Owning rental properties can be extremely lucrative, but it’s not entirely without risk. Tenants can and do, bring lawsuits against their landlords. Many times, these lawsuits can be avoided by following some property management best practices. Here are just a few tips on how to avoid some of the most common situations that cause tenants to sue their landlords.
Set up an LLC
One way to protect your investment is to set your business up under the protection of a Limited Liability Corporation, or LLC. An LLC will protect any personal assets if a tenant brings a lawsuit against the property. Having a well-drafted rental agreement or lease that dictates how the tenant is expected to treat the property is also essential. It’s recommended that you include a clause that makes it necessary to settle the dispute in arbitration rather than in court. For added protection, you can also get an insurance policy for the property that includes limited liability coverage. This would make it possible for the insurance company to defend you if the lawsuit went to court.
Comply with Local Codes and Conduct Routine Inspections
By complying with all local and building codes, you can avoid the likelihood of premise liability lawsuits. Schedule routine inspections of all the systems on the property, including fire alarms, CO2 alarms, and water heaters. Keep a record of all inspections so you have evidence they’ve been properly maintained, should you have to go to court. If you’re aware of any hazards on the property that haven’t been disclosed to the tenant or resolved, this could be grounds for a lawsuit as well. This includes things like tripping hazards, lead paint, or chemical leaks.