Renting Your Property? Avoid These 3 Common Lease Mistakes
If you are becoming a landlord for the first time, you want to make sure you do what you can to reduce the risk inherent in renting out something that is a significant financial asset.
There are laws that can help protect your property and help you collect financial payments, but your ability to use the law to your advantage can be diminished if you make legal mistakes with lease agreements and tenant screening.
Fortunately, with the help of a real estate attorney, you can avoid these three common mistakes that undermine your protection as a property landlord.
Assuming Too Much
Often, landlords do not realize how much a good lease agreement can protect them. A basic agreement found for free online may help you determine things like rental rates and lease length, but ideally, a lease will provide explicit and specific details about tenant responsibilities, including what the property is to be used for.
It might seem like overkill at first to include restrictions for property use, but these restrictions can protect your property from damage or give you the ability to evict troubling tenants.
For example, if you are renting out a house to a family, you might include the restriction that the residence cannot be used for business. This includes home-run businesses, like hair salons, massage services, catering, or home-based consulting. This way, your insurance for a residential property remains valid, and you don’t have to worry about increased liability.
The use of property is important because certain areas are zoned for certain things. You also don’t want damage that might come from client or customer traffic that comes from someone using the living room as a retail space.
Never assume that your tenants know what you intend for the property. You might include a restriction for overnight guests to prevent people from filling the house with ten extra bodies who just need a place to crash. You can also restrict subleasing, large gatherings, loud parties, and the total number of occupants permitted based on legal requirements.
A lease should also not assume that people will leave the home in good condition. The agreement should specify the tenants’ exact responsibilities, including things like lawn care and basic maintenance. You might also include preventions against hanging signs, painting walls, or making any unapproved changes to the property beyond changing light bulbs.
Your lawyer can help you consider details about your lease that you might not have thought about. A tailored, specific lease is much more defensible should you ever be in a tenant dispute.
Discriminating Against Tenants or Potential Tenants
Even though a detailed lease should help to prevent property damage, the lease can’t overreach and become discriminatory against people who are protected by the Fair Housing Act. You also cannot discriminate when finding tenants to use your property. Landlords may discriminate without even meaning to, especially against people with disabilities or families with children.
For example, if you have a one-bedroom condo you wish to rent out, you might advertise it as “Looking for a married professional couple for single-bedroom condo” on local sites. However, according to federal law, you can’t discriminate based on marital status, and this type of advertising could be viewed as preferential to that relationship.
Similarly, if you have a house for rent, you can’t only allow college students or young single professionals. You also can’t prevent parents with children from renting.
You cannot evict people from an apartment because they become pregnant or adopt children, as long as there is legal occupancy for them. There are some legal exceptions, depending on city ordinances and owner-occupancy, but these are less common.
For people with disabilities, landlords are required to make reasonable accommodations for tenants. This might mean installing a ramp up to the front steps to allow wheelchair access. You also must allow for service animals, even if you have a no-pets policy.
When screening tenants, you may not ask about medical history, race, age, religion, or marital or familial status. You may screen tenants using credit history, employment history, and credit checks. You can also ask for references.
Talk to your lawyer before you search for tenants and create your leases to make sure you’re staying in line with the Fair Housing Act.
Incorrectly Adding Provisions to a Lease
Finally, even though a detailed lease is your friend, you also need to realize that some provisions in a lease cannot be upheld in court. For example, tenants are entitled to receive their damage deposit back at the end of a lease, and no clause in the lease can allow them to forfeit it — unless, of course, the entire amount is needed for damage repair.
To illustrate, you may not state that a tenant forfeits their entire deposit if they have a pet when you have a policy against pets. Instead, you might impose a fine in the agreement instead. You also may not turn the lease into a waiver where the tenant signs away their ability to sue you for injury or damages.
For more information on crafting a legal, detailed, and protective lease, contact us at Kelm & Reuter, P.A.