Investing in real estate is one of the best decisions you can make. The market offers property investors a stable and predictable way to generate passive income from renters.
That said, maneuvering landlord-tenant laws can be tricky. To turn a profit, property investors must remain updated on the latest legislation affecting landowners, landlords, and tenants.
They must know the answers to questions like:
• What are the federal and state laws you must comply with?
• What are the eviction rules and procedures?
• How does a lease agreement work?
If you’re looking for answers, you’ve come to the right place. Here’s a list of laws that every property investor should know.
1. Anti-Discrimination Laws
Property investors in the US must abide by certain anti-discrimination laws.
These regulations apply when screening new tenants, establishing apartment rules, and advertising property.
For instance, the Fair Housing Act mandates landlords not to discriminate against tenants due to their disability, religion, familial status, gender, nationality, or race. The statute must be followed across the country.
States may also have their own laws in place. This could include banning discrimination based on a tenant’s source of income, or adhering to strict regulations when checking the criminal background of a tenant.
2. Security Deposit Regulations
All property investors know that tenants must pay a security deposit when they move into a home. However, only a few understand the regulations around deposits.
For example, some U.S. states have limits on the deposit amount that can be collected from tenants. In California, security deposits cannot exceed two months’ rent if an apartment is unfurnished, and three months in case it is furnished. Other states, like Connecticut, require landlords to place the deposit in an interest-bearing account.
At the end of the lease period, the deposit must be paid back in full, barring any reasonable deductions. Tenants who don’t clean the home at regular intervals, damage property, or fail to pay rent on time risk losing their deposits.
To avoid confusion, the landlord’s expectations regarding how they want the property to be maintained should be outlined in a lease agreement.
3. Fair Credit Reporting
Under this law, landlords who deny tenants a home based on their credit report must send the applicant a letter notifying them of the reason.
This adverse action letter must include details of the credit reporting agency, including its name, telephone number, and address, along with a notice informing the applicant that they are free to dispute the information outlined in the report.
With that said, checking the credit score of an applicant is a legal and widespread practice adopted by most landlords.
4. Lease Agreement
A lease agreement is a legally binding document that protects landlords and tenants in case of a dispute. Given its importance, it must adhere to certain laws.
For example, all agreements must indicate the rental period, the rent amount, late fees, the property’s address, and the names of both parties. Furthermore, it could impose limitations on the number of occupants, mention guidelines for subletting, and include the details of the security deposit.
The agreement must also list the duties of the landlord —such as performing necessary repairs, maintaining a habitable home, and ensuring general upkeep.
Since 1992, the Residential Lead-Based Paint Hazard Reduction Act has been requiring landlords to inform the tenant of the presence of lead-based paint and its associated hazards.
Several states mandate that the landlord give the tenant sufficient notice before entering the property to protect the privacy of the tenant.
Others, like Missouri, have more niche laws, such as requiring landlords to disclose if the property has been used for methamphetamine production.
Given the scope of the task at hand, property investors must be aware of specific regulations in their state before crafting a lease agreement.
5. Rent Collection Laws
Landlords are also bound by certain laws when collecting rent.
In California, it is illegal for landlords to demand rent in cash or via electronic transfer. They must give tenants the option to pay through checks or money orders. Landlords can only demand cash payments if the check bounced.
Meanwhile, many states also dictate how much late fees a landlord can charge if the rent isn’t paid on time. In California and Tennessee, this penalty cannot exceed 10% of the total rent amount. Grace periods are similarly subject to state laws.
In states with no specific laws on late fees and grace periods, the landlord must include their own guidelines in the lease agreement to avoid future disputes.
6. Eviction Policies
Property investors should also be aware of eviction procedures. Most state laws prohibit shutting off the water, gas, or electricity supply when evicting a tenant.
Furthermore, eviction notices must be filed in court. Tenants should also be notified of their eviction in advance and the reasons why they are being evicted, including lawful violations they committed.
The US has several other laws to protect landlords and tenants. As a property investor, familiarizing yourself with all regulations and ensuring compliance can make ownership sustainable and more manageable. Plus, it frees you from any legal repercussions that may come from breaking the law.
