How to Prevent Lawsuits

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.

Avoid Discriminatory Practices

It’s also important to note that according to the FHA, all multifamily homes built after 1991 must be accessible to all disabilities. All reasonable modification requests must be granted. A reasonable accommodation is a change or adjustment to a rule, policy, practice, or property that allows a person with disabilities to have equal opportunity to enjoy the property. Some examples of reasonable modifications include a change in the “no pets” policy to allow for a guide animal or adding a grab bar to a tenant’s bathroom. Keep a record of all modification requests as well as your response.

Conduct a Walkthrough and Provide an Itemized List

Another common area of dispute between landlords and tenants are security deposits. Most tenants expect to receive their security deposits shortly after they move off the property. If the tenant disputes the amount of the deposit held for repairs or maintenance, it could lead to a lawsuit. To avoid any problems, it’s recommended that you conduct a pre and post rental walkthrough with the tenant present. During the walkthrough, provide them with an itemized list of the repairs that are needed. Having an itemized list in hand will reduce the chances of disputes or litigation. To add further protection, make sure you’re complying with your local laws regarding how you can use the deposit.

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Article quoted from Tenant Screening Center