Being a landlord is a complex endeavor that can increase your chances of being sued. Landlords must assess their risk exposures and take proactive steps to minimize the potential for being sued by tenants and even prospective tenants.
Consider the following tips for avoiding tenant lawsuits.
Keep the property in good condition and make repairs promptly. In many states, landlords are legally responsible for any failure to keep tenants safe from dangerous conditions on a rental property. Landlords need to keep up with state and local health, building and safety codes, as well as the basic legal requirements for repairing and maintaining a rental property. If tenants request repairs, make them as soon as possible. And be sure to make regular inspections on your own and promptly inform tenants and guests of potential hazards. If a tenant is injured or sustains property damage due to a hazard that the landlord is aware of, the tenant may be able to sue for damages.
Do not discriminate. The Fair Housing Act prohibits a landlord from refusing to rent to a tenant for reasons of race, religion, gender, national origin, disability or familial status. If you even ask questions about any of these factors, you can be investigated by the U.S. Department of Housing and Urban Development (HUD) or you can be sued. A tenant or potential tenant who believes that his or her civil rights have been violated can sue you, which will cost you time and money, even if you are innocent. You need to learn the basics of fair housing laws, and be sure that you treat everyone the same. Your rental property must be accessible to disabled tenants; if your multi-family property was designed and constructed after March 13, 1991, it must comply with the Fair Housing Act’s “design and construction” requirements. In addition, reasonable requests for modifications from a disabled tenant or prospective tenant should be granted. Be sure to keep a detailed log of all accommodation requests and your response.
Remove environmental hazards. Environmental hazards such as lead paint, radon and carbon monoxide that are present on your property should be removed as soon as they are discovered. Require tenants to inform you of any leaks or water damage to prevent mold from developing. All heating systems and appliances must be properly maintained, and you should install carbon monoxide detectors and comply with all federal asbestos testing requirements.
Never violate a tenant’s privacy. You must give a 24-hour notice before entering a rental unit.
Employ careful and consistent business practices. Your standard lease or rental agreement should be state approved or written by a real estate attorney, and all clauses in the lease should be enforced consistently. Develop a list of rules that all tenants must follow and enforce those rules consistently. Do not include any provisions in your rental agreement that could provoke legal action against you.
Follow all eviction laws and procedures. Eviction is a legal action by a landlord to remove a tenant from a rental property. You must go through all of the appropriate legal steps before you remove a tenant from your property or the tenant may have a legal right to damages.
Disclose potential problems or hazards to tenants and prospective tenants.You can be sued if you fail to disclose important information about the property, such as the suspected presence of mold. Other information you must disclose could include information about a registered sex offender living in the area, a recent death in the unit, or whether the unit contains lead-based paint.
Always return the security deposit or document repairs. You are permitted to use a tenant’s security deposit to make repairs to damage that he or she caused after the tenant moves out. In these cases, you must provide the tenant with an itemized list of repairs and their costs. You must also return any unused portion of the security deposit to the tenant, or you can be sued.
Take appropriate security precautions. Landlords have been held legally responsible for crimes that occurred on their properties if they did not provide adequate security. Be sure to comply with any local regulations regarding safety precautions on rental properties. Carefully screen potential tenants and employees.
Have the right insurance. Besides insuring for property damage, landlords need to maintain sufficient liability insurance to protect them from lawsuits brought by a tenant. Liability insurance will cover the cost of litigation and will pay the damage award if necessary. Your basic dwelling property coverage will probably not provide adequate liability protection. You might need to add a personal umbrella policy to your primary residence policy. Umbrella insurance can extend your liability coverage up to $1 million or more.
If you are a landlord, the best defense is a good offense. Purchasing landlords insurance can help you avoid a wide range of expenses resulting from unforeseen losses. You can never eliminate all risks, but you can substantially minimize them if you employ fair, consistent and legally compliant business practices. If you are sued anyway, the right insurance can help protect you.
What are some precautions that you have taken to reduce the risks of being sued by a tenant?