Laurence Harmon

Article / Updated 10-27-2023

Dozens of federal, state, and local laws govern the residential rental industry and the landlord-resident relationship. All of these laws are important. The following calls to your attention ten important laws for you to know and follow when you're a landlord. The Fair Housing Act The Fair Housing Act prohibits you from discriminating against applicants or residents based on any of the seven protected classes: Race Color Sex National origin Religion Handicap Family status The Fair Housing Act establishes only the minimum protections. States and localities may set additional protected classes, such as source of income — whether a person's income is from a job, alimony, child support, unemployment, welfare, disability payments, and so on. The Fair Credit Reporting Act According to the Fair Credit Reporting Act (FCRA), you may use credit reports to evaluate rental applications. However, if you deny housing to an applicant based on information contained in the credit report, you must provide the applicant with an adverse action notice that includes the following information: The name, address, and telephone number of the credit-reporting agency (CRA) that supplied the credit report, including a toll-free telephone number for CRAs that maintain files nationwide A statement that the CRA that supplied the report didn't make the decision to take the adverse action and can't give the specific reasons for it A notice of the applicant's right to dispute the accuracy or completeness of any information provided in the credit report, and the applicant's right to a free report from the CRA upon request within 60 days The FCRA also comes into play if you want to report the nonpayment of rent to one or more CRAs. If you report a resident for nonpayment of rent and the resident cures the debt, you're legally obligated to update the resident's credit report to indicate that the debt has been cured. The implied warranty of habitability The implied warranty of habitability requires that landlords provide residents with living space that's fit for human occupancy. To be habitable, living space must have heat when it's cold, running water, a sufficient amount of hot water, plumbing and electricity that function properly, and so on. Landlords must also maintain clean and sanitary buildings and grounds — free of debris, filth, rubbish, garbage, rodents, and vermin. If a rental unit is uninhabitable, residents have the right to withhold rent until the necessary repairs are made or, in more serious situations, terminate the lease. Although your residents are responsible for repairing anything they or their guests break, you're required to perform any repairs required to maintain fit and habitable living conditions, and you must complete the repairs in a reasonable period of time. The mutual covenant of quiet enjoyment Implied in every lease and rental agreement is the mutual covenant of quiet enjoyment, which grants all residents the right to the undisturbed use and enjoyment of the rental property. This covenant applies to you, as landlord, in two ways: You're not allowed to enter a resident's unit whenever you want. You can enter in an emergency that threatens life or property, when you ask and the resident gives you permission, and to perform necessary inspections or repairs or show the unit to prospective renters or buyers (only after giving the resident sufficient notice). You need to reasonably investigate complaints and potentially take action against any resident who's disturbing his neighbors. Your state's security deposit rules Every state has a security deposit statute that typically specifies the following: How the security deposit is to be held — usually in an interest-bearing account in an in-state bank What the security deposit may be used for — usually to cover unpaid rent, damage beyond ordinary wear and tear, and cleaning to make the unit as clean as it was when the resident moved in and sometimes to repair or replace the landlord's personal property in the unit if that use is mentioned in the lease When the unused portion of the security deposit must be returned to the resident That the landlord provide an itemized invoice of any money deducted from the security deposit Disputes over security deposits are common and frequently lead to the resident taking legal action against the landlord. To protect yourself, comply with your state statute, and take the following precautions as good business practices, even if it isn't required under the applicable statute: Have a separate interest-bearing account for holding security deposits. Complete a move-in/move-out checklist to document the condition of the property at the beginning and end of a resident's stay. Take photos or video of the property to create a visual record of the property's condition at the beginning and end of a resident's stay. Keep receipts for all repairs and cleaning required to prepare the unit