Successfully managing an investment property is about much more than finding the perfect tenant for the perfect unit. It’s even more important to understand the legalities associated with running a rental business. Landlords should be up-to-date on all laws regarding tenant rights and the proper legal proceedings of managing a property. Here are a few of the laws every landlord should know about.
The Top 7 Laws Every Landlord Needs to Study
1. State Regulations
Every state has its own regulations regarding housing. These laws govern tenant-landlord interactions, tenant rights, how to terminate leases, how to carry out evictions, and even the size of the security deposit. To learn about the specific laws associated with your state, visit the U.S. Department of Housing and Urban Development.
2. Legal Binding Contracts
This may seem like a no-brainer, but it’s important to cover. When a tenant and landlord sign a lease agreement, it becomes a legal, binding contract, which can only be broken under certain parameters, as stated in the contract or by federal or state law. Both the tenant and the landlord are legally responsible for any constraints issued in the document.
3. Tenant Privacy and Access Rights
A master key does not grant landlords access whenever they want. Laws may differ from state to state, but in general, landlords are only allowed unannounced access to an apartment in the case of an emergency. They’re also allowed access without the tenant’s permission in order to show the property to a prospective tenant and make repairs, but generally, they are required to inform the tenant at least 24 hours in advance. Otherwise, they must be invited or give proper warning before entering.
4. The Fair Housing Act (FHA)
Under federal law, the Fair Housing Act protects against discrimination on basis of race, color, national origin, religion, sex, familial status, or handicap. Discrimination is defined as treating one tenant differently than another and varies from setting higher rent to denying a lease for personal reasons. The FHA also prohibits discriminatory or selective advertising. For more information about the FHA, click here.
5. The Fair Credit Reporting Act (FCRA)
Landlords are also responsible for securely treating tenant credit information. This act regulates landlord access to tenant credit report histories. The act was designed to protect tenant privacy, and failure to respect the law usually leads to lawsuits and civil penalties. Click here to learn more about the FCRA.
6. Landlord Liabilities
Almost every state mandates that tenants have the right to live in a dwelling that meets county building and health standards. If the landlord rents out a property that is not fit for habitation by these standards, they are liable for the consequences, unless the current tenant caused the damage. Essentially, this law penalizes any landlord who doesn’t do his or her job.
7. Terminating Contracts and Evictions
Since terminating a contract or evicting a tenant breaks the binding contract, there are proper regulations based on the state you live in. If the tenant or landlord is not holding up their end of the contract, it may call for an early termination, resulting in a mutual parting of ways or an eviction. Likewise, there are instances where the tenant will have a legally backed reason for breaking a contract, and the landlord must honor that request.
When this occurs, consult your state regulations for the proper way to handle it. In general, breaking a contract involves giving 30 days’ notice and the proper paperwork.
It’s also important to note that the landlord is not allowed to change locks, turn off utilities, or use other means of force to evict a tenant. Nor is the landlord allowed to perform an eviction in retaliation to the tenant’s past actions.
The legalities of being a landlord take a considerable amount of research and understanding before you feel comfortable that you’re not breaking the law. Be sure to get a handle on the specifics of your market to stay legal and profitable!
What laws would you add to my list?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.