Property Management Tips – Legal Mistakes That Landlords Don’t Want to Make

 

By Property Management Systems

PORTLAND, OR. – There’s no denying that being a landlord can sometimes be a difficult job, especially if you’re still managing your rental properties yourself.

Why?

Besides having to take care of things like maintenance and repairs at a rental property, a typical landlord also has to stay up to date on the latest landlord-tenant laws or they could find themselves on the wrong side of the law.

Going to court is the LAST THING that any landlord wants to do but it’s all too common these days as many landlords often cut corners and do things to bring in new tenants quickly.

Sadly, cutting corners only leads to trouble because this means that processes are not being followed and it’s easy for any landlord to make a legal mistake (intentional or not) that lands them in court.

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Legal Mistakes You Don’t Want to Make

If you are managing rental properties yourself, one of the top legal mistakes that you don’t want to make is refusing to rent to families with small children.

Discriminating or refusing to rent to families with small children has been illegal for over 20 years and is a violation of just about every Federal and State housing law that you can think of.

As an owner, you also cannot discriminate against tenants based on their sex, color, race, religion or status of their disability.

To ensure that you don’t end up being accused of discrimination against your tenants one of the very best things you can do is stay up to date with the latest HUD laws, rules and regulations or hire a professional property management company like Property Management Systems to professionally manage your rental properties for you.

Besides discrimination, some of the other top legal mistakes that you don’t want to make when managing rental properties include:

Banning Applicants with a Criminal History

A criminal history might be a standard red flag; but according to a new policy memo issued last year by the Department of Housing and Urban Development, criminal history alone is not a sufficient reason to turn down a rental applicant.

To be clear: that does not mean that you can’t consider a person’s criminal history at all during the tenant screening process. Instead, HUD is basically telling landlords and property managers the following:

  • You cannot institute a blanket ban on all applicants with a criminal history.
  • You cannot reject a tenant based upon an arrest that did not result in conviction.
  • You must treat comparable criminal histories similarly without consideration of race, national origin, or other protected class.

Instead, when reviewing a person’s criminal history, consider factors like:

  • Was the applicant arrested or actually convicted of the crime?
  • What was the severity of the crime?
  • How long ago was the crime committed?
  • Was it a drug-related crime?

Just to be on the safe side, we suggest screening tenants based upon financial and other financial qualifications before conducting a background check. This will protect you from denying a tenant for a financial reason–for example, a history of unpaid rent–and having that tenant argue that they were denied based upon their criminal background.

Using Generic Lease Forms

Standard lease forms should just be a starting point for landlords and property managers. Generic lease forms available for download online usually include the most basic information: names of all parties, property address, rental amount, term of lease, and so forth. However, there’s no way for you to know if this generic form is compliant with your state and local fair housing laws–and its protection may not extend as far as you’d expect.

Instead, hire an attorney to craft a lease that’s specific to your property (e.g. Is driveway parking included in the lease? Who is responsible for yard maintenance?) and is in compliance with all local landlord-tenant laws. Hiring an attorney to draft your lease agreement is a one-time cost that will pay dividends in the protection that it offers through the years.

Improperly Collecting or Holding Security Deposits

Laws vary by state, but most have very explicit rules around how much you can collect as a security deposit. Some states also have specific rules regarding how that security deposit must be held.

In Massachusetts, for example, all security deposits must be held in an interest-bearing escrow account that was opened in the name of both the landlord and the tenant. Each year, landlords must refund tenants any interest that has accrued on that amount. The interest must be paid to the tenants by bank check, which can cost upwards of $15 to issue depending on your bank–something that many landlords forget to do, especially because the interest is often only pennies or dollars each year.

Most residents don’t realize that this policy exists, so it often falls under the radar. However, in the event that you were to end up in court for an unrelated housing dispute with this tenant, the tenant could challenge how you’ve collected and held their security deposit. In some states, this automatically results in treble damages, regardless of the outcome of the other dispute. This is among the costliest legal mistakes made by landlords and property managers, so be sure to steer clear of it!

Hiring a Resident as Your Property Manager

This seems benign enough. If a resident is already living on-site and is willing to assist with general property maintenance and other management duties, why not cut them a break on rent and save on property management fees?

Honestly, it’s not worth the risk. Here’s an anecdote from one landlord we’ve worked with in the past: When he played football in college, per NCAA guidelines, he could not get a paying job while on the team. However, he still needed some cash, so he worked out a deal with his landlord: He’d be the property manager for the 14-unit property in exchange for a $500 discount on his monthly rent. It seemed like a win-win scenario… until a massive fire broke out at the property.

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For professional property management in Portland Oregon contact Property Management Systems today by calling (503) 515-3170 or click here to connect with us online.

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