Landlord's Legal Kit For Dummies E-Book

Robert S. Griswold

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 656

Veröffentlichungsjahr: 2014

Beschreibung

The landlord's essential guide to residential rental law Landlord's Legal Kit For Dummies is a comprehensive guide to the laws and legalities of renting property. This one-stop legal reference provides both guidance and the correct forms that help landlords avoid tenant issues, which could lead to legal ramifications. From screening potential tenants to handling your own insurance and taxes, you'll find expert insight in this easy-to-read style that simplifies complex legal matters into understandable terms. The book includes access to all the needed legal forms in both English and Spanish, and contains current information about applicable codes, ordinances, and policies across the country. Landlords have a responsibility to provide a safe, fully operational home for their tenants, and oversights can result in major court settlements. As a landlord, you need to know what the law requires of you. You also need to understand your rights, and the actions available to you when the tenant is in the wrong. This resource brings you up to speed, with the most current information about residential rental property law. The book covers privacy rights, domicile laws, paperwork, and more. * Features up-to-date lease forms and contracts available for download online * Provides information about applicant screening questionnaires and anti-discrimination policies * Includes state and local building codes, health ordinances, and landlord-tenant laws * Instructs you how to handle breach of lease situations and evictions There's even guidance on hiring a lawyer to protect your assets, property, and rights. Ignorance of the law is no excuse in court, and it frequently leads to misunderstandings that can hurt your wallet and your reputation. Before you lease another property, get all your ducks in a row with the essential instruction and tools in Landlord's Legal Kit For Dummies.

Leseprobe

Landlord’s Legal Kit For Dummies®

Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com

Copyright © 2014 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

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Library of Congress Control Number: 2013954220

ISBN: 978-1-118-77519-6

ISBN 978-1-118-77519-6 (pbk); ISBN 978-1-118-77511-0 (ebk); ISBN 978-1-118-77518-9 (ebk)

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

Landlord’s Legal Kit For Dummies

Visit www.dummies.com/cheatsheet/landlordlegalkit to view this book's cheat sheet.

