What Every Landlord Should Know to Stay Out of Legal Trouble
Owning rental property is a huge responsibility. One wrong step (like a bad lease clause, a self-help eviction, or improperly withheld deposit) can spark a lawsuit that eats your profits, time, and peace of mind. Lawsuits are expensive financially, but they can also harm your reputation. Thankfully, most legal trouble is avoidable.
Here are five of the most common mistakes landlords make and how to avoid them.
1. Bad lease agreements
Getting your paperwork wrong is the easiest way to get dragged into court. The leases you create are supposed to be a shield. If you have generic or outdated leases that don’t align with state and local laws, one wrong move can cost you everything in court. Many landlords use generic lease templates they find for free online, but they don’t always reflect the law. That will work against you in court.
To avoid falling into this trap, don’t use any lease templates you find online – paid or free. Always have a lawyer draft and review your lease agreements. If a clause in your lease conflicts with state law, a court will likely consider it unenforceable, and that can be problematic.
2. Not hiring a property manager
Many landlords end up getting sued when they break the law without realizing it. That’s why trying to self-manage your properties without solid legal and operational experience is a liability. Many first-time landlords know they can hire a property manager but skip this step because of the cost.
However, the potential legal pitfalls make property management worth the extra expense. For instance, Houston property management company Green Residential provides landlords with iron-clad lease agreements written by attorneys. Their clients know they’re protected by clauses that align with state and local laws. If they do get sued, they don’t have to worry about the court tearing apart their lease.
Many landlords are overwhelmed by compliance issues, and nearly half have been fined or threatened with legal action over issues like fair housing violations, security deposits, and maintenance delays. Don’t think it can’t happen to you. Hiring a property management company that works with attorneys is the best way to protect yourself legally.
3. Fair housing violations and discrimination
These violations are extremely easy for landlords to commit, even accidentally. For instance, if you treat applicants inconsistently, you give them ammunition for a civil rights claim, even if it was just your lack of organization.
There are both federal and state fair housing laws that impose strict limits on how you can screen tenants and reject applications. It’s illegal to discriminate based on race, color, national origin, religion, sex, family status, disability, and any other protected class. Many landlords unknowingly violate this law when asking questions that seem well-meaning. For example, asking an applicant if they’re married or have kids can be seen as discriminatory.
It’s equally common for landlords to unknowingly violate the law that requires accepting service animals and emotional support animals (ESAs). Some believe ESAs are optional or that just because someone got their ESA letter online automatically means it’s fake. Neither of those assumptions are true.
Since discrimination claims often come with statutory damages, attorney fees, and high court costs, it’s crucial to be knowledgeable and consistent to avoid this type of violation.
4. Mishandling a security deposit
Disputes over security deposits are one of the most common reasons for lawsuits. Most states have laws that govern when and how you must return a deposit and what deductions are legal. If you violate the law and get sued, the court can award double or triple the tenant’s deposit in damages.
Always consult an attorney on the timeline for returning a deposit and deducting amounts for repairs or unpaid rent. In some states, you need to supply an itemized list, and some even require receipts for the work performed.
5. Illegal evictions and lockouts
No matter how tempting it is to change the locks, remove a tenant’s possessions, or shut off utilities to force someone out, that’s playing with fire. Landlord-tenant law in nearly every state and local jurisdiction prohibits self-help evictions. You must use legal procedures to evict a tenant; otherwise, you are subject to damages.
Be proactive to stay protected
Legal trouble doesn’t just come from dramatic situations. Often, lawsuits are filed because of routine mistakes and disorganized systems. Having a solid lease and a lawyer on your side will go a long way in helping you stay compliant with landlord-tenant laws. It’s the best way to stay legal, keep tenants happy, and avoid lawsuits altogether.
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