As a landlord, it is critical to protect yourself and your property from a lawsuit.
Not only are lawsuits stressful, but they can also be both financially and emotionally draining as well.
Anytime you choose to rent out your property, you are opening yourself up for the risk, which is why it’s essential to do your due diligence to avoid legal battles as much as you are able.
In this article, you will learn things to avoid and things to do when protecting yourself from a lawsuit.
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We know you want to avoid being sued when renting your home. No one wants a lawsuit. As if you didn’t know that. Since it is best to avoid it, let’s look at some sure-fire ways that will land you in court with a disgruntled resident.
Of course, remember that we are providing this as a guideline. We are not attorneys. Please, always consult competent legal counsel before you make any decisions.
Keeping that disclaimer in mind, here’s how to protect your home from a lawsuit.
We’ll start by addressing a few items you always want to try to avoid as a landlord.
The first topic to discuss is geared more towards those who own more than a few houses. Inconsistent underwriting could land you in rough waters with Fair Housing Laws – which continue to be reinterpreted today.
You can’t discriminate against certain “protected classes” of people. Everybody knows that and works hard to follow that.
The truth is, all we want is someone who will pay the rent on time and take care of the home as a landlord. But, few people know that you can unintentionally violate a fair housing law and still get into loads of trouble.
You can create specific policies (again unintentionally) which discriminate against certain “protected classes” of people; and, thus, violate Fair Housing Laws.
We’ve had residents who trashed the home attempt to sue us for their security deposit – plus pain and anguish. Great notes from the move-in and the move-out, along with some pictures goes a long way towards making your case for keeping the deposit.
If you show up in court without those items, it is your word against the residents’. Unfortunately, that is a situation where you will not win. To avoid this type of issue happening, make sure you do a great job documenting everything before a resident moves into the home.
Then, once the resident has moved out, make sure you document everything again and meticulously compare it to your pictures and notes from the move-in. Doing your job here will save you a lot of embarrassment in front of a judge.
It is almost silly to say that you need to follow the law to keep yourself from being sued, but we see far too many vigilante landlords who believe they can simply remove the front door when the resident isn’t paying the rent.
Judges don’t think this is a silly act to get someone out. Someone could owe you thousands of dollars and still sue you, and in this situation, they would win. It’s hard to believe. It is crucial for you to know and abide by your landlord-tenant law. It’s not uncommon to hear judges say, “Not knowing the law is not an excuse for not following it.”
Now that you know the things to avoid, let’s take a closer look at some helpful tips to prevent lawsuits.
Of course, you’ll want to make sure you have insurance to cover any property damage, but you should also have the proper liability insurance as well. Having sufficient insurance will help protect landlords from any potential legal action taken against them by a resident.
Liability insurance will cover the damage award, if necessary, as well as the cost of litigation. As you can imagine, these costs can add up quickly, so having the right insurance can be crucial.
Owning a rental property has many tax benefits, but with it comes additional tax responsibilities as well. To avoid any tax issues, and therefore lawsuits, make sure you have a thorough recordkeeping system in place. Here you should be tracking any and all income and expenses for your property.
Always be sure to talk to a tax and legal professional regarding your taxes so you can know you are filing everything correctly.
As previously mentioned, the Fair Housing Act prohibits any landlord from discriminating against a current or potential resident due to any of the following classifications:
Even asking questions regarding any of these identifications could lead to an investigation. As a landlord, be sure to tread lightly not to discriminate both knowingly or unknowingly.
You are permitted to use the security deposit towards making repairs in your property that were necessary due to the resident. If you do use any of these funds, you must provide documentation of these repairs.
Any unused amount of the security deposit must be returned to the resident promptly, as dictated by local laws. Otherwise, legal action could take place.
Finding yourself in court staring up at a judge who thinks you are the problem, not the resident, is not a fun position to be in. Make sure you follow these steps to keep from landing yourself in court due to your rental.
Protect yourself and your property with the power of knowledge. Having a good understanding of what to avoid and what you should be doing as a landlord to avoid being sued is incredibly helpful.
Now, you no longer have to ask yourself how to protect your home from a lawsuit.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.
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