How to Avoid Being Sued When You Own Rental Real Estate …

Copyright (c) 2008 Michel Lautensack

The decision on whether to manage your own rental property or to outsource it to a professional residential property management company is a personal decision that only you can make. Two important aspects of owning and managing property are knowing how to properly screen tenants and developing adequate knowledge of property law. Let’s look at both of these very important issues.

Tenant Screening – When a potential tenant submits an application for housing with you, you have to make a determination as to whether or not you want to rent to them. A hundred years ago you might have been able to reach a decision based upon a gut instinct, but you can’t rely on instincts or hunches if you want to maximize your chances of a positive experience with a tenant you don’t know.

As an individual real estate investor, you have limited information at your fingertips. While you can call past and present employers, landlords, as well as other references, that doesn’t necessarily paint an accurate picture of what kind of tenant you’ll get if you opt to rent to them.

Because information is power, you will want to obtain as much high-quality, detailed information about potential renters as you can to reduce your potential liability in the event that something unexpected happens. For instance, what do you do if it turns out that your “good renter” is a pedophile or a rapist? Can you afford a lawsuit from another one of your tenants if something happens and you get sued?

There is a glut of information available in a variety of computer databases, but if you don’t know where to look, it’s useless. In addition, as an individual you might have difficulty running criminal background checks, credit checks, and other public notice checks. A professional residential property management firm can complete these checks very quickly and easily, and is well-versed in the best ways to go about gathering this information.

Property Law – You’re not a lawyer, but you almost have to be in order to understand the myriad laws, rules, and regulations that pertain to how you manage your property. Federal, state and local laws vary and change regularly. Just a few of the laws that affect you and your property include the Americans with Disabilities Act and Federal Fair Housing regulations. Ignorance is no excuse in the eyes of the law, so if you run afoul of just one of these laws, you open yourself up to being sued by a tenant, or being fined by a governmental regulatory agency – or both.

Do you know if your property has to have a wheelchair ramp or safety rails? What about the rules pertaining to wiring? There are hundreds of laws, rules, and regulations that directly apply to you and you’re expected to be in compliance with all of them at all times.

You can learn these various rules, but they change so frequently that it can be a full-time job just staying on top of all the changes. If you aren’t in compliance, there’s always an attorney willing to file a lawsuit seeking money from you for having the temerity to violate the law.

If you aren’t able or willing to be a “hands on” landlord, a residential property management company can provide the knowledge and expertise to decipher and sort out all of these rules and regulations and keep you in regulatory compliance.

Rates are reasonable and you will rest easier knowing that the heavy lifting is being performed by knowledgeable professionals who have a vested interest in seeing to it that you’re in full compliance with all of the rules and regulations.