Table of Contents

Introduction

About This Book

Foolish Assumptions

Icons Used in This Book

Beyond the Book

Where to Go from Here

Part I: Getting Started with Landlording Fundamentals

Chapter 1: Grasping the Legal Fundamentals of Managing Residential Rentals

Running Your Operation as a Corporation or LLC

Taking Ownership of a Rental Property

Avoiding the Legal Pitfalls of Managing Residential Rental Properties

Obeying fair housing laws

Setting rents and payment policies

Screening applicants

Drafting a lease or rental agreement

Managing security deposits

Moving residents in and out

Fulfilling your maintenance and safety obligations

Dealing with cotenants, sublets, and assignments

Terminating rental contracts

Chapter 2: Protecting Your Legal Assets

Forming Your Business

Choosing a legal structure

Exploring ways to incorporate

Knowing the Law or Consulting Someone Who Does

Conducting your own legal research

Turning to an attorney

Preparing for and Paying Taxes

Making sense of income taxes

Grasping (and appealing) property taxes

Chapter 3: Taking Possession of a Rental Property

Knowing What to Get Up-Front

A list of the property included in the sale

A copy of all resident files

A seller-verified rent roll and list of all security deposits

A copy of all required governmental licenses and permits

A copy of all the latest utility bills

A copy of every service agreement or contract

A copy of the seller’s current insurance policy

Insuring Your New Property

Finding the right insurance company

Telling the difference among the types of insurance coverage

Determining the right deductible

Letting your tenants know about renters insurance

Handling potential claims

Notifying Residents of a Change in Ownership

Meeting with the residents in person

Inspecting the rental unit

Using a new rental contract

Evaluating the current rent

Chapter 4: Hiring a Property Manager

Recognizing Your Property Management Options

Hiring a Professional Property Management Firm

Finding the right company for you

Knowing what to ask a prospective management company

Sidestepping pitfalls

Going with an Individual to Manage Your Property

Screening candidates

Signing an employment agreement

Compensating your property manager

Complying with employment laws and accounting requirements

Firing and evicting an employee

Notifying Residents of a Change in Management

Part II: Advertising and Taking on New Residents Legally

Chapter 5: Getting the Lowdown on Fair Housing

Examining the Fair Housing Act

Recognizing the seven protected classes

Identifying conduct that constitutes discrimination

Identifying conduct that constitutes preferential treatment

Meeting the three conditions of a violation

Including principals and agents

Knowing what you’re allowed to do under the law

Noting exceptions to the law

Paying the price for infractions

Digging Deeper into the Sex, Familial, and Handicap Protected Classes

Sex

Familial status

Handicap

Exploring Additional Protected Classes at the State and Local Levels

Steering Clear of Steering

Safeguarding from Claims of Housing Discrimination

Taking a proactive/preventive approach

Defending yourself against claims of housing discrimination

Chapter 6: Exploring the Legal Aspects of Advertising

Applying the Fair Housing Act to Apartment Advertising

Understanding the law

Complying with the law

Adhering to Truth in Advertising Laws

Accurately describing the rental units

Disclosing any important policies

Presenting rents and amenities accurately

Avoiding bait-and-switch advertising

Advertising on the Internet

Understanding the Communications Decency Act of 1996

Applying the Communications Decency Act to apartment advertising

Chapter 7: Addressing the Legalities of Rent Collection and Rent Control

Creating a Written Rent Collection Policy

When rent is due

Where rent is paid

How rent is paid

Dealing with Rent Collection Problems

Collecting late rent

Charging late fees

Handling returned rent payments

Dealing with partial rent payments

Serving legal notices

Raising the Rent

Recognizing restrictions on rent increases

Giving residents advanced notice

Dealing with Potential Rent Regulation Issues

Determining whether your rental property is subject to rent regulation

Increasing rents

Being extra careful when evicting a resident

Closing down a rent-regulated property

Complying with Housing Choice Voucher (HCV) Rules and Regulations

Understanding how HCV works

Knowing what to do if you rent to HCV residents

Chapter 8: Screening Applicants: Knowing When to Approve or Reject Them

Preparing a Legal Screening Policy and Letter of Consent to Background Checks

Setting criteria for acceptance

Starting with a boilerplate screening policy and making adjustments

Getting consent for a background check

Developing Your Rental Application

Knowing Your Options When Screening

Taking the do-it-yourself approach

Outsourcing to a screening service

Charging a fee to cover your costs

Notifying Unqualified or Less-Qualified Applicants of “Adverse Action”

