While real estate laws differ by state, these key issues are relevant no matter where you own property.
For many entrepreneurs, rental properties are a profitable investment strategy. But before taking on the responsibility of owning and renting property, investors should be aware of the real estate laws in their area. Property owners who fail to understand and follow these regulations can find themselves facing lawsuits, monetary fines, or other legal challenges. In this article, we’ll share some of the most important real estate laws and regulations that landlords should be aware of.
There are two main federal laws in the U.S. that landlords must keep in mind: the Fair Housing Act and the Fair Credit Reporting Act. The former prevents landlords from discriminating against tenants based on race, gender, disability, and nationality while the latter lays out the proper ways in which a landlord is allowed to screen tenants using their credit history.
At the local level, each U.S. state and city has its own real estate laws that dictate the rights and responsibilities of landlords and tenants in their jurisdiction. These laws can range from legislating how security deposits can be used, to how a tenant can ensure their privacy is maintained while they stay in a property they do not own.
While each jurisdiction’s real estate laws are different, there are a number of issues that are relevant no matter where you own property. Here is a brief overview of nine regulations that landlords should review before deciding to purchase a rental property.
Even as a property is being advertised to potential renters, landlords must ensure that their outreach is not targeted in a discriminatory way. This means that the language used to advertise the property can’t specify a preference for tenants of a particular profile. The Fair Housing Act highlights how landlords can ensure that their outreach, screening, and rules are free of discriminatory language, but each state or city may have additional guidelines. For example, in Oakland, California, landlords are prohibited from asking about an applicant's criminal history and running a criminal background check.
Lease agreements are crucial documents that codify the roles and responsibilities of tenants and landlords in a rental property relationship. It’s the landlord’s responsibility to ensure that their lease agreements comply with their local real estate laws around security deposit returns, late fees, rent increases, and renters insurance requirements. The lease is also an opportunity for the landlord to clearly state their expectations on issues such as subletting, pets, landscaping responsibilities, smoking, and more.
Federal law states that landlords must inform tenants about the presence of lead-based paint hazards. In some states, landlords must also tell their tenants about the local laws that landlords and tenants are bound by such as smoking policies and the presence of environmental hazards. It is critical for landlords to know about these regulations and relay the relevant information to their tenants in a clear and timely manner in most states. States such as Colorado, Idaho, and Vermont, however, do not require landlords to make any disclosures.
Each tenant puts their safety in the hands of the landlord when they choose to stay in a particular property. States take this responsibility seriously and use laws to ensure that landlords keep their rental properties safe for all their inhabitants. Landlords may need to make sure that their properties are free from serious damage, that each light fixture and lock is in working condition, and that the apartment is free from pest infestations. In some states, landlords are allowed to make pest control the renter’s responsibility, but this must be noted in the lease.
Most landlords collect security deposits from their tenants and each state has clear rules on how that amount can be used during the tenancy. Security deposits are intended to cover expenses when tenants damage the property beyond normal wear-and-tear or default on rent payments. Landlords must keep a full, itemized record of any deductions they make from the security deposit. Failure to do so can result in lawsuits or hefty monetary penalties that outweigh the amount of the deposit.
Every state requires landlords to respect the privacy of their tenants during their lease period. This means that in most states, landlords can only enter the premises with proper notice and for valid reasons such as making repairs, showing the property to prospective tenants, or conducting an inspection. Landlords usually may enter the property without advance notice in emergency situations, such as a fire, flood, or crime.
When tenants vacate a property, they may leave behind some personal belongings. Regardless of the value of these items, landlords must notify tenants of the abandoned property and tell them how long they have to reclaim them. Depending on the state, landlords must store a tenant’s abandoned property for a minimum of a week — or in the case of Vermont and Texas, two months. Once the claim period is over, the landlord can choose to keep, sell, or discard the items.
Rent prices are rising all over the country. To curb these rising rent prices, more than a dozen states, including New Jersey, Colorado, and Florida, are considering proposals that would limit rent increases to between 2% to 10% per year. In the coming months and years, landlords should keep an eye out for such legislation in their area to ensure compliance and profits — especially if inflation continues to impact property management costs.
Tenants that violate the terms of a lease can be forcibly removed from a rental property, but the laws that govern what constitutes a violation differ greatly from state to state. Terms that are outlined lawfully in lease agreements are usually enforceable through evictions should the need arise.
That said, landlords should avoid seeking a “retaliatory eviction,” in which a property owner refuses to renew a lease in response to a tenant taking actions within their legal rights, such as joining a tenant’s organization or reporting health violations to the authorities. In most of these cases, landlords should focus on solving issues through communication, documentation, and when necessary, legal action. Forcing renters out — for example, by turning off their electricity or changing the locks without permission — will likely have negative legal consequences in most states.
Limited supply and rising demand have made rental property ownership an attractive investment strategy. However, maintaining compliance across multiple processes including insurance, rent collection, tenant screening, and much more can be challenging, particularly for first-time landlords.
Landlords can simplify all of their rental property financials by consolidating rent collection, insurance, and banking in Azibo, a one-stop-shop platform designed for landlords and renters. Azibo allows rental property owners to streamline their business operations and organize important compliance documents across their rental property portfolio.
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This article and the Azibo Blog in general is intended for informational and educational purposes only. It is not investment, tax, financial planning, legal, or real estate advice. Please consult your own experts for advice in these areas. Azibo provides information believed to be accurate, but Azibo makes no representations or warranties about the accuracy or completeness of the information contained on this article or blog.