As a landlord, you probably view your rental property as a business. You want to minimize your expenses and maximize your revenue, so that you can earn a nice profit. Just like any other business, consulting with an attorney before you begin can save you countless headaches later on. This article lists some of the most important things an attorney can do for you before you even meet your first tenant.
Review Your Title, Deed, and Mortgage
Your biggest expense as a landlord should be the building you wish to rent, not legal fees and court costs. However, many real estate properties have covenants and other restrictions on the property. In addition, they may have problems with the title, which means the ownership on the property is not clear. Either of these issues could lead to big legal battles later on. A lawyer can investigate your deed and title to make sure there are no problems involved in purchasing the building or leasing it out. If the lawyer does find problems, he can advise you about the best way to clear them up before you start renting the property.
A lawyer can also inspect your mortgage papers in order to make sure the terms are fair. Many landlords may not fully understand their mortgage papers or may have been pressured into taking a loan with balloon payments, floating interest rates, or other expenses. These kinds of surprises can make a previously profitable business too expensive to keep. A lawyer can explain to you each term in your mortgage, and whether that term is valid under current housing law. She will also be able to explain how to work with your mortgage company to create a different payment schedule. This may help avoid problems if you ever have trouble paying your mortgage and need to refinance or work out a new agreement.
Check that Your Building is up to Code
Many rental units are older and may no longer be up to code. Some states or towns have strict rules about the safety and design of buildings that are rented out. If your building does not have enough electrical outlets, or if the exits are not easily accessible or do not accommodate handicapped tenants, you may face a lawsuit from a tenant. Many landlord tenant lawyers are experts in local housing codes and will be able to tell you what a building needs in order to comply, which repairs must be made right away, and which repairs can wait until you have the time and money to spend on them.
Set up a Business and Finances
Many landlords choose to set up a small business in order to shield themselves from liability. That way, if a tenant decides to sue, it will be the landlord's business and not the landlord personally that will be liable. A lawyer can advise you on which business arrangement is best for you and then draft the appropriate formation documents.
A lawyer can also advise you on how to properly manage your finances as a landlord. You may need to keep your tenants' security deposits in their own account. In addition, there may be legal restrictions on when and how you can spend your money as it relates to renting out your property. Your attorney can give you this valuable information to help you avoid a future misstep.
Create a Standard Lease Agreement
Finally, a local landlord-tenant lawyer will be able to advise you on what can and cannot be included in a lease agreement. Some landlords, in an effort to protect themselves, put strict provisions in their lease agreements that are invalid under state law. The laws governing lease agreements vary by state, and sometimes by town, so a lease that works in one jurisdiction may not work in yours. It is best to check with an attorney to make sure your lease will hold up in housing court.