Most rental property owners worry about protecting their investment. From physical damage to the property to insurance claims to lawsuits brought by tenants, there are myriad ways that you can lose money. Fortunately, minimizing risks in a rental business doesn't require a ton of money or a staff of experts. All you need to do is learn where you're vulnerable and then take commonsense steps to minimize that vulnerability.
Here are ten steps you can take to protect yourself against liability as a landlord. By acting now, you'll enjoy a big payoff: reduced likelihood of lawsuits, harm to tenants and guests, damage to your property, and financial distress to your business.
Step #1: Get the Right Insurance for Your Property and Business
Don't wait until a loss occurs before you determine whether you have the right insurance for your business and property. Review your current policy with your agent or broker, then discuss coverage options that fit your needs.
Step #2: Make Your Property Physically Sound
Keep your property safe so that people don't get hurt. To do this, learn the basic legal requirements for repairing and maintaining your property, and then follow them.
implied warranty of habitability. Virtually every landlord must comply with a legal rule known as the "implied warranty of habitability." This means you must make sure your rentals are in a "fit" and "habitable" condition when tenants move in, and you must maintain this condition throughout the tenancy. Get familiar with your state and local health, building, and safety codes, and strive to keep your property compliant. (To learn how to find the laws that apply to your rental property, see Nolo's Legal Research area.)
Take steps to prevent injuries and losses. In addition, take other reasonable steps to prevent injuries and other losses. For example, take all tenants' repair requests seriously and fix problems promptly. Inspect your property yourself for hazards. If you can't address a hazardous situation immediately, warn tenants and visitors about the danger. (For example, put traffic cones around a pothole, or post signs and safety tape near a spill on the floor.)
Step #3: Make Your Rental Property Accessible to Disabled Tenants
Make your property accessible to tenants with mobility impairments and other disabilities. Check whether structures on your property must follow the Fair Housing Act's "design and construction" requirements. (Generally, multifamily buildings that were designed and constructed for first occupancy after March 13, 1991 must comply.)
Regardless of when your buildings were constructed, seriously consider all requests from a disabled prospect or tenant to modify your building in order to meet that person's needs. Review each request on a case-by-case basis and grant it if it's reasonable. For example, a prospect's request to install grab bars in the bathroom or lower kitchen cabinets is probably a reasonable modification request.
Step #4: Remove Environmental Hazards from Your Property
Removing environmental hazards is often trickier than removing other physical hazards. Environmental hazards often can't be seen, and they may not become apparent until they cause injury or property damage. For example, a landlord might not learn of lead paint dust on her property until a family gets their child's blood test results showing elevated levels of lead. What's more, in some cases environmental hazards remain invisible even once they've caused damage, as in the case of carbon monoxide or radon.
Do your best to address environmental hazards before they cause serious damage. Here are some ways to do so:
- Require tenants to report all leaks and flooding to you promptly so that you can take quick action to prevent mold.
- Maintain your heating systems and appliances, and install carbon monoxide detectors in order to prevent carbon monoxide build-up.
- Comply with federal testing requirements when employees or contractors work on asbestos-containing building materials, such as sprayed-on ceilings. These tests will reveal to workers what's in your building, and you can use this knowledge to protect your tenants, too.
Step #5: Prepare for and Handle Disasters and Emergencies
Take steps to safeguard your business and protect your property, tenants, and employees in an emergency. For example:
- Back up your computer files and keep important documents (such as a mortgage, note, and management contract) in a secure and fire-proof off-site storage facility.
- Report suspicious objects, activities, and mail to the police, and take bomb threats seriously.
- Document the location of utility shut-off valves, a step that can save lives and minimize damage if a fire or other disaster occurs.
- Create an emergency procedures manual with an evacuation plan that's tailored to your property.
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