Limiting Your Liability as a Landlord

targetBeing a landlord means putting yourself at risk for liability issues. When you own a piece of property and a lot of different people are living there, you’ll have opportunities for people to get injured, harm others, or cause a problem that damages the structure in some way. There are a few ways to limit your liability. The first way is to screen your tenants very carefully, and have strict criteria for renting from you. When you “weed out” tenants who have criminal records, don’t make a lot of money, or have poor credit, you can more easily avoid some of the risks that come with owning an apartment complex.

That doesn’t guarantee that you’ll never have a liability issue, of course, but it does tend to make things easier and help you sleep a little bit better at night. It’s also not the only thing you can do to protect yourself. Another way to reduce your liability risk is to have the right insurance. Don’t just carry the minimum required by law. If something major goes wrong on your property, that amount of insurance might not be enough. Instead, buy more insurance that you have to have, and get as much as you can reasonably afford without completely overdoing it. Your insurance agent can give you a good idea of how much insurance you should really have for your rental property, in order to properly protect your interests.

In addition to insurance and good tenants, you’ll want to consider limiting your liability by creating a company. If you just own the building, you open yourself up to being personally sued if there’s a problem on your property. If you have an LLC, for example, and that company technically owns the property, the company can be sued but the landlord, personally, cannot. Of course, you’ll want to consult with an attorney about what kind of company structure might be best, and whether it’s a good idea for you to form an LLC or any kind of corporation to protect your interests. Knowledge is power, and can help lower your liability.

Don’t forget that the safety of your property matters, too. Handling repairs quickly and making sure everything is in good working order can keep the chance of a tenant getting injured much lower. A slip, fall, or other injury could still occur, but it won’t happen because of dangers on the property or the negligence of the landlord. If you do get sued for the injury, that attention to keeping the property up can make a difference in the outcome of the case.

No matter which ways you limit the liability you have as a landlord, there can still be problems. There’s no way to completely reduce all of your risk, but being a good landlord and taking the proper precautions to ensure you’re protected as much as possible is very important. Then, if something does go wrong, the amount of risk you’ll be taking will be limited, and even that can make a significant difference in the outcome of any liability issues that arise.

This article originally appeared on AAOA.

Are You Too Nice to Your Tenants?

too niceIt’s possible to be too nice to your tenants. If you’re guilty of that, you can find yourself in a situation with a lot of stress – and you could even end up in legal trouble. There’s no reason to be a mean just because you’re a landlord, but you definitely want to remember that business is business. People’s stories about how they can’t pay rent because something horrible has happened to them are not your problem. That may sound harsh, but being a landlord is running a business. If renters don’t pay, you don’t get paid, either.

If you have a mortgage on the building you’re renting out – and many landlords do – you may not be able to easily make your payments unless your renters provide you with the monthly income you’re expecting. There should be some “wiggle room” in your budget for vacant units, but it’s very important that you collect the proper amount of rent each and every month from tenants who have agreed to pay you. If you’re too nice and let things slide, even one time, the tenant will know that they can continue to get away with things. That can lead to months of unpaid rent, damage to the unit, and other problems that you just don’t want to have to deal with.

You can also end up with a legal problem if you bend the rules of the lease agreement for one tenant but won’t do it for another tenant. That’s discriminatory, and could lead to a tenant taking you to court. While that probably won’t happen, there’s no reason to risk it. Stick to the way the lease is written for each and every tenant. If you do choose to make an exception for a tenant who can truly prove a legitimate problem, make sure you make the same exception for other tenants – and keep good records of all of it! By having good records and applying any leeway fairly to all tenants, you reduce the risk of being accused of discrimination, unfair business practices, and other issues that tenants may try to claim.

There’s a big difference between sticking to business and not being nice, and you can be polite with tenants even when denying their request. The more polite you are, the better, but remember that you’re not getting paid to be nice. Letting tenants walk all over you because you don’t want to be unkind just sets you up for more problems down the line. Then when you decide it’s time to stop being so nice because you’re being taken advantage of, you’ll meet with a lot of resistance from tenants who were used to getting their way.

That can mean more trouble than you would have had from denying their requests in the first place, and make an already difficult situation much worse. Don’t take the chance. Be firm but fair with every tenant and stay consistent, so you can avoid the problems that come with being too nice of a landlord.

This article originally appeared on AAOA.

