How to know when you need a lawyer as a landlord
Let's face it. Lawyers are expensive, and it's no wonder many landlords take the DIY approach towards legal matters.
We aren't legal experts, however, as a landlord insurance company, we know the common scenarios that may require a lawyer.
That's often the best strategy, but there are places where saving a dime can cost you a dollar's worth of time or effort.
If you own a few rentals, you most likely won't need a lawyer on staff or a retainer (an amount you pay in advance so that a lawyer can help you with routine issues or questions). But it makes sense to recognize common scenarios where you'd benefit from an expert’s legal advice and years of experience.
Before you search the lawyer directory for a law office near you, it's important to note that even a lawyer specializing in landlord-tenant law may work other practice areas such as DUI and criminal, estate planning and probate, family law, or personal injury. A free consultation acts as the first step in developing a good attorney-client relationship.
Check out these situations where a landlord-tenant lawyer might help you avoid headaches, hassle, and huge settlements.
Answering suspected illegal housing discrimination
No, you won't need a lawyer to fight every prospect or tenant accusation. It's all too common for property owners who obey the fair housing laws to still get complaints from rejected prospects or evicted tenants. But when an allegation turns into a lawsuit, or if the United States Department of Housing and Urban Development (HUD) or a fair housing agency investigates, you might talk to an attorney.
Just what is the HUD civil penalty for first-time offenders? A hefty $16,000, and that's before you add in actual damages, lawyer fees, and other judgments. The liability can skyrocket if you take your case to court or must settle.
Not to mention the damage and bad press for your business and reputation. With all that's at stake, it's no surprise that many landlords hire a lawyer to help them navigate the issues.
Collecting payment from tenants
Your lawyer should try to help you prevent non-payment from happening in the first place. It's one reason for employing an attorney to write your lease agreement.
You should set up a system you take every time a tenant doesn't pay. Hiring a lawyer might be just one such point in the process. Timing is often an issue, and landlords should file their leases and be aware of important dates, such as the end of grace periods.
When a landlord shows compassion with tenant issues or grants extra time for certain circumstances, renters could take advantage. You could also be accused of unfair treatment, so you may want to get a lawyer's advice on the best course of action.
Changing your business structure
Will you run your business as a sole proprietorship, general partnership, limited liability partnership (LLP), limited partnership, limited liability corporation (LLC), or business corporation? Some business owners make every rental property its own LLC. Depending on your state, an accountant or a lawyer might be better suited to answer questions and bring up concerns you may not consider.
What documents must you file in your state? Must you file once or annually? You could figure these things out on your own, but you might benefit from a law firm holding your hand through the process.
Creating a lease agreement
A well-written lease agreement can help you avoid landlord-tenant issues before they arise. Both the landlord and tenant should clearly understand the leasing relationship. And with clarity, the items of the contract become enforceable when it follows landlord-tenant law.
Common parts of the rental agreement include:
- Names of Tenants.
- Terms of the Lease (Length of tenancy)
- Due Date
- Fee, Fines, and Charges
- Landlord Access
- Use of Residence (No business use)
- Other Rules (Local, city, or state law)
Perhaps you get the lease agreement drafted once for the property, and then you can use it for all the units as renters come and go over the years. You can also request updates to reflect any new real estate laws or regulations that affect landlord-tenant matters.
Defending against an injury or illness claim
What happens when tenants or guests claim your negligence caused them to get sick or sustain an injury? The liability part of your insurance protects you from these claims. If it's a minute claim, you may hire your own lawyer or manage the issue in small-claims court. But in most cases, you'll want to contact the insurance company and so they can hire an attorney on your behalf.
Personal injury claims can turn into high dollar settlements, and experienced attorneys often know the legal issues much better than a residential landlord. There's also a bit of awkwardness because you may still need to provide your tenant a place to stay even as they sue you. The attorney should help you navigate your obligations to the tenant while you deal with the lawsuit.
Defending against a property damage claim
A tenant or guest can also sue if they believe your lack of maintenance caused their property damage. For example, you may have repaired a roof several times, but a severe weather season has caused water to leak through and damage your tenants' living room furniture and electronics. Now, the tenants want you to pay for new stuff and dole out thousands to do so.
Once again, the amount will guide how you fix the problem. If the amount is high, then your insurance policy's liability protection would save the day. If the amount is low, you may opt to handle the issue yourself after a quick coaching session from an attorney.
Disputing security deposit
Have your past clients' children ruined the carpet? Is there a lingering smell of cigarette smoke? Or perhaps it's the dreaded cat urine, despite your "no pets" policy?
The tenant swears the place was spotless and damage-free after they moved out. They even hold a copy of the move-out checklist to prove it. After your inspection, you know otherwise.
And now you're stuck in a landlord-tenant dispute about the security deposit. You believe you deserve it, so you can get the place ready for the next tenant, and the tenant thinks you're trying to pull a fast one. Maybe a talk with an attorney can help you resolve the matter in a way that's fair to both sides.
Evicting a tenant
It's the last resort, and it's the worst part of being a landlord. But when you have no choice to protect your property, profits, and peace of mind, you do what you must.
An eviction shouldn't necessarily involve an attorney, and in several instances, you can resolve the issue fairly quickly if you follow the precise rules—geography matters. Although similarities exist, New York's eviction process differs from Atlanta's or Chicago's.
Depending on where you live, you'll notify the tenant within the regulated period and fill out the right forms and paperwork. Remember, the judges almost lean in favor of the tenants' rights because you're dealing with their home. Even with a clear-cut eviction lawsuit, winning as a landlord isn't a walk in the park.
That said, many experienced landlords can successfully evict tenants when they follow the rules and know the process. You may want to call an attorney if:
- The eviction is your first.
- The eviction requires you to follow housing program rules or rent control.
- The tenant has filed for bankruptcy.
- The tenant has hired a lawyer to fight the eviction.
- The tenant is your employee.
Responding to an IRS audit
It's not always necessary to go right to a lawyer if the IRS or your state tax agency audit your return or business. For instance, a few thousand dollars may not justify the added cost of an attorney. But when there's significant money at stake, think about an attorney, accountant, or other tax professional.
If you've made a mistake on your taxes that the government has yet to discover, for example, you didn't correctly report income or took improper deductions. You may look into legal services to review the mistake and avoid any mishap before the government gets involved.
Suspecting illegal activity
You can't kick someone out on a hunch, but perhaps other tenants or a neighbor have reported things to you. What do you do if you suspect drug-dealing, prostitution, dog-fighting, or other illegal activity in your rental?
Protecting the safety of your other residents, neighbors, and your property is amongst your chief concerns as a landlord. You can almost always give a tenant the boot for illegal activity, but you must get adequate proof. That's where it may be wise to consult a landlord-tenant attorney and see what makes up solid evidence.
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