Obtaining the right type of insurance on a rental property will ensure coverage for accidents and physical damage to the property. There are three important types of insurance for rentals:
Federal and state laws prevent the use of discriminatory practices in housing when selecting a tenant. State laws vary and may prohibit other types of discrimination, but the federal Fair Housing Act and the Fair Housing Amendments Acts prohibit discrimination based on race or color, national origin, sex, religion, familial status, and disability. When selecting a tenant, it is important to treat every prospective tenant equally. A landlord should not:
Anti-discrimination laws apply to anyone dealing with the prospective tenant. This includes owners, real estate agents, landlords, and managers. A prospective tenant may be able to sue the property owner for the civil rights violations of its employees.
To avoid fair housing complaints, a landlord should create a fair application procedure by:
The federal Fair Housing Acts require rental property owners to make certain alterations for disabled tenants. A landlord must:
A landlord should inspect property for dangerous environmental risks. Hazardous materials include lead-based paint, asbestos, mold, carbon monoxide, and radon. Because many environmental hazards remain undetected, physical injury or property damage may occur before the discovery of the danger.
To help prevent injury and damage, it is important to comply with federal and state laws and to make regular inspections. For example, installing carbon monoxide detectors, maintaining appliances and vents, repairing water leaks, and complying with asbestos regulations will help prevent serious issues arising from environmental hazards on a property.
Regardless of the terms in a lease or rental agreement, a landlord must provide the tenant with a rental unit that is fit and habitable to live in. This is referred to as an "implied warranty of habitability." During the renter's tenancy, the landlord must comply with state and local building and safety codes. Typically, a rental unit must have heating, plumbing, gas, clean water, electricity, and a structurally safe roof.
A landlord must also regularly inspect the property for hazards. If the landlord finds a dangerous condition but is unable to fix it immediately, the landlord has a duty to warn tenants and visitors of the danger. A landowner may incur legal liability for injuries that result from recklessness, carelessness, a violation of a health or safety regulation, or the failure to make certain repairs.
In recent years, courts have held landlords responsible for criminal activity that occurs on their rental property. Consequently, landlords should take precautions to protect the neighborhood from the illegal activity of tenants and should protect tenants from the criminal behavior of other tenants and from criminals that enter the property. Landlords have a duty of "due care" to take reasonable steps to protect tenants from foreseeable danger. Reasonable precautions a landlord may take include:
Hiring employees or contractors to help manage rental property may create a more profitable and efficient business. Depending on whether the worker is an employee or a contractor will determine a landlord's level of risk. When hiring employees, it is important to consider liability issues for sexual harassment or discrimination since under certain circumstances a landlord may be held liable for the acts of its employees. When hiring contractors, creating a written contract that clearly specifies the duties of each party should govern the relationship. Contractors should also acquire their own liability insurance.
Maintaining organized and accurate records is an important part of managing rental property. It may be helpful to consult with a certified public accountant or a tax attorney for tax advice. Tax and accounting considerations may include the following: