One of the upsides of real estate investing is how easy it is to control the downsides. Being mindful of landlord tenant law and working with your rental property management are the best ways to identify and limit your risks.

Premise Liability a Downside to Real Estate Investing

Most risks in real estate investing stem from the condition of the property. Premise liability lawsuits, including “slip and fall” cases are a favorite pastime of tenant attorneys. This liability is no different than if you owned a store and someone slips on a wet floor, or your inventory keeps crashing on customers’ heads.

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Deteriorating conditions in a property, falling tree branches, icy stairs, lack of adequate lighting or inferior railings around a rooftop are prime examples of premise liability problems. These conditions do not just occur in older properties. A building can be brand new and completely high-tech, but still be accident prone.

So, what’s the solution?

One of the easiest things to do is simply rely on the building, zoning and fire codes to outline the standards. This is the first place tenant attorneys go to show you were negligent. Follow these laws, and not only will the building will be safer to begin with, but you’ll be able to stand by your record.

Here’s some more sage business advice:

Use only licensed vendors for the tough fixes, like plumbing and electrical work. Tell your rental property management to shy away from unskilled workers.

Routinely inspect the property for safety issues.

Tell your rental property management to fix any problems as soon as possible.

Environmental Hazards Are Nothing to “Om” About

More sage advice…

A special type of premise liability relates to environmental hazards. For the most part, these hazards are invisible and inspectors don’t always look unless you ask. That’s one of the challenges to real estate investing — knowing what to ask.

Lead paint used in older buildings is a serious concern. So is asbestos, especially if you need to remodel. The U.S. has recently passed more stringent landlord and tenant legislation concerning remodels and repairs on older rental buildings, and require expensive mitigation procedures. What’s more, the owner can be liable simply for the existence of these hazards.

Radon is a common cause of lung cancer. Not all areas of the U.S. have a landlord tenant law regarding radon, so it’s important to ask for the test before you purchase, or as soon as you realize there could be a problem.

To reduce the risks, make sure you follow both federal guidelines as well as local landlord tenant law when you have renters in your buildings. Often, these rules require disclosure of the potential hazard to the tenants. Fines can be levied simply for failing to disclose the hazard, regardless of any injuries. Don’t hesitate– fix the problem!

Secondhand smoke has become a common area of liability. Landlords do have the right to restrict smoking in rental apartments. The only exception is current tenants whose leases have yet to expire, and who will not agree to forego smoking. In that case, you will have to take steps to protect other tenants who are experiencing secondhand smoke.

Pests are a profit killer. By now, everyone is the world knows about the bed bug epidemic. Maybe you haven’t heard about the bed bug lawsuit epidemic. Jury awards have been increasing significantly in recent years. Other pests are even more dangerous because they can spread disease. But even more insidious than blood-sucking bed bugs are the pesticides used to control pests. Self-application of pesticides by tenants or property managers can cause significant injury, especially to children, spiking the owner’s liability.

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The simple solution: make sure your rental property management contracts out pest control to a licensed and reputable firm.

Understanding Landlord Tenant Law and Tenant Privacy

Privacy is one of the most important tenant rights. Unannounced visits by your rental property management or employees can cause lawsuits. Tenants are entitled to notice before anyone enters the unit, except in an emergency. Make sure your rental property management company has a policy regarding entry.

Keys to units have to be carefully stowed so there is no risk of unauthorized entry.

Tenant screening reports and the rental application include intimate information about the tenant that must remain confidential. Disclosure of personal information violates the law, and the tenant has a right to sue for invasion of privacy.

Not Screening Vendors, Contractors, Employees

Vicarious liability can apply against an owner for negligence, and in some cases, criminal actions. It’s just as important to screen workers as it is tenants.

Housing Discrimination Hurts the Bottom Line

You have to go into real estate investing knowing the housing discrimination is a serious violation of landlord tenant law. There is no upside to discrimination; the belief that an exclusionary policy guarantees better tenants is a myth. Good tenants can’t be distinguished from bad tenants based on appearance.

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Don’t Use Standard Security Deposit Deductions

There is no such thing as a “standard” deduction when it comes to security deposits. This is a highly regulated area of law, and there are strict limits on what can or cannot be deducted from these funds. The sign that you have good rental property management is that the security deposits are returned. That means the tenant was properly trained and supervised. The deposit is not a profit center, it’s simply an incentive to perform the lease agreement.

Class action lawsuits target landlords whose managers’ policies are to deduct a little something from every deposit. Sure, it’s good to treat all tenants the same, but treating them all unfairly will only increase the losses.

Screening Tenants on High Credit Alone is RISKY!

Credit is an important aspect of tenant screening, but it’s lazy to go with credit scores and not check other factors like criminal history. Landlords have liability for bringing a dangerous tenant into the apartment community. Likewise, there should be a guest policy that requires a background check on those who end up staying long-term.

Staying ahead of possible liabilities is the best way to avoid any trouble on your real estate investing journey.

Steve Martel
Steve Martel is a serial 8-figures/yr business magnet, real estate mogul, millionaire philanthropist, author, educator, public figure & happily married father of 4 little munchkins under 10. His teachings and concepts have revolutionised the lives of over 100,000 entrepreneurs around the world and he has consulted 428 clients who’ve collectively created businesses worth over $560 million in the last 5 years alone.