Legal Mistakes Landlords

Are you trying to navigate the legal landscape of property rental? These laws, intended to create a fair housing equilibrium for both landlords and tenants, aren’t always crystal clear and may, at times, appear counterintuitive from a landlord’s standpoint. It’s all too easy to inadvertently hit a legal pothole and find yourself with significant troubles.

In this guide, we’ll uncover eight commonplace mistakes landlords might make, unknowingly breaching the law or missing out on its protections. We’ll shed some light on the reasons behind each rule and offer solutions for landlords to stay on the right side of the law.

Bear in mind that the information below is designed as a guide to give landlords a general understanding of the law but should not be considered legal advice. If in doubt, consult a qualified landlord-tenant lawyer.

Table Of Contents: Common Landlord Legal Mistakes

What are some of the most common legal mistakes that landlords make? Find out below.

1 – Not Running Proper Tenant Checks

Not Running Proper Tenant ChecksLandlords are within their legal rights to run background checks on potential tenants, including credit checks, rental history, evictions, and criminal record checks. In many states–for example, New York–you need to obtain written permission before running the check, but you have the right not to take the application further if they do not agree to it.

You can charge a fee to cover the cost of tenant screening, but there are often maximum allowable fees. For example, in New York, the maximum fee is $20 or less if the cost of running the checks is lower.

There are situations in which a landlord might be tempted to skip the background check, but this is inadvisable. Tenant screening can reveal issues such as a tenant’s history of paying rent late or evictions for serious lease infractions. These aren’t things that a landlord wants to discover after the lease has been signed.

To learn about our tenant screening options at RentPrep, check out our full packages page.

2 – Asking Discriminatory Questions

Asking the wrong questions, even in a casual conversation with potential tenants, can land you in hot water if the tenant feels like you are asking discriminatory questions and then use that information to reject their rental application or end their tenancy.

Under the Fair Housing Act, it is illegal to refuse to rent a property to a person based on protected characteristics, including race, religion, national origin, gender identity, sexual orientation, or familial status. Asking questions about these characteristics should never be part of the official tenant screening process, but asking them in casual conversation can also be a problem.

Imagine that you have a conversation with a potential tenant while showing them the property, and you innocently ask them where they are from or how many children they have. Later, their application is rejected due to their income or credit score, but they might feel like the information they revealed to you played a role. They can lodge a complaint under the Fair Housing Act, and it will be up to you to prove that there was no discrimination in the decision.

Penalties, if you are found to have broken the Fair Housing Act, can range from $16,000 to $150,000, even for a first infraction.

3 – Using Discriminatory Terminology In Advertising

When speaking to potential tenants, you might direct them toward the most appropriate property for their needs. But this can actually land you in trouble. According to the Fair Housing Act, Any notice, statement, or advertisement … that indicates any preference, limitation, or discrimination based on a person’s race, color, religion, sex, handicap, familial, status, or national origin” is illegal.

This can have a broad interpretation. For example, if you put together marketing materials for an apartment complex and only include pictures of white young adults, with no images of people of color, children, or seniors, this could be considered discriminatory advertising.

Similarly, if someone with a disability wants to see a property and you tell them that the access in the building is not good and they might prefer another option, this could be interpreted as discriminating against them on the basis of their disability.

There are certain words and phrases that are considered red flags in property ads when it comes to discrimination, both when describing the property and suitable tenants. For example, properties should not be described as being in an “exclusive neighborhood,” “near a temple,” or appropriate for “adult living.” Desirable tenants should not be described as “stable,” “quiet,” or “mature persons,” to name a few.

The Fair Housing Institute provides a list of acceptable and unacceptable advertising words and phrases here.

4 – Including Illegal Provisions In A Rental Agreement

Including Illegal Provisions In A Rental AgreementThe rental agreement is the legally binding contract between landlord and tenant that governs how the arrangement will work and protects both parties. The more detailed the lease, the better, as both the landlord and tenant can then refer to the agreement to resolve any disputes.

For example, you could include details about what kind of decorating and “home improvements” can be done by the tenant and which would need landlord involvement and approval.

