Understanding the Legal Side of Multifamily Syndication
There are a lot of legal issues to consider before you can start looking for partners for your multifamily syndication. Understanding federal and local laws and ordinances will help you steer clear of potentially damaging and costly issues later on.
On that note, here are a few key pointers for stress-free real estate syndicating:
Security deposit laws
A security deposit is an amount of money that a tenant leaves with a landlord for the duration of time that they use a rental space. That cash is then returned by the landlord after the rental period is over. However, a certain amount is deducted for cleaning or repairs.
Certain laws come into play when it comes to how landlords utilize the security deposit.
Each state has a law on how a security deposit can be used in a multifamily property. For example, New York tenant laws state that you cannot mingle deposit funds with personal ones. Moreover, if you put the deposit in a bank, you are required to give its name, address, and how much of it was put in there.
Pet Ownership
This one has always been tricky for multifamily asset owners.
Pet ownership in multifamily has had somewhat of a strained relationship. On the one hand, multifamilies who welcome pet-owners are more likely to profit more from properties that do not. On the other hand, it also has risks of raising tenant complaints such as messes, noise, and even injury.
There are different standards in each state on whether multifamily can welcome pets in a property or not. It’s up to you to know where your area stands on pet-ownership.
Laws for lease, rent, and fees
These laws are involved with financial matters of multifamily.
It’s important to understand these laws. For example, New Hampshire Tenant laws state that leases must use clear and coherent words that are easy to understand.
Additionally, when it comes to rental laws, if a tenant fails to pay on time, the landlord has to give them at least seven days to either pay the overdue fee or vacate the premises.
Understanding legal matters like these for each state will save you a headache when a tenant may potentially bring it up someday.
Tenant screening laws
Bringing in tenants has its own set of legal matters for each state.
Screening tenants is necessary for the multifamily business as it can keep unruly residents from ever making it into your property in the first place. For this, an effective screening process is needed.
State laws such as Texas each have their own rules and regulations when it comes to screening tenants. These include asking for and checking a tenant’s:
- Criminal history
- Previous rentals
- Current income
- Credit history
Follow up on the laws of your area as you dig into multifamily syndication. It doesn’t make the business easier, but it does make it more manageable!
Comments