5 Legal Obligations Every Landlord Needs to Meet

Have you finally learned that real estate is the ultimate wealth-building tool? By investing in real estate, you can build your net worth the smart way, by leveraging assets that increase in value every year.

And not only that, but you get to enjoy monthly cash flow, along with debt paydown as your tenants pay off the mortgage on your property for you.

Real estate is the best-kept secret of the wealthy, and those who want to retire early. But it doesn’t come without work. Becoming a landlord is a big deal. Landlord obligations vary from place to place, and from investment type to investment type.

But you’ll quickly learn that becoming a landlord isn’t a passive activity. However, the pros far outweigh the cons, if you know what you are doing.

So what are landlord legal obligations, and how can you maintain minimum standards for rented housing with ease? Keep reading below for all the answers.

1. Offer Fair Housing

As a landlord, you are required to be fair in your process of screening and choosing tenants to rent your property. That means that you cannot discriminate based on factors like race, sex, religion, ethnicity, family status, or disability. You also cannot charge different rental rates based on any of these factors.

If you do, tenants or prospective tenants may file a complaint with the Fair Housing Administration (FHA).

You do, however, have the ability to choose who can and cannot rent your property based on an applicant’s criminal record. That is why landlords usually run background checks.

For example, you may not want to lease your property to someone who has been convicted of arson, or who has used a residence in the past for illicit activities. And to protect your neighborhood, you may choose not to rent to those listed on the National Sex Offender Public Registry.

However, just because there are criminal remarks on the history, doesn’t mean you should deny them housing altogether. Consider the crime listed, and how long it’s been since that time before making a decision.

2. Provide Tenants With Updated Copy of Lease

The lease agreement between you and your tenant is a living and breathing document. It’s what defines the relationship, and who is expected to do what, and when.

It’s extremely important for both parties to have a copy at all times. If your tenant loses theirs and requests a new one, you need to provide them with one, and they always need to be signed by both parties.

It’s the lease the defines the obligations of landlord and tenant. It’s best to take time preparing a lease agreement and can help to work with an attorney to ensure you have a document that protects both you and the tenant from unfair treatment.

3. Landlord Obligations Regarding ADUs

One of the best ways to jumpstart your real estate investing career is by renting out a portion of your current home. Alternatively, you can buy a new home that you plan to move into, and ensure it has enough space to rent out, while still maintaining privacy for yourself.

This is known in the investing community as house hacking. The benefit of this style of investing is that financing is much easier to obtain. When purchasing a primary residence, you can qualify for mortgage programs that allow for much lower down payments, such as 3.5%, 5%, or 10% as opposed to the standard 20% or more for investor loans.

If you live in a big, historic city, there’s a good chance you’ll have a sizable basement. If you don’t have a proper duplex, a good strategy is constructing an accessory dwelling unit (ADU) or apartment in your basement. This is also referred to as an English basement and is common in places like Chicago, New York City, and Washington DC.

But before doing this, you want to study landlord responsibilities of building and renting an ADU in your city and neighborhood. The acceptance and rules vary from state to state, county to county, and even by neighborhood in your city.

You can learn more about the process of building an English basement here, so you can start investing the easy way.

But basically, you are going to need to discuss your plans with the city’s planning and zoning department. You’ll need to consider square footage, ceiling height, room width, and fire safety via window exits, and ensure the tenant will have their own, private entrance.

Many homes you can buy in bigger cities will already be set up for this. But if not, it may be worth the expense of constructing them.

4. Provide Notice Before Entering Property

There are many instances when you may need to enter your property, which is now leased to a tenant. But in most cities and states, you are required to notify your tenant ahead of time. No spontaneity here.

Usually, you need to give them a 24 or 48-hour notice. It’s best to use multiple communication methods, including email, which provides a paper trail, along with a text or phone call to ensure they get the memo. Entering the property unannounced can get you in trouble if the tenant reports you.

5. Notify Tenants Before Increasing Rent

It’s very normal to increase rents either annually or biennially. As property taxes increase, as well as appreciation on repairs and materials, you need more to keep up with maintaining a property.

But before raising rents, be sure to provide written notice to your tenant ahead of time. It helps to do so two to three months before they need to sign a new lease. If they cannot meet the new rent, they should have adequate time to find new housing.

Also, it’s best to increase rents little by little every so often, as opposed to one big jump once in a while.You can find lease document in as simple format as Google Docs which you can edit online for free.

Stay Up to Date

New landlord rules are popping up all the time. As an investor and landlord, it’s your job to study up on the requirements in your area, and pay attention to any changes made, as they can affect your landlord obligations and profitability.

However, don’t let these obligations deter you from the best wealth-building tool of all time: rental real estate.

Looking for more tips like this? We’ve got plenty up on our blog for you to browse now, so check them out!