The Law: What You Don’t Know Can Hurt You

The fifth and final basic element of property management is the law and your duty as a rental property owner to observe the applicable laws. All the aspects of the rental property business that we have discussed so far—the owner, the property, the tenant, the money—are impacted by myriads of local, state, and federal laws and regulations. And as you may have heard, ignorance of the law is no excuse.

So you’ve got this house and you want to put it to good financial use by renting it out. It doesn’t seem real complicated. You just want to protect your real estate investment and make a little money in the process. And of course you know that you must obey the same laws as other property owners and business owners, laws dealing with zoning, property use and upkeep, taxes, etc.

But what is unique about the rental business is the fact that you have a special relationship with another person who now legally possesses your property, who may have competing interests to yours, and who is backed up by the authority and punitive power of government. When you acquire a rental house you now must obey an array of laws that apply particularly to this landlord-tenant relationship.

Federal statues impact the local landlord (particularly one who owns multiple properties) primarily through the Fair Housing Act. Covered landlords cannot discriminate in the renting process on the basis of certain protected classes: race, color, religion, national origin, sex, disability, and familial status.

However, it is the state that defines the many specific protections of property owners and of renters in landlord-tenant laws. While regulations differ somewhat from state to state, there are certain matters that are addressed in most jurisdictions and that every landlord needs to keep in mind. Here are some of the common landlord responsibilities:

• Ensure that leases are legally written
• Provide disclosures to tenants about state laws, landlord policies, property hazards, etc.
• Provide tenants with a safe, habitable rental unit
• Respond in a timely manner to tenant reports of needed repairs
• Properly handle security deposits, especially upon lease termination
• Protect the tenant’s right to privacy and provide adequate notice if there is a need to enter the property
• Report any criminal activity of tenants to authorities
• Provide required safety measures such as smoke detectors, window locks, etc.
• Follow proper procedures during an eviction process

You can see why a prudent landlord who manages his or her own properties will want to have an attorney on retainer and consult with them regularly. An obvious alternative is to employ a property management company with a state-licensed broker and staff who are specially trained in the legal issues that impact the landlord business. Such a move contributes mightily to a property owner’s peace of mind.