Increasingly, the role of landlord is being played by Average Joes who happen to own a second piece of real estate. While rental lease properties can make great assets, they can also be a legal liability, especially for “Saturday landlords” who have an unrelated full-time job and are trying to eke out some extra income with a rental property on the side. Most states’ landlord-tenant laws are complex and often favor the tenant, so it’s important for landlords to understand the most common legal pitfalls in the industry.
1. Fair Housing Laws
It is illegal for landlords to select one rental application over another on the basis of race, color, national heritage, religion, gender, disability, or familial status. That might sound like an simple law to follow, but it’s easier to violate than you might suspect. For example, if you advertise for a tenant in your local Catholic circular, and nowhere else, you’re in violation of the Fair Housing Act. Or if you have two rental applications, one from an older couple whose children have already moved out and who have slightly lower income, and one from a family of five with several young children who have slightly larger income, you can be found guilty of discrimination if you chose the older couple. Clearly, the older couple is far less likely to cause damage and substantial wear and tear on the rental property, but you’ll need to find a different reason to accept their rental application (for example, maybe they have better credit, or perhaps have a cleaner criminal or eviction history).
2. Self-Help Evictions
One of the realities of signing a lease agreement is that it’s both expensive and time-consuming to go through the eviction process to remove the tenant, no matter how cut and dry the tenants’ breach of lease agreement. For example, when a tenant fails to pay the rent, the landlord must serve the tenant with an eviction notice that gives them even more time to pay the rent, then the landlord must file in rent court, then must wait for a hearing date, then must sit in court all day, then must have an eviction date scheduled, then in some jurisdictions has to give the tenants several more weeks of notice… the process often takes longer than three months. But like it or not, these are the laws your elected officials have enacted, so you must adhere to them, and can’t simply change the locks after the rent has gone unpaid for several weeks.
Claim up to $26,000 per W2 Employee
- Billions of dollars in funding available
- Funds are available to U.S. Businesses NOW
- This is not a loan. These tax credits do not need to be repaid
3. Security Deposits
So you signed a lease agreement, collected a security deposit, and now that the tenant moved out and left the rental property in shambles, you’re keeping the security deposit to pay for it, right? Not so fast. Many states require that landlords place security deposits in a separate bank account, and give the bank account information to the tenant upon signing a lease agreement. Furthermore, many states require that the landlord send the tenant a written disclosure of all monies withheld from the security deposit upon move-out, within a certain time frame (often 15 days). Make sure you’re aware of your state’s laws regarding security deposits.
4. Pet Deposits
A pet deposit is refundable by its very nature, even if you specify it as a separate deposit. In other words, legally-speaking it’s considered part of the security deposit. If you want to charge a non-refundable pet fee, you can, but refer to it in the lease agreement as a non-refundable pet fee due upon signing.
5. Lead Paint Documents
If your rental property was built before 1978, by federal law you must give your tenants both the EPA Lead Paint Pamphlet and a disclosure of your knowledge of lead paint hazards in the rental unit, along with the lease agreement. Many jurisdictions also require lead paint inspections performed, in some cases in between each tenancy.
It’s easy to run afoul of landlord-tenant laws and violate them by technicality, but don’t expect any sympathy from the judge. As a landlord you must follow the law to the letter, or else tenant-friendly laws and judges will leave you exposed and liable, despite your intentions to simply provide a service in exchange for a fee.