Common Legal Mistakes Landlords Make

By E-Renter Tenant Screening
Posted on February 9, 2010 under Landlord Paperwork and Forms, Landlord Tips | icon: commentBe the First to Comment

gardening-blog-header21-300x200While most landlords appropriately treat their rental property businesses like a business, there are always ways to improve practices and in turn, cash flow. If you’re making any of these common legal mistakes, you could be putting your business and finances at risk.

Lackluster leases and rental agreements: The most important legal document in a landlord’s toolbox is the lease. You must be sure yours stay within the limits of new federal and local laws. If your lease has paragraphs scratched out and rewritten lines, do yourself a favor and revamp it. Then have a landlord/tenant attorney take a look at it—it’s worth it to be sure you’re in compliance.

2. Not having a lawyer: Sure, legal guidance can be expensive. But acting as your own attorney, or relying on friends or the Internet for your legal advice can end up costing much more than sound, professional advice from a licensed attorney. For routine procedures, like evictions, hire an attorney for your first one and then you can possibly file subsequent paperwork yourself.

3. Ignorance of Rental Laws: Landlords are expected to familiarize themselves with federal, state, and local laws. The Fair Credit Reporting Act outlines proper credit check procedures. The Fair Housing Act prohibits discrimination against potential tenants on the basis of race, color, religion, sex, family status, or national origin. The Americans with Disabilities Act prohibits discrimination against persons with disabilities, and can require landlords to modify their leases (such as no-pet rules) or their properties to accommodate them.

4. Ignorance of Employee Laws: Landlords need to know how employees are defined by state and federal government. Whether you consider someone an employee or a contractor might not match the government’s definition—which determines whether or not you must pay taxes and offer any mandated employee insurance coverage. Be careful when paying independent service people, like handymen or lawn care people—don’t pay in cash, and establish contractor status by recording their EIN or Social Security Numbers so you can issue 1099s at the end of the year, if needed. Of course, ask your lawyer for specifics.

5. Insufficient Record Keeping: Ideally, you asked your tax professional or CPA how to set up your records before you purchased your first rental property. Keeping track of mileage, rental income, security deposits, expenses and other deductions is not the most enjoyable part of being a landlord. But it’s the most important part of running your business. Careful records and receipts for all of your expenses are vital to the health of your rental business.

Keeping legal matters tidy is one way to ease the stress of being a landlord.

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