How do you protect yourself from being sued as a landlord ?

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How do you protect yourself from being sued as a landlord ?

Carmen Lapham
Member since 2019 · 12 posts · 6 votes

I'd like to know what a small size landlord does in order to protect them from being sued? Is there more than just putting your business in a LLC?

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Adam Martin
Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
3y

The best offense is a good defense so know your laws and both the rights for yourself and tenants and follow them and this will stop most lawsuits that have merit.  I self manage so any competent lawyer is going to sue me anyway so I see no point in an llc and focus on a large insurance/umbrella policy to protect my assets.  There is a lot of talk about getting sued and loosing everything but I have yet to see it happen and the only times I am aware of where it got bad for a landlord, they had it coming not following my first bit of advice.  My lease is ever evolving as situations arise I didn’t anticipate but follow your lease, treat tenants fairly, and don’t be a generally bad person and you should be good.  I’ve been threatened with a lot of suits for people who were mad they didn’t qualify or mad they didn’t deserve their deposit back but I’m still waiting on those papers to be served.  

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  • Adam Martin
    Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    The best offense is a good defense so know your laws and both the rights for yourself and tenants and follow them and this will stop most lawsuits that have merit.  I self manage so any competent lawyer is going to sue me anyway so I see no point in an llc and focus on a large insurance/umbrella policy to protect my assets.  There is a lot of talk about getting sued and loosing everything but I have yet to see it happen and the only times I am aware of where it got bad for a landlord, they had it coming not following my first bit of advice.  My lease is ever evolving as situations arise I didn’t anticipate but follow your lease, treat tenants fairly, and don’t be a generally bad person and you should be good.  I’ve been threatened with a lot of suits for people who were mad they didn’t qualify or mad they didn’t deserve their deposit back but I’m still waiting on those papers to be served.  

    7Reply
  • Jeff CopelandBusiness Member
    Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
    3y

    Putting your assets in an LLC does nothing to stop you from getting sued. It just limits your exposure to the only assets lowed by the LLC. 

    To prevent lawsuits, do things to prevent people from getting hurt or killed on your property:

    -Inspect your properties regularly for trip and fall hazards, fire hazards, and other safety issues. 

    -Repair things quickly to avoid any appearance of negligence. 

    -Use licensed contractors (especially for things like electrical work)

    -Limit tenant access to dangerous spaces such as the attic. 

    -Check out http://www.evicttv.com/categor...

    To protect your interests once an incident occurs and/or you do get sued:

    -LLCs and other entities can limit your exposure, but aren't always feasible (for example, when using conventional financing properties may need to be titled in your own name).

    -Property and casualty Insurance for the property itself insures you for things like fire and storm damage (this doesn't really have anything to do with getting sued, but is obviously important)

    -Maximize your liability coverage on your homeowners policy (liability coverage insures you against wrongful death, injury, or scarring of someone on your property). Most homeowner's policies will max out at $300k to $500k for liability coverage, which may not be enough in the event of a wrongful death or personal injury suit. 

    -Have an umbrella liability policy that kicks in where your homeowners coverage maxes out. $1M to $2M in coverage is fairly typical here. 

    Copeland Morgan LLC4.770 Reviews
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  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    3y
    Aloha,

    Everything above is absolutely correct. However, in addition, IF you create a legal entity of any kind to hold your property in, you MUST be certain to always, always, always, sign documents properly and maintain records for the entity as the business that it should be.

    What does that mean?

    If you are a trustee, a limited partner, an officer of the corporation, or whatever your position or title is, you must sign in that capacity to prevent personal responsibility: John Jones, Trustee; Paul Smith, President, etc. When you ONLY sign as John Jones or Paul Smith without your position or title, you are signing as an individual, NOT as the Trustee or President etc.  Google "Signing Capacity".

    If you create, for example, a corporation, and do not maintain meeting minutes and other required business records for votes or other actions, you are not treating it as an actual business in the eyes of the law. LLC's and other entities also require registration with your state that must be kept current or re-submitted annually or biannually, often with a small fee. You must also file the proper tax forms annually (with proper, accurate accounting of expenses and income, of course). Always keep personal income and expenses clearly separate from all business funds, properly documenting transfers to or from you personally. There may be other requirements depending on the type of entity, and your locale. Trusts usually have provision for substitute Trustees, and may have requirements of the Trustees that must be followed. This info should be reviewed and updated periodically as well. (You should also have a copy of the "Short Form" Trust available for any required third party reviews, such as loan applications and certain contracts.)

    In short, any failure to properly document, register, account for funds, or even something as seemingly unimportant as properly signing ANY document, can create an opportunity for "piercing the corporate veil" resulting in your personal liability with no recourse.

    I cannot count the number of times Clients have come to us with no idea how they should sign documents; insurance or tax filings that do not match the owner of record (or each other), and generally poor records of tenant agreements/payments. They spent significant money to establish the entity, but years of improper documentation put their personal assets at high risk. Also, I would point out that virtually all of the above also applies to those of you on HOA Boards. Treat Business AS Business, and affix your proper signature for the entity you are acting on behalf of.
    2Reply
  • Blake Johnson
    Real Estate Consultant · Franklin, TN · Member since 2022 · 13 posts · 7 votes
    3y
    Quote from @Carmen Lapham:

    I'd like to know what a small size landlord does in order to protect them from being sued? Is there more than just putting your business in a LLC?


     Make sure you are working with an attorney you trust and have this attorney draft you a lease/management agreement. When I first started out, I spent thousands on specific agreements for my operations (management agreement and lease agreement specifically). This has protected me throughout the years. 

    LLC is a great protection as well.

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    Common sense. Make your properties as safe as is reasonably possible and keep them that way.  This is where most people fail. 

    Have an appropriate amount of liability insurance and then a bit extra... no need for an LLC....

    3Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    LLC will not protect you

    Have a rock solid lease 

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Carmen Lapham:

    I'd like to know what a small size landlord does in order to protect them from being sued? Is there more than just putting your business in a LLC?

    Know and obey the law. Seriously, that will protect you far more than an LLC or insurance. Most disputes between Tenant and Landlord are over security deposits. Know and obey the law, treat the Tenant fairly, and document everything. I manage 400 rentals and have never been sued once. Even if I were sued, I have all the documentation to back up my actions.

    The DIY Landlord Book4.7248 Reviews
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  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
    3y

    @Carmen Lapham

    Develop a process that follows state and federal law, then follow the process.

    0Reply
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    3y
    Quote from @Carmen Lapham:

    I'd like to know what a small size landlord does in order to protect them from being sued? Is there more than just putting your business in a LLC?


     1. Be professional and nice

     2. Know the laws and abide by them and make the tenants abide by them

     3. Screen the tenants intensely prior to having them move in (check employer, landlord history etc.)

     4. Carry an Umbrella policy 

    5. Have the properties in an LLC

     6. (bonus) on all rentals if you are doing work have a license and bonded person working on it/them

    The McKernan Group4.954 Reviews
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  • Melanie ThomasBusiness Member
    Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
    3y

    Stay above board, always CYA and have a few good attorneys on hand. Even with that said, I have paid a ton of money just to be on the "right" side. Anyone will sue these days for anything. Good luck, happy investing!

    [email protected]
    RentWerx Property Management4.73296 Reviews
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    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    Bring up all your concerns to an insurance agent and an attorney. 
    See which can provide you a resolution and allow you to sleep well at night.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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