How do landlords protect themselves legally from being sued?

6 Replies

Make sure you abide by your state laws. Also get a good liability policy. If someone is determined to sue they are going to do so no matter what.

@Margaret Azzano

First and foremost, operating within the confines of the law and being ethical and transparent in all your business transactions is the most important thing you can do.

But we do live in an overly litigious society where predatory lawyers and frivolous lawsuits abound. So, there are two primary schools of thought on the issue.

1.) Use a combination of trusts and LLCs to separate yourself from the properties.

2.) Have good insurance.

Last year I met with two different RE lawyers on this topic (both have been in the business a long time) and got two different answers (see 1 & 2 above).

If you acquire a decent portfolio I would definitely move all of the properties (other than your primary residence) into a separate business entity of some kind. But whether or not your need a different LLC for each property and trusts for added anonymity is entirely subjective. In my opinion, a combination of the two strategies works best but I know investors who do it both ways and have had success.

You should take some time to learn about LLCs/trusts and various insurance policies and how they can protect you. Then make your own decision. I’m speaking mainly about long-term buy and holds too.

-Dan

if your a single member you can be held liable personally no matter how you hide wrap or insure things . A judge will pierce right through that stuff in a court room . Here’s a better way :Maintain your buildings do what’s right fix stuff if it breaks and if the tenant is owed back money pay them .

Originally posted by @Margaret Azzano :

When you are buying and holding properties and doing the brrrr method what's the best way to protect yourself. Is landlord insurance enough to cover you if a tenant decides to go after you?

 You can't eliminate the risk of someone filing a lawsuit against you. You can mitigate it though. Some things you can do to mitigate your risk of being hit with a lawsuit are as follows.

  • Buy properties in nicer neighborhoods.
  • Hire a licensed property manager.
  • Only work with licensed contractors.
  • Keep the property in premium condition.
  • Always pull the proper permits.
  • Screen your tenants well.
  • Do not rent to attorneys.
  • Do not rent to people who work for attorneys.
  • Do not rent to anyone who has ever filed a civil lawsuit.

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