There are several legal concerns that might arise when renting out a property, and much more when renting out a property managed by a third party. Property managers are often placed in a tough position: they are caught between the property owner and the renter. As a result, they must balance the expectations of both sides while being ethical, lucrative, and efficient.
Unsurprisingly, a recent survey found that the most common legal difficulties for property managers were tenant-related: debt collection, frivolous litigation, and wrongful termination. However, additional issues may occur, such as disagreements with the property owner and squabbles with local and state authorities over rules and zoning changes.
Here are a few of the most common difficulties we’ve seen and how to deal with them:
Collection of Debt
Debt collection was rated as a very significant problem by 69% of those polled in the preceding study. Obtaining money from delinquent renters may be a major hassle—not to mention expensive! Many property managers are inclined to let the debt pile up, but this is just not a good idea.
If you let one tenant get away with it, you’ll very certainly have another who wants to get away with it, much like in old mafia movies. If you can’t convince your renter (or, preferably, prior tenant) to pay you back by playing nice (certified letters, recorded and observed personal visits), a collections agency may be your best friend.
Collections may be expensive, therefore property managers often choose to go to small claims court. It may seem to be a hassle to hire a lawyer (assuming you don’t already have one on retainer) and go through the court system, but if you can’t persuade your renters to pay up the cash of their own free will, you’re going to need some legal assistance.
Rights of Tenants
Many debt collection conflicts begin or are aggravated by breaches (or perceived violations) of a tenant’s rights. While you may administer the premises where they live or operate their company, they have some inalienable rights. These might range from the right to 24 hours’ notice before an inspection/visit to a rent increase cap.
Visit the U.S. Department of Housing and Urban Development’s website for a comprehensive list of state requirements that may apply to your renters.
When it comes time to evict your renters, be sure you follow the rules to the letter to prevent litigation. Landlords must, in particular, terminate the lease by written notice, provide renters with a fixed length of time to vacate, and monitor the situation without harassing the person. If the renters refuse to leave, you may file an illegal detainer action, in which the courts can lawfully evict them for you.
You have the legal right, as the property manager, to terminate a tenant for a number of reasons, which vary by state but may include failing to pay rent, breaches of the rules of tenancy, or even turning the home into a “house of ill fame.” Before you begin the procedure, consult with your legal counsel to confirm that you are within your rights.
Owners of property
The owners are your superiors if you work as a property manager. Dealing with them might be challenging at times since you must balance your relationships with them as well as your renters.
Ordinances/Regulations of the City
City legislation is as complicated as it is in the United States Senate, but on a smaller scale. Property use laws and rules are always changing. While the city has a legal obligation to notify property owners and managers of changes, such notifications may take the form of a public statement in the local newspaper, making them easy to overlook.
It’s a good idea to remain up to date on problems in your town or city that will effect you in order to be on the right side of the law. Attend meetings, engage with the planning board and zoning commission, and keep a watch on Department of Buildings correspondence (or similar local agencies). Knowing how numerous legislation will effect your function as property manager is an essential component of your profession.
And if one of these changes does impact you, the simplest solution is to accept it. If an ordinance or building code changes, you have the option of accepting the change and bringing your properties up to code. You may also submit a grievance or start a petition to ask the city council or other concerned entities to reexamine the matter at hand.
It is typically far simpler to influence these sorts of things before they are adopted, which is why attending public hearings and council meetings ahead of time is preferable.