for the next resident, even though you're permitted to charge the resident only for damage beyond ordinary wear and tear, and cleaning to make the unit as clean as it was when the resident moved in. Return the unused portion of the security deposit to the resident as soon as possible as required by state law. Along with the unused portion of the security deposit, include an itemized list of all costs deducted from the security deposit. The Residential Lead-Based Paint Hazard Reduction Act The Residential Lead-Based Paint Hazard Reduction Act, in part, requires that landlords inform residents of the hazards posed by lead-based paint. If your rental property was built prior to 1978 (the year the EPA banned lead paint) you're required by law to do the following: Disclose all known lead-based paint and lead-based paint hazards and any available reports on lead in the property. Give renters the EPA pamphlets "Protect Your Family From Lead in Your Home" and "The Lead-Safe Certified Guide to Renovate Right." Include certain warning language in the lease as well as signed statements from all parties verifying that all requirements were completed. Retain signed acknowledgments for three years, as proof of compliance. Housing that is exempt from this rule include the following: Units that have no bedrooms, such as lofts, efficiencies, and studio apartments Short-term rentals of fewer than 100 days Housing designated for the elderly or the handicapped unless children live or are expected to live there Property that's been inspected by a certified inspector and found to be free of lead-based paint State-required disclosures In addition to the federal lead-based paint disclosure, many states require that landlords disclose one or more of the following: Environmental hazards, including periodic pest control and herbicide treatments, toxic mold, asbestos, radon gas, bedbug infestation, and methamphetamine contamination Recent flooding or location in a flood zone Security deposit policies and procedures Nonrefundable fees, such as a pet fee, where such fees are allowed Smoke detector location and maintenance requirements Nearby military ordinance, such as a US Army base Smoking policy Landlord's or property manager's name and contact information Any shared utility arrangement Your state's Landlord Tenant Act Nearly every state has a version of the Landlord Tenant Act, which defines the rights and obligations of the landlord and the tenant (also known as the resident), legal remedies for breach of contract, possible defenses to legal actions, and much more. To find your state's landlord tenant act, search the web for your state's name followed by "landlord tenant act" and click one of the links that looks promising. If that doesn't work, track down your state's official website, and search that site specifically for something like "landlord tenant" or "residential rental laws." Eviction rules and procedures If you need to evict a resident, turning off electricity, gas, and water to the unit to compel the resident to leave is illegal. You must follow your state's eviction rules and procedures, which typically require that you perform the following steps: Check your state's landlord tenant act to find out whether you have legal grounds to evict the resident. Give the resident reasonable notice of your intent to file for eviction, including the reason you intend to do so and, if required by state law, the time the resident has to address the issues. Wait until the morning after the deadline specified in your notice, and then file for an eviction hearing at your county's courthouse. Assuming you prevail in court, wait until the day after the court's deadline for the resident to move out, and if the resident hasn't moved out yet, call the sheriff to evict the resident. Failure to follow your state's eviction process could result in your losing your case. The resident may end up living in the property for some time, perhaps without paying rent. In addition, the resident may be able to file a legal claim against you in civil court and force you to pay damages, legal fees, and penalties. Mitigation of damages When a resident breaches a lease, for example by moving out three months into a one-year lease, the resident is obligated by the contract to continue to pay rent. However, you can't just let the unit remain vacant for nine months. You're legally obligated to take steps to mitigate (lessen) the resident's losses. In this example, ways to mitigate the damages include: Accepting a replacement the resident recommended to rent the unit for the months remaining on the lease, assuming the recommended replacement qualifies Advertising the unit to find a new resident, screening applicants, showing the unit to qualified applicants, and so on Gather evidence of your attempts to re-rent the property, such as advertisements, records of applicants you screened, and dates on which you showed the property to qualified applicants.