But some clauses that might seem reasonable are actually illegal to include in a rental agreement. For example, you cannot include “no roommates” in the rental agreement, as a landlord can’t prevent a tenant from having a roommate, spouse, or partner live with them.

Landlords also cannot include any clauses that break local laws–for example, clauses that allow the landlord to increase the rent more often or by more than is permitted by state law, that allow the landlord to take ownership of tenant property, or to refuse to renew the rental agreement.

This is why landlords should use a lawyer-reviewed template for all their lease agreements and seek legal advice when wanting to include specific clauses. Agreement between the landlord and tenant on the clause is not enough because if the clause is illegal, it is not enforceable.

5 – Disregarding A Tenant’s Right To Privacy

While, as the landlord, you own the property, when you enter into a lease agreement with a tenant, you are granting them reasonable use of that property. This grants them a right to privacy, which means you cannot turn up at the property whenever you wish. Landlords must give the tenant at least 24 hours’ notice of a visit or inspection and longer in certain circumstances.

When landlords inspect a property, they should be looking at the state of the property itself and not a tenant’s personal possessions or documents. Landlords also can’t have unauthorized surveillance equipment on the property.

Even if a landlord is following the rules, they could be breaching the tenant’s right to privacy if inspections are too frequent, if a date and time are not properly specified, or if entry is being used to harass the tenant.

6 – Not Maintaining The Property

In most states, when you rent out a property, there is an implied warranty of habitability that the landlord must maintain. This means keeping the property in a safe and habitable state.

Therefore, you have a legal responsibility to ensure the heat and plumbing are in working order, that clean water and electricity are available, and the property is structurally safe.

If you fail to keep up with these responsibilities, there are several things a tenant can do, depending on state law. They can pay to fix the problem themselves and deduct the cost from future rent payments. They can withhold rent until the problem is fixed. They could break the lease and move out without being subject to penalties, and they could report a building violation to the state inspector.

All of these actions could result in costly headaches for the landlord. This is why it’s best to prioritize addressing maintenance problems and communicating clearly and regularly with tenants about what is being done and the timetable for any repairs.

7 – Keeping Security Deposits

A security deposit is a standard part of any lease agreement as it helps protect the landlord in case of damage to the property or unpaid rent. But strict rules govern how a security deposit should be handled.

A security deposit should be held rather than be treated as a payment and can only be withheld at the end of the lease to cover specific items.

The security deposit can be used to cover damage to the property but not to deal with expected wear and tear. The tenant must be provided with an itemized list of how the security deposit is used to cover acceptable costs, and the balance of the security deposit should be returned to them.

The security deposit cannot be used to cover the last month’s rent unless previously agreed upon in writing. It cannot be used to cover normal cleaning costs or any costs not directly related to the tenant. It can , however, be used for repairs, item removal, and excessive cleaning costs, but these must all be included in the itemized list.

It’s also illegal to include clauses in the lease that allow the landlord to keep the security deposit or use it for purposes outside the limits of the law.

8 – Not Getting Everything In Writing

When you want to come to an agreement with a tenant about certain things, such as permission for the tenant to decorate under certain terms and conditions or letting them temporarily use a vacant parking space, it can be tempting to just agree to the situation verbally and move on. But this could be a mistake.

You should keep everything that you agree upon with your tenant in writing and follow up on in-person conversations and agreements in writing. If you don’t, you won’t have the proof needed if issues arise.

For example, perhaps you agreed that a tenant could paint a property, but only if they used a professional to paint to a proper standard. Perhaps they did the job themselves or did not use a qualified professional, and when they move out, you are stuck with a property that you must repaint. In this situation,  it could be challenging to deduct this expense from their security deposit.

You should have a paper trail for everything that happens in relation to the property so you always have documentation that you acted appropriately.

Know Your Local Laws

The laws that govern rental property arrangements are in place to protect both landlords and tenants, ensuring the property and investment of the landlord are protected and that tenants’ rights are respected and they live in a safe environment.

It’s essential to know your legal rights and responsibilities so you can ensure you are compliant. Laws differ among states and regions, so it’s necessary to do your research. When in doubt, consult a lawyer. And don’t forget that legal fees are part of the cost of doing business and are tax deductible.

Note: RentPrep does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, or accounting advisors.