Keeping Essential Records

Keeping records for rejected applicants

Maintaining residents’ files

Securing sensitive information

Chapter 9: Composing Your Rental Contract

Eyeing the Need for a Rental Contract

Comparing leases and rental agreements

Realizing the importance of putting the agreement in writing

Starting with a State-Specific Template

Customizing the Lease Template

Introductory language

Rental unit

Rent

Security deposit

Term

Utilities

Cash payment

Occupants

Prohibitions

Smoking prohibition

Quiet enjoyment

Fines and penalties

Repairs and alterations

Acceptance of premises

Care, cleaning, and maintenance

Landscaping

Smoke detection device

Carbon monoxide detection device

Renters insurance

Waiver of breach

Joint and several liability

Entry

Subletting and assignment

Breach of lease

Sale of property

Notice

Addenda

Entire agreement

Credit report

Attorney’s fees

Signatures

Considering Additional Provisions

Delay of possession

Delivery of notices

Pets

No illegal use

Notice of injuries

Delay in repairs

Notice of absence from premises

Abandonment

Materiality of application to rent

Remedies not exclusive

Destruction of premises

Eminent domain

Governing law

Chapter 10: Establishing a Security Deposit Policy

Defining the Legal Uses of Security Deposits

Deciding How Much to Charge as a Security Deposit

Setting separate deposits for pets

Avoiding the temptation to charge last month’s rent

Exempting Ordinary Wear and Tear

Distinguishing damage from ordinary wear and tear

Assessing damage with move-in and move-out checklists

Safeguarding and Returning Security Deposits

Holding security deposits in a separate account

Keeping receipts for repairs and cleaning

Completing the security deposit itemization form

Dealing with unknown costs

Adding statutory interest to security deposit calculations

Delivering the security deposit refund and itemization form

Collecting damages and unpaid rent in excess of a security deposit

Handling security deposit disputes

Chapter 11: Moving in a New Resident

Agreeing on the Move-In Date

Meeting with a New Resident Prior to Move-In

Establishing your policies and rules

Reviewing and signing legal documents

Transferring the utilities to the resident

Collecting the rent and security deposit

Inspecting the property with your resident

Providing an informational letter

Taking security measures with a unit

Keeping Detailed Resident Records

Choosing a Reliable Means of Communication

Part III: Recognizing Your Responsibilities and Liabilities

Chapter 12: Repairing and Maintaining the Premises

Honoring Your Duty to Maintain Habitable Housing

Defining habitable

Adhering to local codes

Preventing and eliminating nuisances

Protecting children

Suffering the consequences of falling short

Informing Residents of Their Legal Obligation to Maintain Their Units

Knowing your residents’ responsibilities

Seeking damages when residents fall short

Putting a Proactive and Responsive Maintenance and Repair System in Place

Recognizing the benefits of a proactive and responsive system

Establishing a policy and setting goals

Conducting regular maintenance and repair inspections

Responding to residents’ maintenance requests

Dealing with Residents Who Withhold Rent

Exploring Contractor-Related Legal Issues

Hiring licensed, bonded, and insured contractors

Insuring uninsured workers

Getting warranties to cover the work

Chapter 13: Minimizing Injuries from Potentially Dangerous Conditions

Preventing Injuries in Rental Units and Common Areas

Using materials safer than standard glass

Using safe cords (or no cords) for window coverings

Securing swimming pools, spas, and hot tubs

Ensuring security of construction sites

Improving exterior lighting

Preventing injuries from pets

Focusing on fire safety

Preparing for natural disasters

Identifying Potentially Dangerous Conditions

Encouraging residents toreport safety concerns

Conducting regular safety inspections

Evaluating Your Legal Liability

Knowing when you’re liable

Considering potential damages

Chapter 14: Preventing and Eliminating Hazardous Environmental Conditions

Clearing the Air Your Residents Breathe

Asbestos

Carbon monoxide

Formaldehyde

Radon

Assessing and Limiting Your Liability for Lead Paint and Toxic Mold

Lead paint

Toxic mold

Informing and protecting residents during repairs and renovations

Preventing and Exterminating Pests

Preventing and Eliminating Hazardous Waste

Determining whether something is a hazardous waste

Identifying common sources of hazardous wastes

Educating residents and staff on proper use and disposal of hazardous substances

Figuring out who’s legally liable for the cleanup

Chapter 15: Protecting Residents and Workers from Criminal Acts

Eyeing Your Obligations andLegal Liability

Knowing your responsibilities

Grasping the potential costs of lax security

Taking Practical Security Measures

Turning to a crime prevention program

Taking necessary security precautions

Educating and connecting residents

Tightening security

Securing Your Business

Safeguarding the rental office andresident records

Maintaining control over locks and keys

Screening potential employees

Keeping tabs on employee behavior

Dealing with Troublesome Residents

Responding to general criminal behavior

Handling domestic issues

Dealing with druggies and dealers

Being Truthful about Safety and Security

Chapter 16: Understanding Resident Privacy and Your Right to Enter the Premises

Balancing Owner and Renter Rights

Exploring the influence of contract and property law

Honoring the implied covenant of quiet enjoyment and warranty of habitability

Looking into state statutes

Stating your right to enter the premises in your rental contract

Exercising Your Right to Enter an Occupied Residence

Building rapport with residents

Entering a residence only when necessary

Giving residents advanced notice and getting permission

Responding to a resident’s unreasonable refusal to let you enter

Counting the potential costs of abusing your right to enter

Honoring Additional Resident Rights: Do’s and Don’ts

Do ease up on overnight guest restrictions

Don’t release information about a resident

Don’t call or visit a resident at work

Don’t be snoopy

Don’t ostracize a resident you don’t like

Chapter 17: Resolving Landlord-Resident Disputes

Settling the Most Common Problems

Late-, partial-, or nonpayment of rent

Additional occupants

Inappropriate noise level

Unsupervised children

Consulting Your Attorney for Advice

Resolving Problems without Eviction

Hashing it out: Listening and talking

Bringing in a mediator

Writing a warning letter

Taking a resident to small-claims court

Encouraging a voluntary move-out

Avoiding Retaliation

Part IV: Changing and Ending Leases

Chapter 18: Handling Cotenancies, Sublets, Assignments, and Guests

Recognizing Legal Issues Involving Nonresidents

Understanding cotentancy and why it matters

Noting New York’s Roommate Law

Dealing with Common Cotenant Issues

Deciding who pays the rent

Raising the rent and security deposit

Taking a hands-off approach to cotenant disputes

Terminating a cotenant’s lease

Deciding Whether to Allow Subleases or Assignments

Chapter 19: Revising and Terminating Rental Contracts

Changing the Rental Contract Terms

Terminating a Rental Contract

Terminating a lease

Ending a rental agreement

Dealing with a resident’s termination of the rental contract

Requiring an intent to move out notice

Accepting rent after the lease ends

Prorating rent

Evicting Troublesome Residents

Serving legal notices

Filing a formal eviction action

Following the do’s and don’ts of the eviction process

Collecting judgments

Chapter 20: Moving a Resident Out

Requiring Written Notice of Your Residents’ Move-Out Plans

Providing Your Resident with a Move-Out Information Letter

Conducting the End-of-Lease Inspection

Thoroughly inspecting the property

Completing the move-out checklist

Taking photos to document any damage

Recognizing common damage deductions

Reclaiming an abandoned rental unit

Part V: The Part of Tens

Chapter 21: Ten Tips for Staying Out of Legal Trouble

Acting beyond Reproach

Screening Applicants Carefully

Keeping Abreast of Changing Laws

Writing a Solid Rental Contract

Complying with Fair Housing Laws

Maintaining Your Property

Keeping a Paper Trail

Following Legal Eviction Procedures

Practicing a Reasonable, Legal Security Deposit Policy

Promising Less, Delivering More

Chapter 22: Ten (or So) Tips for Being a Better Landlord

Assessing Your Landlord Readiness

Maintaining Rapport with Residents

Establishing Professional Relationships

Joining an Association

Taking Landlord Training Courses

Getting Certified

Keeping Abreast of Legal Developments

Being Proactive

Honing Your Communication Skills

Hiring an Expert When Necessary

About the Authors

Cheat Sheet

More Dummies Products

Guide

Table of Contents

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Introduction

Success as a landlord requires more than finding residents, collecting rent, and performing repairs and maintenance. You also need to be familiar with and abide by federal, state, and local laws that govern rental housing. Failure to do business in compliance with those laws can result in severe and very costly consequences.

You need a guide to bring you up to speed in a hurry about the legal aspects of managing residential rental property and provide you with the contracts, forms, and other documents that will help you to comply with those laws. You also need guidance on how to avoid and protect against legal claims commonly filed against landlords. Landlord’s Legal Kit For Dummies is your guide.

About This Book

In this book, we lead you through the legal minefield of owning and managing residential rental property, from the time you purchase your rental property and market and advertise the property until the rental contract ends and the resident moves out. You steer clear of legal problems in three ways:

Understand and comply with all relevant laws — federal, state, and local.Honor your legal obligations as a landlord to your residents, so they’re less likely to file a claim against you — and if they do, they’re less likely to win a judgment.Document all landlord-resident agreements and communication, so you have evidence that stands up in court.

This book is based on hands-on experience and lessons from our experiences owning and managing residential rental properties and helping other owners comply with federal, state, and local housing laws. To make your life easier, we’ve included many of the contracts, forms, and other documents — whether you’re just starting out with a single-family rental home or condo, you have a handful of rental units, or you possess a whole portfolio of rental properties. To access the forms, go to www.dummies.com/go/landlordlegalkit. We strongly recommend that you have your local legal counsel review them, and then print them out and start putting them to use. You can access this website by using the user name robertgriswold and the password landlord when prompted.

Foolish Assumptions

In order to provide you with the guidance you need, we had to make a few assumptions about who you are. We assumed the following:

You own or manage or you plan to own or manage rental property.You’re specifically interested in finding out about laws that govern residential rental properties, not commercial properties.You’re committed to operating in accordance with all federal, state, and local laws.You want to avoid having legal claims filed against you.When a legal claim is filed against you, you want to win.