Article / Updated 10-27-2023

How you choose to structure your business as the landlord depends in part upon your willingness to share its future and yours with others. Forming a corporation is a fairly complex legal endeavor that involves the following steps: Choose and register a name for your corporation that complies with state requirements. Write and file your articles of incorporation. Write bylaws to govern corporate operations. Issue stock certificates to your corporation@’s owners and investors. Obtain any business licenses and permits required by your state and local governing bodies. You can take any of the following three approaches to form your corporation: Do it yourself. If you’re the sole owner of the business and don’t intend to add owners, seek outside capital, or do business in multiple locations, you may be able to incorporate without expert assistance. Use a third-party service. Hire a reputable, local attorney. Outsourcing to a business-formation service Numerous firms offer services to help you form a business entity. Three of the best known are Legal Zoom, Rocket Lawyer, and The Company Corporation. Others include Inc Authority, and Directincorporation.com. Before using a service, check with others who’ve used it, and expand your search to include LinkedIn, Facebook, and X (formerly Twitter). Find out how they’re regarded by the Better Business Bureau and local consumer protection organizations to determine whether any complaints have been filed against them. Keep in mind that these firms are ordinary retailers who tend to advertise low prices “Starting at …” for only a few of the services you need. Comparison shop. Find out what’s included and what’s not. Get a price quote from a reputable local attorney, as well, for comparison purposes. Make sure you get a price quote that covers everything you need to form your corporation. Hiring an attorney and accountant We recommend that you hire a reputable, local attorney to guide you through the process of incorporating your business and an accountant to manage the corporation’s payroll, taxes, and financial reporting for several reasons, including the following: Your attorney can help evaluate your specific needs for the area where you’re setting up shop and recommend the best business structure to meet those needs. Choosing the wrong business structure may imperil your personal assets and limit your tax benefits. Your attorney makes sure all documents are filed properly with the right government agencies and in a timely manner. Your attorney can refer you to experts in accounting, banking, financial planning, insurance, and web design. A good business attorney will have an ongoing professional interest in your success. Your accountant keeps the books and creates and files financial reports in compliance with federal, state, and local laws. Running your operation as a corporation As complicated as forming a corporation is, running it requires even more attention to detail. You must fulfill the obligations of corporate governance, which include: Paying yourself and other owners and investors salaries or distributions Holding at least one director and shareholder meeting annually Typing up and filing minutes from those meetings Updating the bylaws Practicing generally accepted accounting principles (GAAP) — standards and procedures for recording financial transactions and producing financial reports Producing and filing an annual report with your Secretary of State Preparing the corporation’s annual tax return

Article / Updated 10-27-2023

Residents often need or want to take on a new roommate, sublet the rental unit, or assign their rental contract to someone else. To deal with these types of situations, consider this advice when you’re a landlord: Require that all prospective roommates be screened and added to the rental contract. Prohibit residents from subletting their rental units. When a resident sublets, the new resident has no legal obligations to you under the contract. Prohibit residents from assigning their rental contracts without your written consent and only on condition that the assignee be screened and approved by you. Except for children and other dependents, everyone living in one of your rental units should be screened and approved and required to sign the rental contract.

Article / Updated 08-28-2023

The Internet is an exceptionally popular and productive medium for residential advertising, because many people begin their search for apartments online. However, posting advertisements and listings online is so easy that you need to be particularly vigilant in complying with fair housing law in all of your online advertising. Many online services, such as Craigslist, require compliance with fair housing laws and may provide guidelines similar to those listed above that identify words and phrases that may be considered discriminatory. Understanding the Communications Decency Act of 1996 The Communications Decency Act of 1996 was an attempt by Congress to regulate the use of pornographic material on the Internet. The following year, however, the anti-indecency provisions of the CDA were found to be unconstitutional. What remains of the Act is an amendment that’s been interpreted to mean that operators of Internet services aren’t considered to be publishers of the contents of their advertising and therefore aren’t legally liable for the words and phrases of the advertising that appears in their Internet postings. Any liability for using discriminatory language, therefore, applies only to the advertisement’s originator. In other words, if you post an ad online, you’re responsible for making sure it complies with all federal, state, and local laws. Applying the Communications Decency Act to apartment advertising Although website owners may be immune from prosecution regarding content posted on their sites, you may still be held accountable as an individual or a business for any discriminatory advertising content that you post or have posted anywhere online. The safest course is to strictly follow the provisions of the Fair Housing Act and make absolutely certain that your advertising — wherever you post it — doesn’t discriminate against anyone.

