Managing properties comes with some huge responsibilities, both moral and legal. You have to follow federal and state laws, but sometimes those laws aren’t easy to remember. For instance, in many states, giving notice to a tenant requires following some very specific laws. In these states, your reason for giving notice determines how much notice you must provide.
With all the finer details regarding landlord-tenant law, you’re bound to make a mistake at some point. However, some mistakes are more serious than others. To keep your properties running smooth, these are the mistakes you want to avoid the most.
1. Security deposit mistakes
Perhaps the biggest mistake landlords make is not handling a tenant’s deposit correctly. It seems like it’s a simple thing to collect a deposit and return it when a tenant leaves, while deducting expenses for repairing damage. However, security deposits are much more complex.
For example, the law determines how much you can collect from a tenant for a security deposit, how you must store that deposit, what deductions are allowed, and how long you have to return the deposit after a tenant moves out.
For example, LosAngelesPropertyManagementGroup.com explains that in California, you can’t collect nonrefundable cleaning deposits. Any cleaning deposit must be part of the fully refundable security deposit.
Some of the most common mistakes landlords make with security deposits include:
- Deducting too much for repairs without receipts to account for the money
- Not providing receipts when required (sometimes receipts aren’t required, but it depends on the state and the amount deducted)
- Keeping the security deposit for the last month’s rent (even when a tenant asks you to do this, it’s never a good idea)
- Waiting too long to send the security deposit refund check
- Not sending the security deposit refund check to the correct forwarding address
- Not holding the security deposit in a separate bank account
Some tenants will sue their landlords over not getting their deposit back. If the deposit was small, you might not think they’d bother. However, in some states, tenants can win three times their deposit amount, making it worth their time to file a lawsuit in small claims court.
Be extra vigilant regarding how you manage tenant security deposits. Most importantly, don’t skip collecting a deposit. Always collect a deposit from your tenants.
2. Trying to force a bad tenant to move out
Every action you take as a landlord can be used against you later on if your tenant takes you to court. When you’re dealing with a bad tenant, you need to exercise extreme caution regarding how you interact with them. For instance, if you give a tenant notice to vacate and they refuse to leave, go straight to an attorney and get the eviction process started. Don’t argue with your tenant, and don’t do things to make them leave. Go straight for the paperwork.
Once it’s clear you want a tenant to move out, anything you do to force them out can be considered harassment and self-help eviction. For instance, it’s illegal to change the locks, turn off utilities, or restrict a tenant’s use of the premises against their lease in order to force them to leave.
When you want a tenant to move out, you need to go through all the proper legal channels or you risk getting sued. Trying to work it out with them will only prolong the amount of time they’ll spend occupying your property, which increases the potential that they’ll cause serious damage.
3. Not removing dangerous tenants immediately
Technical errors are one thing, but when a tenant poses a threat to other tenants or even yourself, it’s critical to remove them from the property immediately. If you have a tenant that has attacked another tenant, don’t delay – evict them right away. If one of your tenants has physically assaulted you, evict them right away and get a restraining order against them.
If you’ve been physically assaulted, the court will most likely grant you an immediate temporary restraining order before your hearing, which means you can have a sheriff escort your tenant off the property immediately.
The risks of leaving a violent tenant on your property increase as time passes. They might turn their anger toward other people, or they might seek revenge against you after a minor disagreement. Don’t get involved with a dangerous tenant. Start the eviction process right away.
4. Not hiring a property manager
Managing landlord duties day-to-day is challenging, and that’s why many property investors hire a property management company. If you don’t enjoy being a landlord, you’ll love having a property manager. For instance, they’ll perform all the following tasks for you in accordance with the law:
- Collect rent
- Fill vacancies
- Serve eviction notices
- Deliver lease change notices
- Handle emergency calls 24/7
- Coordinate repairs and maintenance
- Host open houses and private showings
- Manage your property’s bills like property taxes and landscaping
Some property management companies will even help you sell your home. The benefits of having a property manager are huge. For instance, they’ll follow the law to the letter to make sure you don’t get in trouble for making small mistakes. An experienced property management company will usually have an attorney on retainer who they can ask questions if they’re ever unsure about something.
Most importantly, you’ll get more time to live your life the way you want, whether that involves pursuing more investments, working on a business, or spending time with your family.
If you haven’t considered hiring a property manager because it’s going to be another expense, try looking at it differently. Instead of an expense, consider it an investment in your real estate business.
Don’t learn big mistakes the hard way
Sometimes mistakes are best learned by doing. However, that’s not the case when you’re a property manager and mistakes have legal consequences. You’ll be in an ideal position after hiring a property manager.
However, if you can’t do that, consult with an attorney to create a set of procedures to follow based on applicable laws.