Icons Used in This Book

Throughout this book, icons in the margins highlight different types of information that call out for your attention. Here are the icons you’ll see and a brief description of each.

This icon points you to files or forms you can use in your day-to-day property management. You’ll find them online at www.dummies.com/go/landlordlegalkit. You can access this website by using the user name robertgriswold and the password landlord when prompted.

We want you to remember everything you read in this book, but if you can’t quite do that, then remember the important points flagged with this icon.

Tips provide insider insight. When you’re looking for a better, faster way to do something, check out these tips.

Focus on this icon for real-life anecdotes from our many years of experience and mistakes. When you’ve managed more than 60,000 rental units in 35 years, you see some interesting situations. Now, we share them with you.

“Whoa!” This icon appears when you need to be extra vigilant or seek professional help before moving forward.

This icon points out bonus material you can find online.

Beyond the Book

In addition to the material in the print or ebook you’re reading right now, this product also comes with some access-anywhere goodies on the web. Go to www.dummies.com/go/landlordlegalkit for additional information, such as the following:

Sample lease agreement, move-in/move-out inspection checklist, eviction notice, and dozens of other essential legal forms and documentsResources for finding state and local statutes and additional legal informationReferences to organizations, government agencies, media, and vendors/suppliers that provide additional information, training, tools, and services to make you a better landlord

Use robertgriswold for the username and landlord for the password.

Also, check out the free Cheat Sheet at www.dummies.com/cheatsheet/landlordlegalkit for strategies you can use for screening applicants, establishing security deposits and procedures, meeting your obligations as a landlord, and brushing up on fair housing laws. Be sure to visit www.dummies.com/extras/landlordlegalkit for free articles about retaining good residents, screening residents, complying with your duties to make repairs, and more. You can also read a bonus chapter about establishing competitive, yet profitable rents.

Where to Go from Here

You can approach this book in three ways:

Read it from beginning to end. Although being a landlord isn’t a linear process, we present topics in the order you’re most likely to encounter them. We start with setting up your business and taking possession of a rental property; move on to advertising vacancies, screening applicants, and fulfilling your legal obligations to residents; and end with a resident moving out.Skip around. Each chapter is a stand-alone lesson on a specific legal aspect of property management. If you want to know about fair housing laws, skip to Chapter 5. Head to Chapter 10 for guidance in developing a security deposit policy. For information regarding your legal obligations to perform maintenance and repairs, flip to Chapter 12.Use it as a reference book. Whenever you need information and advice on a specific legal aspect of being a landlord, turn to the index, look it up, and flip to the chapter or the specific page where that topic is covered.

If you just need some quick advice on how to avoid having legal claims filed against you, skip to Chapter 21, where you’ll find ten tips for staying out of legal trouble.

The more you use this book, the more confident you’ll be that you’re complying with federal, state, and local laws and that you’ll have the documented evidence you need to take legal action against a resident and defend yourself when a resident or someone else takes legal action against you.

Part I

Getting Started with Landlording Fundamentals

Visit www.dummies.com/cheatsheet/landlordlegalkit for more informative tidbits about the ins and outs of landlording.

In this part …

Get a bird’s-eye view of your legal rights and obligations as they relate to owning and managing residential rental property.Discover the benefits of operating as a legal entity, such as a limited liability company (LLC), instead of as a sole proprietorship.Understand your tax obligations, so you can plan ahead and have enough money set aside to cover your tax bills.Find out how to conduct legal research to find out about state statutes and local regulations regarding residential rentals.Take possession of a rental property the right way, so you get everything you paid for and avoid any legal snags.Choose and buy the right insurance policy to cover your rental assets in the event of unavoidable mishaps and disasters.Decide whether you want to outsource some of your landlord chores to a property manager or management firm, weigh the pros and cons of each option, and find the right individual or firm for the job.

Chapter 1

Grasping the Legal Fundamentals of Managing Residential Rentals

In This Chapter

Incorporating for legal protection and income optimization

Stepping into a rental property as its new owner

Getting up to speed on landlord legalities

Whenever you approach a subject for the first time, you probably try to wrap your brain around it before getting into the specifics. This chapter helps you gain the big-picture perspective by highlighting the key legal aspects of being a landlord and managing residential rentals. Think of this chapter as a framework on which you can hang all the detailed information, guidance, and insights we present throughout this book.

This chapter begins by laying out the legal foundation for your residential rental operation. The first section stresses the importance of running your business as a legal entity in order to protect your personal assets, minimize taxes, and maximize profits. The second section touches on important steps to follow when taking ownership of the property. The third and longest section in this chapter introduces your legal obligations as a landlord; here you find out how to fulfill your obligations while protecting your rights and avoiding legal problems.

Running Your Operation as a Corporation or LLC

Unless you take steps to give your business the status of a corporation or limited liability company (LLC), you’re operating as a sole proprietorship and placing your personal assets at risk. If you can’t pay what you owe to a creditor, such as a contractor, a utility company, or the bank that holds the mortgage on your property, they can pursue your personal assets to collect what you owe. Operating your business as a corporation or LLC insulates your personal assets from your business assets, thus protecting your personal assets from such claims. In addition, operating your business as a corporation or LLC potentially reduces your taxes, increasing your net profit.

Most landlords choose to operate as an LLC, because it provides the protection of a corporation without the costs and complexities of forming and managing a corporation. Any claims by creditors against the LLC are limited to the LLC’s assets, protecting your home, personal financial accounts, and other personal assets from those claims.