Article / Updated 07-10-2023

When landlords fail to maintain habitable and nuisance-free rental properties and fail to remedy serious issues raised by residents, several consequences may follow. However, for you to be held legally liable and for residents to have a right to take recourse, the following five conditions must be met: The issue makes the resident’s premise uninhabitable or a significant threat to the resident’s life, health, or safety. The resident notified you of the issue. Neither the resident nor the resident’s guest, child, or pet caused the damage. (If one of them caused the damage, then the resident is responsible for fixing it or paying for it to be fixed.) The resident gave you or your agent access to the premises to perform the repair. Residents can’t demand that you repair damages if they substantially interfere with your ability to perform the repair, such as preventing an electrician from entering the unit to fix faulty wiring. You failed to remedy the situation in a reasonable amount of time. (What’s reasonable varies according to several factors, including how the residents are affected and the state and local statutes, but two to four weeks are typical. Of course, if the heating goes out in the middle of a frigid winter day, reasonable may mean immediate attention is required.) Generally, residents have the legal right to take any of the following actions: Withhold or escrow some or all rent until the repair is made. In some areas, residents must obtain permission from the courts to withhold or escrow rent, and the amount withheld may be limited. Hire an outside contractor to make the repair and deduct the costs from future rent payment(s). Residents should only use qualified and licensed personnel plus provide copies of any bids or estimates and written proof of payment for a reasonable amount to complete the work. Personally repair and deduct the repair costs from future rent payments. Residents shouldn’t attempt to do the work themselves (or a relative or friend) unless they’re qualified and properly licensed, if required, to do the specific work needed. Sue for damages from the date of the landlord’s knowledge of the breach of the warranty of habitability. The measure of damages is generally the difference between the value of the rented premises in its uninhabitable condition and its fair market rental value. Sue to force the landlord to make repairs by obtaining a court order requiring the landlord to make the repairs. Note, however, that courts are unlikely to use this option because it involves costly court supervision. A variation of this remedy allows the landlord and resident to agree that the resident may repair the damage and subtract the cost of repairs from future rent payments. Move out and terminate the lease. If the premises are truly uninhabitable, the resident has the right to move out temporarily or permanently based on the grounds of constructive eviction — by failing to provide residents with a habitable dwelling, you evicted them, breaking the rental agreement. Furthermore, the resident may sue for money damages for the landlord’s breaking the lease and may recover for emotional and physical stress. One of the rarely mentioned costs of a landlord’s failure to provide habitable housing is a decline in occupancy. As residents move out in response to substandard living conditions, occupancy and revenue from rent payments drop. Keeping your rental units and common areas in good repair is a good business decision. Residents in properties regulated by the New York City Housing Authority (NYCHA) may make a claim for breach of the warranty of habitability even if they fail to serve a notice of claim on the NYCHA before raising the claim, as long as they seek only a rent set off and not a money judgment. Residents who want a money judgment from the NYCHA must serve the city with a notice of claim for damages. If the failure to provide habitable living conditions violates state or local building or health codes and inspectors verify the violation, they may require you to fix the problem and pay additional fines or penalties.

Cheat Sheet / Updated 09-20-2022

Being a landlord certainly sounds easy. All you have to do is line up responsible residents, maintain the property, and count your money as the rent rolls in, right? Actually, no. Owning and leasing residential real estate requires that you comply with a host of federal, state, and local laws. Certain residents may complicate your life by taking legal action against you or forcing you to take legal action against them. This snapshot explains some important landlord legalities and helps you avoid the most common legal pitfalls of owning and leasing residential rental property.

Article / Updated 03-26-2016

One of the most common sources of landlord-resident disputes is the return of security deposits. To prevent confusion and disagreements, make sure you establish security deposit policies and procedures that address the following: Amount: Usually no more than the equivalent of one- or two-month's rent. Some states and municipalities have specific limits. Due date: Usually due at the signing of the rental contract. Allowed uses: State and local laws usually allow landlords to use security deposits only to cover unpaid rent, damages to the unit beyond ordinary wear and tear, cleaning expenses (only to make the unit as clean as it was when the resident moved in), and to restore or replace damaged or missing property, including keys and appliances furnished with the unit. Where the deposit will be held: Even in states when it is not required, deposit all security deposits in a separate interest-bearing account and pass along any interest earned to the resident when you return any unused portion of the deposit. Return of the unused portion: Check on the required maximum number of days you're allowed to hold any unused portion of the security deposit before returning it to the former resident, and return it earlier if possible. The security deposit is the resident's money. Don't treat it as another source of income, because doing so may get you into legal trouble and tarnish your reputation as a fair landlord.

