By William Bronchick, Real Estate Coach
In real estate investing , as a landlord, you should be aware of some of the legal issues related to leasing properties.
Here are a few of them:
LEAD-BASED PAINT DISCLOSURE
Federal law requires that the lessor (landlord) of any rental property constructed before 1978 disclose the presence of any lead-based paint or hazards known by the lessor and provide the lessee with all reports in his possession. In addition, the lessee must be provided with an EPA pamphlet entitled Protect Your Family From Lead in Your Home and be given a ten-day period to conduct an inspection for lead-based hazards. This ten-day period of an inspection may be waived in writing by the lessee. It is advisable that you have your tenant sign an acknowledgment that you have complied with these requirements.
State law may also require additional lead-based paint disclosures. Massachusetts, for example, is one such state. California requires the disclosure of sex offenders in the area (called Megan’s Law). Before exhausting yourself with state disclosure requirements, find out whether any of the regulations apply to single-family homes.
DISCLOSURE OF LATENT DEFECTS
Although not specifically addressed under state or federal law, you should disclose any defects or dangerous conditions on the property that are latent (not readily apparent by inspection). A failure to disclose such a condition could result in liability against you. For example, outside stairs that become slippery in the winter may not be obvious to a tenant that moves into the property in the summer months.
LOCAL ORDINANCES & RENTAL REGISTRATION
In addition to federal and state regulations, you should be familiar with local ordinances within your county, city or village. A growing trend across the country is the requirement that landlords register and obtain a license for each rental property. Along with an annual fee, the county or municipality may insist on inspecting the property for compliance with building codes and health department regulations. Obtain a copy of these regulations to determine whether you are subject to the registration requirements as a non-owner. Find any loophole you can to avoid having to comply with these burdensome laws.
KNOW THE FAIR HOUSING RULES!
Make certain that you understand the fair housing laws. Under federal law (42 United States Code Secs. 3601-3619, 3631), you cannot discriminate based on race, color, religion, national origin, familial status, age, or sex. The rules apply not only to the screening process but to the words you use in advertising the property.
Most landlords don’t intentionally discriminate, and when they do so, it is in a more subtle manner:
Example: If you take two applications from an unmarried couple and one from a married couple, this may be considered discrimination based on marital status.
Example: If a family of six is applying to rent a two-bedroom condominium, you cannot turn them away because this would be discrimination based on familial status.
Example: If you only ask Hispanic people for proof of citizenship, you are discriminating based on national origin.
Most states and even some localities have additional restrictions on discrimination. For example, California, Minnesota, and North Dakota prohibit discrimination based on the source of income. Thus, you cannot deny an applicant because he is receiving public assistance. In these cases, it may be better to discourage the tenant from renting because of the fact that he may not be able to qualify for a loan and will lose his option money.
AMERICANS WITH DISABILITIES ACT
The Americans with Disabilities Act (“ADA”) also prohibits you from discriminating against people with a disability. Of course, no decent human being would turn someone down because he was in a wheelchair. However, the definition of the word disability goes way beyond a physical disability. A person with a mental disability is covered by the ADA, as is an alcoholic undergoing treatment or a person convicted of prior drug use. The ADA does, however, exclude drug dealers.
This is just scratching the surface. Make it a point to learn the laws that are applicable to your business at the federal, state, and local levels. Having an attorney that understands or a mentor experienced in real estate, can be a great benefit, especially if you are just starting out!
If you are new to the real estate investing game, having a seasoned real estate mentor, or real estate coach can help you navigate this.
President and founder of the Colorado Landlords Association, best-selling real estate author and attorney, landlord and real estate investor with 28 years' experience.