An LLC doesn’t provide complete protection. If a court finds that your carelessness or negligence contributed to a resident’s injury, for example, you could be held personally liable. We recommend that you purchase a landlord insurance policy that covers such scenarios, as explained in Chapter 3.

Structuring your business and operating it as a corporation is much more complicated and expensive than forming an LLC. You need to register a name for your corporation with your state’s Secretary of State, write and file articles of incorporation and bylaws, issue stock (at least one share), have regular corporate meetings, prepare and file minutes from those meetings, and comply with regulations for recording and reporting financial transactions. In addition, to take full advantage of tax savings, you may need to pay a portion of your profits from the rental property to yourself as a salary, which requires payroll processing.

See Chapter 2 for more about the options for structuring your residential rental business.

Taking Ownership of a Rental Property

Assuming you’ve completed the closing on your rental property, you realize that transferring ownership of any real estate is a fairly complicated endeavor. The process is even more complicated and perilous when transferring ownership of a rental property. When you buy a rental property, make sure you get the following items from the seller:

A list of personal property included in the saleAll resident filesSeller-verified rent roll and list of all security depositsAll required governmental licenses and permitsRecent utility bills that are dueEvery service agreement or contractCopy of the seller’s current insurance policy

Chapter 3 contains additional information about these items.

Meet with a reputable insurance provider and purchase a policy for the property prior to taking possession, so there’s no lapse in insurance coverage before you take possession. If the property burns down before closing, it’s the seller’s problem. If an uninsured property burns down after closing, it’s your problem. For more about choosing an insurance policy that provides sufficient coverage, see Chapter 3.

After you become the proud owner of the rental property, you have a few tasks to attend to as soon as possible, including the following:

Meet with the residents in person, introduce yourself as the new owner, and answer any questions they ask.Inspect the outside of the rental property carefully and make a list of any maintenance and repair issues. Address these issues as soon as possible.Evaluate the current rent. You can’t raise the rent for current residents until their lease expires or the end of the month (for month-to-month renters), but analyze how much rent your residents are paying now, and how much you need to charge new residents to turn a decent profit and how much to raise the rent for existing residents when that time comes.Prepare rental contracts (either a fixed-term lease or a month-to-month rental agreement), so they’re ready for new residents and for current residents who decide to remain after their rental contract expires.

Avoiding the Legal Pitfalls of Managing Residential Rental Properties

Owning residential rental property comes with legal obligations and risks. You’re legally responsible to comply with fair housing laws, keep your property in “habitable” condition, ensure your residents’ rights to “quiet enjoyment” of the property, comply with laws for handling and refunding security deposits, take reasonable steps to prevent crime, and eliminate any dangerous or hazardous conditions. If you have employees, you may be liable for their legal actions, as well. And residents can file a claim against you for any number of reasons, regardless of whether those claims have legal merit.

These sections highlight many of the most common legal issues you need to be aware of. We also guide you in best practices that help you avoid legal problems in the first place, such as screening applicants carefully and honoring your residents’ legal rights.

Obeying fair housing laws

Fair housing laws prohibit landlords from using certain criteria, such as race or sex, to target residents in advertising or to refuse housing to applicants. When screening applicants, for example, you’re permitted to consider only factors that are likely to indicate whether the person will pay her rent on time, take care of the property, get along with the neighbors, and comply with your other policies. You may use criteria such as income, credit history, past evictions, criminal history, and similar factors to determine the prospect’s qualifications. You can’t use race, skin color, religion, or certain other criteria.

In the following sections, we explain the federal Fair Housing Act and look at how some states expand coverage of that Act. We also stress the importance of considering fair housing laws when advertising your rental property.

Federal law: The Fair Housing Act

The Fair Housing Act prohibits you, as landlord, from discriminating against or giving preferential treatment to people based on a protected class — a characteristic that can’t be used to discriminate against or in favor of an individual or group. The Fair Housing Act specifies the following seven protected classes:

Race: Ethnicities or cultures, such as African American, Caucasian, Hispanic, Asian, or American IndianReligion: Christianity, Islam, Judaism, Hinduism, and so onNational origin: The country or area a person was born in, such as Canada, Mexico, the Middle East, or NigeriaSex: Physical sex — male or femaleColor: Skin color or shade, which may seem to be the same thing as race, but people of the same race sometimes discriminate against one another based on lightness or darkness of skinHandicap: Physical or mental handicaps or disabilities, including hearing and visual impairments, chronic alcoholism, and HIV/AIDSFamilial status: Whether a person or couple has children

Consider only those characteristics that reflect the likelihood that the person will pay rent in full on time, treat your rental property with care, and get along with her neighbors. As a landlord, you should consider nothing else.

State and local laws

Some states and municipalities have extended the Fair Housing Act to other protected classes, including the following:

Marital status or changes in marital statusSexual orientation or domestic partner/civil unionAgeSource of incomeCreed (belief system)

For more about the Fair Housing Act, protected classes, and state additions to the Act, see Chapter 5.

Advertising within the law

Fair housing also comes into play when you’re marketing and advertising your property. To comply with fair housing laws in advertising, follow these four general guidelines:

Avoid any obviously discriminating words and phrases that state or imply that certain protected classes are unwelcome or that you prefer a certain type of clientele, such as singles, married couples, or affluent individuals.If you use photographs or pictures of people in your advertisements, make sure they convey diversity in race, sex, familial status, and so on.Don’t use location, place names, directions, and so on that may suggest exclusion or preference for a certain protected class. For example, stating that the property is near a certain country club or religious facility may be construed as a preference for some prospects while discriminating against others.Include the US Department of Housing and Urban Development’s (HUD’s) Equal Housing Opportunity logo or statement on all advertising to invite people of all protected classes to apply.