Article / Updated 03-26-2016

As a landlord, you have certain legal and ethical obligations to your residents that are rarely spelled out in the rental contract, including the following: Maintain habitable living conditions. According to the implied warranty of habitability, you must provide residents with dwellings that are fit for human occupancy. Address safety issues. Comply with all local building, fire safety, and pool and hot-tub safety codes; provide sufficient exterior lighting; maintain walkways, stairwells, and railings; secure any construction sites; enforce pet policies; and address safety issues within rental units by using safety glass, ground fault protection outlets, and safe-cord window coverings, where necessary. Disclose and address environmental hazards. Let residents know about any potential environmental hazards, including lead paint, toxic mold, carbon monoxide, asbestos, and methamphetamine contamination, and take any steps necessary to mitigate risks. Protect residents from criminal activity. Enforce your policies consistently and work with local law enforcement to minimize crime in your facility. Honor the resident's right to quiet enjoyment. Enter a resident's premises only in an emergency or after giving 48 hours' advanced notice to perform essential inspections or repairs or to show the unit to a prospective renter or buyer.

Article / Updated 03-26-2016

Careful screening can help you avoid legal issues, because you have less need to take legal action against good residents, and they're less likely to file legal claims against you. To screen applicants, take the following steps: Have the person complete and submit an application. Order a credit and background report for the prospective resident. Contact the applicant's employer to verify the applicant's employment or check other sources of income. Check recent paystubs, W-2s and 1099s, the previous year's tax return, and a recent bank statement. Contact the applicant's personal references and ask questions about the person's character and reliability. Contact any landlords the applicant rented from in the past and ask about payment history, the condition the applicant left the property in, and whether the applicant caused problems with her neighbors. Interview the applicant in person. When screening prospective renters, you must comply with fair housing laws, so certain questions are off limits. You can gather information about a prospect's employment status, income, credit history, housing history, and criminal past, but you're prohibited from asking an applicant whether she has children, what country she's from, which church she attends, and so forth.

Article / Updated 03-26-2016

Every residential rental contract, whether it's a lease or a month-to-month rental contract, contains an implied warranty of habitability. In other words, even if not included in the contract, you, the landlord, are obligated to your residents to provide living space that's fit for human occupancy and complies with state and local building, health, and safety codes that materially (significantly) affect a tenant's health and safety. Although residents are responsible for some repairs, especially if they break something, you're responsible for repairing any problems that make the rental unit uninhabitable — unfit to live in. The implied warranty of habitability obligates you, as landlord, to provide the following: Windows and doors in working condition Floors, stairways, and railings in good repair Effective weather protection and waterproofing of roof and exterior walls Plumbing in good working order, including running water, a sufficient amount of hot water, and sewage disposal Electrical system in good working order, including wiring, outlets, lighting, and equipment Gas in good working order, if applicable Heating, in areas where heating is required Clean and sanitary buildings, grounds, and other areas Adequate trash receptacles At least one working toilet, sink, and bathtub or shower — bathtub or shower must allow privacy and be ventilated A kitchen with a sink made of non-absorbent material (not wood, for example) Emergency fire exits Deadbolt lock and peephole on entry door(s) to unit Working smoke detectors Locking mailbox Ground fault circuit interrupters for outlets near water, such as in bathroom and kitchen and near pool and sauna Establish a maintenance and repair policy and system for responding quickly to resident requests for maintenance. Respond as quickly as possible to requests for repairs to problems that make a unit uninhabitable, such as a broken furnace on a very cold day, a smoke detector that doesn't work, or a sink that's backing up.