Understanding the Legal Aspects of Rental Property Management
In this article, we’re going to discuss essential property laws every landlord must know in order to avoid unnecessary costs and stress when managing rentals.
Being a landlord is a rollercoaster ride of highs and lows. No two days are the same.
There’s the excitement of building a portfolio and adding a second income stream to complement your day job. But there’s the stress of dealing with roof repairs and other maintenance headaches.
Regardless–getting into property is a decision very few regret as, over the long term, property prices and, subsequently, rental income increase.
One of the biggest challenges of being a landlord is staying on top of the mountain of laws related to property management. Some are easier to navigate, while others require hoop-jumping.
It’s important to be well-versed with the legal landscape–even if you have a property management company looking after your portfolio. Should anything go wrong, you’ll be liable for repercussions.
So, let’s go through the essential laws you should be aware of as painlessly as possible!
Federal Fair Housing Laws
There’s a good chance you’re a fine human being, so we won’t review federal fair housing laws for too long. Nevertheless, you should be well-versed in two laws related to fair housing to avoid an accidental breach.
Fair Housing Act
When tenant-hunting, you can’t advertise the property or screen tenants in a way that would exclude someone based on their:
- National origin
- Familial status
- Disability
- Religion
- Gender
- Race
- Color
You can add any other restriction, provided it does not discriminate against the above list. So, it’s perfectly fine not to want people who smoke and people with pets (unless they are service animals). You can stipulate a certain level of income or credit score prospective tenants should have to be eligible to rent
Americans with Disabilities Act (ADA)
ADA is primarily designed for public places, so it does not apply to residential property but becomes applicable to peripheral services.
For example, it would apply in the following scenarios:
- Common areas in apartment buildings (doors, stairs, etc.)
- Building entrances
- Recreation areas
- Parking lots
- Elevators
- Signage
ADA applies to the above list because these are open to the general public.
Safety Standards
Another essential property laws every landlord must know is that landlords are legally required to provide a safe, habitable living environment—no exceptions.
This implied warranty of habitability means keeping properties structurally sound, providing essential utilities like water, heat, and electricity, and tackling any health hazards, including mold and pests.
On top of that, landlords must meet local building codes and pass regular inspections to ensure safety standards are met. Cutting corners isn’t just bad practice; it’s illegal and can have serious consequences.
Security Deposits
Security deposit laws will vary by state. Generally speaking, security deposit laws will cover the following elements:
- A maximum amount. Many states will restrict how much deposit a landlord can extract from their tenants. Most states set the cap at a maximum of two months’ rent–although others have no cap at all.
- Some states (like Maryland and Illinois) prohibit landlords from storing tenant security deposits in their personal or business accounts to prevent mixing. Landlords would need to lock deposits in a dedicated account. The idea is to ensure the deposit can be promptly returned (or used, if needed) and not accidentally spent on unrelated things.
- Additionally, if deposits in a dedicated bank account earn interest, the landlord needs to declare and transfer the sums to the tenant. For example, in New York, this rule comes into effect if you own six or more units.
- The use of a security deposit. Deposits can only cover unpaid rent, property damage, and cleaning costs. Any money spent from the deposit needs to be itemized using receipts.
- Once a tenancy ends and any deductions are finalized, you must return the remainder of the deposit to the tenant within 14-45 days, depending on the state.
Use our free template to learn how to write a security deposit return letter.
Lease Agreements
A tenancy is a contract between you and your landlord. This contract needs to be a physical document covering several areas:
- Basic details like the parties involved
- Property details
- Lease details
- Start/end date
- Renewal options
- Rent information (amount, due date, late fees, grace periods, stipulations around rent increases)
- Security deposit details (as described above).
- Grounds for termination before lease end
- Landlord entry and inspection rights
- Maintenance conditions
- How to resolve conflicts
- Occupancy limits
- Subletting rights
- Any other disclosures or conditions as mutually agreed
Eviction
Evicting must follow a legal process, which includes giving proper notice and, if necessary, filing for eviction through the courts. Skipping steps or mishandling an eviction can lead to legal headaches, hefty fines, and even having to start the process all over again.
Insurance
Landlord insurance policies protect against property damage, liability claims, and loss of rental income. Don’t wait until it’s too late—get the right insurance in place and rest easy knowing you’re covered, no matter what happens.
Choosing a Business Structure
A property portfolio is like having a business as it generates income.
Choosing the proper structure is essential when setting up your rental property business. To protect your assets, you might consider forming an LLC.
For instance, a Delaware LLC can offer unique benefits for property managers, including flexible management options and strong liability protection. This structure could be particularly advantageous if you’re managing properties across multiple states or looking to attract investors.
Establishing a solid business framework organizes your rental operations and prepares you for potential growth and risk mitigation.
Remember, the structure you choose can impact everything from your taxes to your daily management practices, so it’s worth exploring your options thoroughly.
There are a variety of funding options available that you can make use of. For instance, veterans may be eligible for VA loans. These loans offer favorable financing terms that make purchasing investment properties easier. They often come with lower interest rates and no down payment requirements, helping you kickstart your property investment journey.
Are you a Property Manager Drowning in Property Legalities?
Understanding the legal framework, from tenant rights to property maintenance, is essential for mitigating risks and ensuring smooth operations.
Property managers can leverage various tools to streamline their tasks and enhance efficiency.
For instance, solar project management tools can be invaluable for those managing properties with solar installations, ensuring compliance with renewable energy regulations and optimizing energy efficiency.
Additionally, specialized software can help manage tenant leases, rent collection, financial reports, and maintenance requests, reducing the administrative burden and minimizing potential legal disputes.
Essential Property Laws Every Landlord Must Know
That wasn’t too bad(?)
In the real world, things can go wrong with any property, making it vital for property owners to be familiar with the laws that concern them.
Arguably, maintenance is the biggest stressor.
With RentRedi’s Premium Maintenance, repairs are taken care of without your involvement. Give your tenants a premium maintenance service without worrying about them yourself!