Most landlords avoid blatantly discriminatory language and images in their advertisements. They’re more likely to inadvertently commit a violation by showing a picture of a young white couple, for example, or mentioning that the property is “perfect” for certain classes of prospects.

Have someone who’s well versed in federal, state, and local fair housing laws review all of your advertisements before you start running them. For more about complying with fair housing and other laws in your advertising, see Chapter 6.

Setting rents and payment policies

Sometime prior to renting out a property, you need to set your rents and payment policies to address the following aspects of rent payments:

Amount: You want to charge enough rent to cover your operating expenses, earn a decent profit, and remain competitive. In a few cities in a handful of states, you also may need to consider rental rate regulation or rent control as well. Visit www.dummies.com/extras/landlordlegalkit and click on the bonus chapter for guidance on setting rents.Due date: We recommend having all residents pay the rent in full on the first of the month. If the resident moves in on a day other than the first, then you collect the first month’s rent in full and then prorate the second rent payment. This way you collect more money up-front and minimize your risk that your tenant will gain possession of your rental property by just paying you a nominal amount of rent.Payment form: This may be cash, check, money order, cashier’s check, or online/electronic payment, depending on what you’re willing to accept.Late payments and penalties: Specify when payments are considered late; for example, “Payments received more than five (5) days after the first of the month are considered late payments.” Also specify a penalty, perhaps a 5 percent late fee when the payment is past due.Penalties for bounced checks: Penalties may include a flat fee to cover the fee your bank charges you plus a little extra for your time, inconvenience, and aggravation. You may also want to specify that if a certain number of checks bounce, the resident loses the privilege to pay with a personal check.Penalties for missed payments: The penalty for missed payments is usually that the resident is required to move out for breach of contract, but you need to specify what a missed payment is; for example, if you haven’t received it within 15 days of the due date.

For more about legal issues regarding rent collection and rent control, see Chapter 7.

Screening applicants

Carefully screening applicants is essential to keep your rental units occupied with residents who pay on time, take care of the property, and get along with their neighbors. Careful screening can help you avoid legal issues, because you have less need to take legal action against good residents, and they’re less likely to file legal claims against you. To screen applicants, take the following steps:

Have the person complete and submit an application that includes her name, current address, Social Security number, employment history, rental history, income, and so on.

Visit www.dummies.com/go/landlordlegalkit and click on the Leasing folder for a sample application.

Order a credit and background check for the prospective resident.

You can find several services online that perform credit and background checks. Your application should include language stating that the applicant agrees to a credit and background check.

Contact the applicant’s employer to verify the applicant’s employment and income and find out how long the applicant has been employed there.

You may also want to require copies of pay stubs, recent W-2s and 1099s, the previous year’s tax return, and a recent bank statement.

Contact the applicant’s personal references.Contact any landlords the applicant rented from in the past and ask about payment history, the condition the applicant left the property in, and whether the applicant caused problems with her neighbors.Interview the applicant in person.

Ask why the person is moving and why she chose this area. Ask questions related to information you gathered in previous steps to determine whether what the applicant tells you matches up with what you already know. Inconsistencies can be a red flag.

When screening prospective renters, you must comply with fair housing laws, so certain questions are off-limits. You can gather information about a prospect’s employment status, income, credit history, housing history, and criminal past, but you’re prohibited from asking an applicant whether she has children, what country she’s from, her religion, and so forth. For additional details on how to screen applicants, see Chapter 8.

Drafting a lease or rental agreement

Your rental contract (either the lease or month-to-month rental agreement) establishes the terms that you and your resident agree to, including who’s going to be living in the unit and paying rent and for how long, the rent amount and when it’s due, the security deposit amount and what it can be used for, your obligations, the resident’s obligations, whether pets are allowed and under what conditions, and so on.

We recommend that you start with an existing lease and then modify it to suit your specific needs. You can obtain a sample lease by doing any of the following:

Visit www.dummies.com/go/landlordlegalkit and click on the Rental Contract folder. In Chapter 9, we explain the terms of this lease and modifications you may want to consider.Search the web for your state followed by “lease” or “rental agreement.” Sometimes attorneys or property management companies post the lease or rental agreement they use.Ask a reputable local attorney who specializes in landlord-tenant law or real estate for a copy of a residential lease and a residential rental agreement. You may be able to obtain the lease for free or for a modest fee.Use an online legal service, such as www.rocketlawyer.com to obtain a state-specific lease or rental agreement. (Many of these services advertise “free lease.” The hook is that they lead you through a long process of creating a rental contract and then require that you sign up for the service and provide credit card information. You may be able to sign up for a free week or month of the service to get the contracts you need and then cancel the service.)Contact your local affiliate of the National Apartment Association (NAA) or a similar rental industry group about membership. They often have comprehensive, up-to-date legal forms that comply with all applicable laws for your area available for their members at a reasonable cost.

