How Do You Avoid Lawsuits with Tenants?
Screen them well. Have a good lease. Avoid war zone properties. Have good insurance. Always make the other guy look like the unreasonable *******!
Put things in writing or emails but not text messages. Text messages most likely will not hold up in court.
Document everything with copies of receipts and photographs. LOTS of written communication (I prefer no texts or emails) with the tenant to discover his pain point but have a good lawyer for backup.
Run a good, honest business. Be nice, even when you're wrong. Be nice, even when they're wrong(this one took me about 3 years to learn- I started investing as a young, temperamental guy. Now I'm a youngish, somewhat less temperamental guy, though I'm probably flattering myself on both counts.)
Don't underestimate the value of upkeep- if residents are happy with their apartments and the buildings that they're living in, they will do all they can to stay. If upkeep is performed in a haphazard manner, or not performed at all, the residents will pay rent haphazardly, or not at all, forcing you to initiate a lawsuit against them(eviction proceeding.)
When an eviction becomes necessary, don't be mad about it. People struggle to pay their bills sometimes, by bad luck or bad habits or whatever, but it doesn't make them bad people. Serve notice respectfully, let them know that you're willing to work with them and that you're not upset by the whole process, and that even though you're evicting them, if they need anything they should not hesitate to contact you, and that you'll help in any way possible.
In other words, be nice, honest, and accommodating to a fault. Some will say this behavior will impact returns negatively, but it will keep you out of court, which is a little harder to factor into a spreadsheet. If you live in the U.S., your attorney is expensive, so having to defend yourself less frequently(via an attorney)or performing fewer evictions can really improve your bottom line.
@Steve Rozenberg I create a good, solid lease and screen every tenant well. Before they sign I spend at least an hour going through the lease with them to ensure they understand everything. By the end they know that I am nice but will always follow the lease, including eviction. I also provide good quality units (not necessarily good neighborhoods (there is a differrence)) and maintain them. When they know you care, they care as well. Knowing that you maintain the property and can prove it, and that you follow the lease, tenants are less likely to sue because they will know they are in the wrong.
Follow all your state regulations, operate professionally and don't worry about lawsuits.
99% of tenants that threaten lawsuits do not follow through and assuming you have operated by the book lawsuits are a non issue.
I agree with the advice above. Thorough, careful screening is a must. My mother was a landlord and I did the majority of her management for her, EXCEPT for the screening part, for reasons that are still unclear to me. She consistently had nightmare tenants because she couldn't be bothered with simple steps like calling previous landlords for referrals, checking credit history, etc. She always told me she did these things, but when I had to put on the game face with her tenants and lay down the law, so to speak, my mom always ended up confessing that she didn't do her due diligence. She ended up with non-payers, people using illegal drugs on her property, hoarders (which led to a mouse infestation and other tenants breaking their lease to escape the smell of rotting garbage), the whole nine yards.
On the flip side, being an efficient, honest, friendly/approachable-yet-fair ("fair" as in "sticks to the letter of the lease") landlord goes a really long way toward not getting sued, too. And KNOW THE LAWS for your area, and follow them to the letter.
I rented for nearly 20 years and I was always the dream tenant (probably because I grew up with a landlord for a mother and was managing her rentals for her on the side!) In 18+ years, I have never been a day late with my rent, have never damaged a unit, have done whatever I could to settle disputes with other renters myself, and always left every unit in better condition than I found it. I treated others' property as if it was my own. Yet that didn't save me from ending up with a few crappy landlords who thought landlord-tenant laws didn't apply to them. I had to threaten to sue one of them, who broke our lease in many different ways, constantly asked me to pay my rent early so the power wouldn't get shut off, and when I finally moved out (thank god), she confessed that she'd spent the deposit that was supposed to be held in escrow, so I would have to wait until she found a new tenant, whose deposit she would use to refund me. I don't think so. It's amazing how fast a supposedly broke landlord will come up with your missing deposit money when you threaten a lawsuit and detail the exact damages you're going to ask for thanks to the various ways their lease agreement is against city laws, or the various ways they broke their own lease while you were there.
So don't be like her and you should be fine. :)
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