In the rental property industry there are always two sides of the coin - Landlords and Tenants.
In a perfect world, everything would always go smoothly, everyone would get along, and both parties would see eye to eye.
Unfortunately, we live far, far away from that world.
Every state has laws in place to protect both property Owners and Renters and there are certain requirements expected of each. You've heard the saying: "with great power comes great responsibility." Well, as a Landlord, you hold a great deal of power in your hands and so you have a greater burden of expectation.
After being in business for over 10 years, we've made our fair share of mistakes and we've seen the pitfalls that other Landlords have fallen into as well.
The bottom line is, it's on you - not your Tenant, not your lawyer - to ensure you're complying with state, federal, and municipal laws. Ignorance will not hold up in a court of law.
Take a few minutes to read about the most common legal mistakes we've seen Landlords make across the board so that you don't suffer the same fate.
1. Asking Discriminatory Questions - Federal Fair Housing laws prohibit Landlords from refusing to rent a property to an individual based on certain protected classes such as race, color, religion, etc.
While there are most certainly cases of blatant discrimination among Landlords, more often than not, property owners unknowingly get into trouble when they are conducting screening interviews.
You have to be extremely careful how you phrase your questions and asking the same ones consistently is just as important. Knowing and understanding of your federal AND local fair housing guidelines will help you formulate proper screening questions that will hopefully result in finding a great Tenant.
The truth of the matter is that we live in a litigious society and so Fair Housing is one area in which you'll want to always be on your p's and q's.
2. Failure to Provide a Safe Environment - In just about every state, Tenants are entitled to a safe and livable home, regardless of how much rent they pay. Landlords are required to offer and maintain housing that meets basic health and safety standards.
Under the warranty of habitability a Landlord must:
- Give Tenant a rental unit in a safe, clean, and livable condition
- Comply with health and housing codes
- Provide and maintain the following in good and safe working condition (if there at the time you signed your lease:
- Electrical systems
- Plumbing (reasonable supply of hot and cold water at all times)
- Sanitary systems
- Heating, ventilating, and air conditioning (adequate supply of heat at all times)
The condition of your rental property affects several important aspects of your investment, however, so you would benefit from doing more than just the bare minimum.
3. Refusal to Make Necessary Repairs - Not only are you required to provide safe and habitable living conditions for your Tenant, you are required to maintain those standards throughout the term of the lease.
If a Tenant reaches out to you about a necessary repair such as a leaky roof or no heat in the winter, you have to get it taken care of in a reasonable amount of time or you could be held legally responsible.
There's only one exception here; if the Tenant was the one who caused the damage, they can be held responsible for ensuring the damage is fixed.
But typically, these types of maintenance issues are due to normal wear and tear and so will fall on you to repair.
4. Including Illegal Provisions in the Lease - It’s common for landlords to include at least a handful of provisions to prospective tenants, requiring them to take certain actions while they live in the property, or giving yourself the ability to evict the tenant or cancel the contract under certain conditions.
However, you don’t have a blank slate here.
There are some provisions that are unambiguously illegal. For example:
- Asking a Tenant to waive the right to privacy
- Making the Tenant's security deposit non-refundable
- Asking Tenants to waive the right to sue you
- Not granting the same privileges to all Tenants
5. Neglecting Tenant's Privacy Rights - While you are the owner of the property, your Tenant has certain rights to privacy that you need to respect.
Oddly enough, many Landlords stop by unannounced, asking to check things over, perform an on-the-spot repair, or show the place to prospective tenants.
Repeated violations of a Tenant's privacy can excuse a Tenant from any further obligations under the lease and may also result in court-ordered money damages against the landlord.
Unfortunately, Indiana doesn't have very cut and dry guidelines on this issue so it can be a bit precarious. Basically, "reasonable" written or oral notice is required before entry. No exact amount of time is specified, but generally 24 hours is recommended.
Of course, if you deem that there is truly an emergency, then you have permission to access the home without advance notice.
6. Misusing and Failing to Return Security Deposits - The most frequent types of cases heard in small claims court are arguments over security deposit retentions. Yet the basic rule that deposits should be used only to cover damage beyond wear and tear and unpaid rent isn't hard to understand.
Still, Landlords routinely use the deposit to cover appliance upgrades, cosmetic improvements and other refurbishing, not repairs. Not surprisingly, many of these Landlords lose these cases in small claims court.
7. Keeping or Mismanaging Abandoned Property - When a tenant leaves items behind after vacating the property, the Landlord must treat it as abandoned property.
Contrary to what you may think, you cannot simply dispose of the items or keep anything that you want. There is a due process that must be adhered to in order to legally deal with any abandoned property.
Title 32 of Indiana Code states:
- A landlord has no liability for loss or damage to a tenant's personal property if the tenant's personal property has been abandoned by the tenant.
- For purposes of this section, a tenant's personal property is considered abandoned if a reasonable person would conclude that the tenant has vacated the premises and has surrendered possession of the personal property.
- An oral or a written rental agreement may not define abandonment differently than is provided in subsection (b).
- If a landlord is awarded possession of a dwelling unit by a court under IC 32-30-2, the landlord may seek an order from the court allowing removal of a tenant's personal property.
- If the tenant fails to remove the tenant's personal property before the date specified in the court's order issued under subsection (d), the landlord may remove the tenant's personal property in accordance with the order and deliver the personal property to a warehouseman under section 3 of this chapter or to a storage facility approved by the court.
If a Tenant doesn't claim their property within 90 days after receiving notice, the warehouseman or storage facility may sell the property.
So in essence, once a Tenant's abandoned property is moved to a storage facility, you should take yourself out of the situation.
8. Using a Generic Lease - Most landlords know it's important to have a written lease or rental agreement. But using the wrong form can get you into trouble.
So-called "standard" forms that are sold everywhere probably aren't compliant with the laws in your state and they may also impose greater restrictions and obligations on you than the state requires.
Using such a lease could place you at a disadvantage in a courtroom situation or make you vulnerable to a lawsuit.
9. Banning Applicants with Criminal History - A criminal history might be a standard red flag; but according to a new policy memo issued a couple years ago by the Department of Housing and Urban Development, criminal history alone is not a sufficient reason to turn down a rental applicant.
To be clear: that does not mean that you can’t consider a person’s criminal history at all during the tenant screening process. Instead, the HUD is basically telling Landlords the following:
- You cannot institute a blanket ban on all applicants with a criminal history.
- You cannot reject a tenant based upon an arrest that did not result in conviction.
- You must treat comparable criminal histories similarly without consideration of race, national origin, or other protected class.
Our company's requirement is that a felony must be at least 7 years old before we will be able to work with the application.
10. Improperly Evicting a Tenant - Evictions are typically where Landlords get into the most hot water during the rental process.
In extreme cases, you’ll have the right to evict a tenant; consistently late or missed payments, deliberate violation of the terms of your lease agreement, and other egregious offenses give you grounds to kick the tenant out of your property—but there’s still a firm legal process that you have to follow.
You have to remember, this isn't the wild west. No matter how awful your Tenant is, you can't take matters into your own hands. Don’t pull any stunts in order to get the Tenant to vacate early, such as changing the locks or turning off utilities.
In Indiana, a Landlord or Property Manager cannot turn off utilities or lock a Tenant out unless the property has been abandoned. The Tenant can actually sue the Landlord for damages if this occurs.
Dealing with the court system is expensive and time consuming, so it's in your best interest as a Landlord to understand Tenant rights and adhere to the laws that are in place.