Renting to Family or Friends: Is it Ever a Good Idea?

movingWhen you work as a landlord, it’s very important to keep your personal and professional life separate. A lot of landlords don’t do that, in that they choose to rent apartments to family members or friends. That might seem like a great idea on the surface. You already like them, so renting to them makes logical sense. You get the chance to help out a person you care about, and you’re able to have renters in your units so you have cash flow coming in. It would seem like the ideal arrangement, and an excellent way for everyone to benefit from the arrangement. Many landlords have rented to family members or friends, and some of those agreements have turned out well. Many have not.

Unfortunately, the way renting to friends or family often works out is far from what would be expected between people who care about one another. For the most part, friends and family members will actually make bad renters, because they’ll expect more from you than a tenant who doesn’t know you. You may get a lot of requests for maintenance and repairs, even for minor things, and you may also find that family members and friends think they should be entitled to perks because of your personal relationship with them. When they don’t get special treatment, they can get angry with you, and that hurts both your professional relationship and your personal relationship.

If you really want to help a friend or family member out when they need a place to live, there are other things you can do for them. Renting to them shouldn’t be on the list. It can be hard to say “no” when you know someone you care about is really struggling, of course, and some landlords do help friends or family members out with short-term arrangements, but even those can become problematic. Generally, mixing the business of being a landlord with personal relationships isn’t a good choice, and should be avoided. There are plenty of other ways you can help out someone who matters to you. You could even let them stay in an empty unit for free for a few nights if they really needed a place to go.

That would keep you from having a lease with them, but keep in mind that you would still have to evict them if they’d been there very long and didn’t want to leave. How long they could stay without needing to be forced out and what kind of agreement you could be said to legally have with them would vary depending on the state in which you live. It would still mean taking a risk, but that would be a choice that only you could make. Just be aware of the problems that many landlords can run into when renting to family or friends, and don’t think it can’t happen to you. Protecting yourself from a business standpoint is still very important, no matter who your renters are.

This article originally appeared on AAOA.

How high property prices are changing the rental scene

Smart StepsRural rooming houses, city “slums in the sky” and accommodation-for-sex advertisements have been in the news recently – symptoms of a rental market that is tough for tenants on low incomes.

Investigations after a blaze in the Lacrosse apartment tower in Melbourne last year revealed up to a dozen tenants were sharing two-bedroom apartments – including some who slept on balconies and in lounge rooms partitioned with curtains.

Shared accommodation is no longer the preserve of uni students: some tenants in their 30s and even 40s are still living in (or returning to) shared accommodation.

There are reports of divorced couples remaining in the same property, often with some modifications or the addition of a granny flat.

And some tenants have been caught sub-leasing rooms by the night on accommodation websites or offering accommodation in exchange for sex.

When rent is so expensive the risk of tenant default comes into sharp focus, particularly if a tenant loses a job or faces competing expenses such as the need to fix a car. Fortunately, property owners can insulate themselves from this with quality landlord insurance.

However, insurance isn’t the solution to all problems.

Landlords and property managers need to inform tenants that by-the-night sub-letting is not acceptable – as it requires tailored short-term landlord insurance rather than a conventional policy.

It’s also important to avoid overcrowding. Overcrowded homes suffer greater wear and tear; can be damaged by unauthorised “renovations” to create more bedrooms; and are at greater risk of fire from overloaded electricity systems.

Warning signs include:

  • Mattresses in living areas – or stacked in garages and sheds.
  • Unusually high rates of wear and tear.
  • Plugs leading to an excess of power boards.
  • Tenants reluctant to agree to inspections or requiring very long notice beforehand.
  • A single individual applying to rent a large home.
  • Signs that more cars have been parked at the property than expected – for example, damage to lawns.

Landlords who want to deliberately overcrowd their properties to increase rent need to be aware that they may fall foul of council and state rules regarding boarding houses.

Complying with those rules often requires significant investment in fire equipment upgrades, a minimum number of bathrooms and so on.

Standard landlord insurance also won’t cover property investors who lease by the room – to do so you would need a different type of policy tailored to the situation.

Rents in regional areas are significantly lower than in the city, but in Victoria they have been growing at a faster pace over the past five years.

Residents priced out of conventional rentals are turning to rooming houses – with 13 premises on the public register this year, compared to two last year.

The Anglicare Rental Affordability Snapshot for 2015 analysed more than 51,000 metropolitan rental properties advertised on one April weekend and found:

  • only one home would have been affordable for a single person on Newstart – that is, rent costs 30 per cent of household income or less;
  • fewer  than one in 100 properties were affordable for people on a disability pension, single age pension, parenting payments or parents on a single minimum wage;
  • families with both parents earning the minimum wage and two children could afford 17 per cent of properties on the market; and
  • families with one parent on the minimum wage and the other on a parenting payment would have affordable access to 2.7 per cent of properties.

Source: Residential Property Manager