Managing security deposits

Prior to when a resident moves in, you need to collect the first month’s rent (or prorated rent) along with a security deposit — a lump sum that you hold until the resident moves out in order to cover the cost of any unpaid rent and damages (beyond ordinary wear and tear). As we explain in Chapter 10, you should have a security deposit policy in place that specifies the following:

Amount: Usually no more than the equivalent of one- or two-month’s rent. Some states and municipalities have specific limits.Due date: Usually due at the signing of the rental contract.Allowed uses: State and local laws usually allow landlords to use security deposits only to cover unpaid rent, damages to the unit beyond ordinary wear and tear, cleaning expenses (only to make the unit as clean as it was when the resident moved in), and to restore or replace damaged or missing property, including keys and appliances furnished with the unit.Where the deposit will be held: We recommend depositing all security deposits in a separate interest-bearing account and passing along any interest earned (unless nominal) to the resident when you return any unused portion of the deposit.Return of the unused portion: Specify the maximum number of days you’re allowed to hold any unused portion of the security deposit before returning it to the former resident. State law may establish a limitation.

Moving residents in and out

Two very important days in the course of a resident’s stay are the first and the last — the day she moves in and the day she moves out. In the following section, we cover the essential tasks you need to perform on these two days.

Moving a resident in

How well you manage the process of getting a new resident moved in can affect your relationship over the entire term of her occupancy. Get started on the right foot by performing the following steps leading up to and including move-in day:

Agree on a move-in date with the resident.Make sure any utilities the resident is responsible for paying are transferred to the resident’s name and are turned on no later than the move-in date.Review important terms of your rental contract and any addenda to the contract and answer any questions the resident asks.Collect the rent and security deposit, if you haven’t done so already.Inspect the property with the resident, complete a checklist to record the property’s condition, and make sure you and the resident sign the checklist.

We recommend taking photos or a video, so you have a visual record of the property’s condition, as well.

Orient the resident to the rental unit and any appliances in the unit, utility shut-offs, and common areas, such as workout facilities, pool, and hot tub.Present a move-in letter and a copy of your rules and regulations.

These documents may include instructions for requesting maintenance and repairs, taking on a roommate, replacing lost keys, paying rent, and so on. You may also include policies for guests, parking, wall hangings, ceiling hooks, pets, and so on.

Give the resident time to read the move-in letter and the rules and regulations and then have her sign and date two copies of each document — one for her records and one for yours.Give the resident keys to the rental unit and her mailbox.

For details on moving a new resident in, see Chapter 11.

Moving the resident out

To avoid disputes and litigation after a resident moves out, manage the process the right way. Here’s how:

Require that residents notify you in writing a certain number of days (30 days is common) prior to the date they intend to move out.Present the resident with a move-out letter with instructions on how to prepare the unit for the move-out inspection and a reminder of your policy for returning the security deposit after any deductions for unpaid rent or damages beyond ordinary wear and tear.

See Chapter 9 for more about what ordinary wear and tear means.

Sign and have the resident sign a termination agreement, so you have documentation that the resident officially moved out.Inspect the unit carefully for any damages or missing items that were furnished with the rental unit, and record your observations on a move-out checklist.

Take photos or video of any damages.

As soon as possible, perform the repairs, maintenance, and cleaning required to bring the rental unit back to the condition it was in before the departing resident lived in it.

Keep receipts for all materials and labor.

Deduct the costs of any repairs, maintenance, or cleaning that qualify as beyond ordinary wear and tear, and return the remainder of the security deposit (with interest, if required by state or local law) and along with an itemized list of expenses deducted.

Some jurisdictions require you to provide the former resident with receipts for work done upon request.

Of course, not all residents move out this smoothly. Sometimes, residents simply skip town, abandoning the property without notifying you. In other situations, in which a resident fails to pay rent or breaks the contract in other ways, you may need to either get the resident to leave voluntarily or evict the resident. These exceptions to the standard move-out scenario have special legal procedures you must follow according to state or local law. See Chapter 20 for details about moving residents out and Chapter 19 for more about evictions.

Fulfilling your maintenance and safety obligations

Your rights as a landlord are based upon your rental contract and your state’s landlord-tenant laws. Your obligations, however, are primarily in the form of written laws or implied warranties and covenants (agreements). In the following sections, we bring you up to speed on your legal obligations to your residents, whether they’re in writing or not.

Recognizing your duty to maintain habitable living conditions

According to the implied warranty of habitability, you must provide residents with dwellings that are fit to live in. For example, the unit’s plumbing and electrical must be in working condition, residents must have running water and reasonable amounts of hot water, the unit must be heated in the winter, common areas must be clean and sanitary, and you must exterminate in response to infestations of rodents and vermin.

If you fail to maintain habitable living conditions, residents may be permitted by law to withhold rent, have the repairs done and bill you for them, sue for damages, take legal action to force you to solve the problems, or move and terminate the lease. See Chapter 12 for details about your obligation to honor the implied warranty of habitability.

Addressing potentially dangerous conditions

Accidents happen regardless of how careful people are, but if anyone is injured on your property as a result of something you did or neglected to do, you could be held liable for the person’s medical bills and lost pay and may even be subject to punitive damages (for any reckless or intentional acts that cause injury). Here are a few areas to consider focusing your safety program on:

Fire safety: Educate residents on the most common fire hazards, provide and maintain fire extinguishers and smoke detectors, and provide residents with a copy of your evacuation procedures. Your local fire department can help you comply with the fire-safety codes in your area. Carbon monoxide detectors are also important if you have gas appliances and are now required in some jurisdictions.Pool and hot tub safety: If you have a pool or hot tub, enclose it with fencing and gates that comply with your local building codes, and post required signage to inform residents and their guests of your rules, such as no diving allowed and adult supervision required for children.Exterior lighting: Make sure parking lots, stairways, walkways, and entryways have adequate lighting to keep people from tripping or bumping into things.Safety within units: Use safety or tempered glass in shower stalls or tub surrounds, use window coverings that have safe cords, make sure all windows have working locks and screens, use outlets with ground fault protection near water (in bathrooms and near the kitchen sink).General maintenance issues: Fix any loose railings, stairs, or handrails; repair uneven pavement in sidewalks and parking lots; replace burnt-out exterior lights; and so on. Shovel and de-ice walkways in the winter. Make sure that you immediately mop up any spills and that you place signs to warn residents when floors are wet/slippery.Set and enforce pet policies: If you allow pets, make sure your residents comply with local leash laws, at the very least.Construction site safety: Make sure contractors secure their construction sites to prevent injuries to curious children and adults.

