.
Comply with Fair Housing Laws
As a landlord, you want to target your marketing and advertising to quality renters and then screen out any applicants that are likely to test your patience. However, you can’t disqualify applicants or treat residents differently based on any of the following federally protected classes:
Race
Color
Religion
National origin
Sex
Familial status
Disability
Your state or municipality may specify additional protected classes.
Maintain your property
Poorly maintained property can lead to legal trouble in several ways, including the following:
Stairs, walkways, and handrails in disrepair can lead to trips and falls and potential personal injury lawsuits.
Failing to address issues that make a unit uninhabitable give the resident the right to break the lease or withhold a portion or all of the rent payment.
Burned-out lights in parking lots, entryways, and other common areas increases the risk of injury and crime.
Poorly maintained plumbing can cause health risks.
Broken locks, screens, and windows make it easier for criminals to gain unauthorized access to rental units.
Keep a paper trail
From the time a resident submits an application until the day she moves out, document all communications in writing.
Keep a file for every resident that includes the following items:
Signed rental application
Your screening policy, which includes criteria you use to screen applicants
Signed copies of the rental contract and other agreements, along with amendments and addenda to agreements
A signed Move-In/Move-Out checklist that documents the condition of the property prior to the resident moving in and after the resident has moved out along with before and after photographs
Maintenance records, including resident requests
Incident reports
Resident complaints and your responses
All correspondence to and from the resident
Record of all relevant spoken agreements
All legal notices, including late-rent and termination notices
Follow legal eviction procedures
The eviction process is long, costly, and aggravating, so landlords sometimes perform self-help or constructive evictions. They turn off the heat, electricity, or water; change the locks; or harass the resident until she moves out “voluntarily.” Self-help eviction is a breach of the rental contract. It gives the resident the right to move out without paying additional rent. Courts even may award additional damages to the departing resident.
Practice a reasonable, legal security deposit policy
Disagreement and confusion over security deposits are often at the root of disputes between landlords and residents. Here are a few recommendations to avoid disputes:
Charge a security deposit that’s within any legal limit set by state or local statute or no more than one or two months’ rent if your state and locality don’t specify a limit.
Place security deposits in a separate, interest-earning account that’s used exclusively for security deposits, even if your state or city doesn’t require separate deposits or accounts that accrue interest.
Deduct only damages, cleaning, and unpaid rent from the security deposit.
Promptly return any unused portion of the security deposit to the resident and an itemized statement showing what the deposit paid for.
Find out the state and local rules that govern security deposits before establishing your policy.
Promise less, deliver more
Managing resident expectations helps keep them satisfied. For example, if you lead a resident to believe that you’ll refund her security deposit in full as long as nothing’s damaged when she moves out, and you deduct a cleaning fee from the damage deposit, the resident will understandably be confused and upset and may even take legal action against you.
Be especially careful when marketing and advertising your units.