Team up with residents to improve safety. Encourage them to report any safety concerns to you, respond immediately to their concerns, and thank them for their efforts. For more about improving safety, see Chapter 13.

Disclosing and responding to environmental hazards

We define environmental hazard as anything that may adversely affect a person’s health, including the following:

AsbestosCarbon monoxideFormaldehydeRadonLead paintToxic moldHazardous wastes, including chemical residue from meth labsPests, including rats, mice, roaches, and bedbugs

Each of these hazards has specific laws regarding the landlord’s obligation to disclose and address.

The best course of action isn’t always to remove an environmental hazard. In fact, attempts to remove harmful substances, such as asbestos, lead paint, and toxic mold, may increase the danger. If you notice an environmental hazard, head to Chapter 14 to find out how to proceed.

Protecting residents and workers from criminal activity

Landlords are legally obligated to take reasonable steps to prevent crime on their property, which is a job that’s more challenging than most landlords realize. If a crime occurs on your property and the courts find that you could have, should have, and didn’t take measures to prevent it, you may be held liable for any injuries or property losses that result. Here are several of your primary responsibilities for protecting residents and workers from criminal acts:

Provide and maintain basic security features, including doors with deadbolt locks and peepholes for rental units, key locks, or keyless (smart key) for external doors, windows with working latches and insect screens (and in some jurisdictions, locking devices), and sufficient security lighting.Report suspected criminal activity to local law enforcement and inform residents of any significant criminal activity in the area that comes to your attention.Evict residents who commit crimes, within a certain number of days of being notified by local law enforcement.Safeguard sensitive resident information to prevent identity theft and other crimes.Secure master and duplicate keys to prevent unauthorized entry to rental units. This also applies to common areas if they’re access controlled and to the extent that it’s reasonably feasible.Conduct criminal background checks on prospective employees and monitor employee activity for any signs of criminal activity.

Team up with local law enforcement agencies. Many law enforcement agencies have pamphlets or booklets (some available online), with valuable guidance on how to secure rental properties. Refer to Chapter 15 for more information.

Knowing the limitations on your right to enter the premises

Landlords frequently believe that because they own the rental property, they can enter rental units whenever they want. You do have a right to enter rental units you own, but your right of entry is balanced against the covenant of quiet enjoyment that gives a resident the right to undisturbed use of the property. In most states, a landlord can enter a residence only under certain conditions, some of which require the landlord to give reasonable advanced notice, and some that don’t:

You can legally enter a rental unit without notice to respond to an emergency that threatens life or property, when a resident has abandoned the property, when responding to a court order, or when you ask for and a resident gives you permission to enter.You can legally enter a rental unit with reasonable notice to check smoke detectors and carbon monoxide detectors, inspect for and make necessary repairs, check for problems during a resident’s extended absence, or show the property to a prospective renter, buyer, or lender.

For more about your right to enter the premises and a resident’s right to quiet enjoyment, see Chapter 16.

Dealing with cotenants, sublets, and assignments

Every landlord recognizes the importance of screening applicants before permitting them to move into a unit. Unfortunately, residents often try to move others into their unit without your permission by taking on a roommate, subletting the unit to someone else, or assigning their lease to someone you don’t know. Such practices significantly increase your exposure to risk, because it opens your doors to people who have no contractual obligation to you. You’re not given the opportunity to screen the person, and you don’t have the power of a legal contract to enforce your rules.

Screen everyone prior to allowing them to live in one of your rental units. Have the person complete an application, and then follow your standard screening procedure, including performing background checks. If you give approval, make sure the person signs a rental contract. A roommate may simply sign the existing rental contract. Instead of subletting and assignments, we recommend terminating the previous resident’s lease and creating a new one for the new resident. For additional details about roommates, sublets, and leases, see Chapter 18.

Terminating rental contracts

All good things (and bad things) must come to an end, and the same is true of rental contracts. The process differs depending on whether you’re terminating a lease or a rental agreement and on the circumstances surrounding the termination:

Lease: A lease is a rental contract for a fixed-term, usually one or two years. You can terminate a lease in any of the following three ways: Let it expire and don’t renew it. In this case, you should serve your resident a Notice of Nonrenewal 30 or 60 days prior to the date on which the lease expires.Mutually agree with your resident to end the lease, in which case you should both sign a Mutual Termination of Lease Agreement.Require that the resident move out for breach of contract. In this situation, you must serve the resident a termination notice giving her a certain number of days to move out.Rental agreement: A rental agreement is a month-to-month contract. You typically can terminate a rental agreement with or without cause: With cause: If the resident breaches the contract, you may be able to require that the resident move out in as little as a few days.Without cause: In most states, you can end a rental agreement without cause, as long as you give the resident sufficient notice, typically 30 to 60 days prior to the termination date.

For more about terminating rental contracts and obtaining the required notices and forms, see Chapter 19.