If you’ve recently become a landlord, you’re most likely still adjusting to the many responsibilities that come with it. It is not uncommon to feel overwhelmed, but by arming yourself with knowledge of your basic obligations, you can learn how best to navigate this new role and also begin to build a lucrative business.
Not sure where to start? Here are 3 of the most essential landlord obligations and responsibilities to keep in mind.
1. Landlord Financial Obligations
Some of the most significant landlord obligations that you’ll have are ones that are financial. It’s important to remember that the income from your rental must cover all of the costs associated with that property. Typical landlord expenses to consider include:
Insurance
Though it’s not legally required to have insurance coverage for your properties, it is important because they help safeguard your business and personal finances.
Homeowner’s insurance
: Homeowner’s insurance will likely only cover rental properties in which you, as a landlord, also reside. Though not legally mandated, homeowners insurance is required by most lenders and covers damage to your property and liability for others injured on the property.
Landlord Liability Insurance:
With a landlord liability insurance policy you are protected from paying any costs incurred if someone is injured on your property or the property is damaged.
Rent Default Insurance:
If a tenant suddenly stops paying rent, a rent default insurance policy ensures that you still receive an income. If you are forced to evict a tenant due to inability to pay, for example, the process can take months. In this case, rent default insurance covers the lost rent throughout the process. Consider companies like Steady who offer customizable plans and no deductible if you must file a claim.
Mortgage and Utilities
Though you are renting out your property, as a landlord, you are still responsible for ensuring all the bills are paid whether you pay them or make it the responsibility of the tenant. Three common processes landlords use include:
- Pay yourself and increase rent to cover the costs
- Have your tenants pay
- Pay yourself but charge a separate monthly fee to keep rent costs down
Taxes
You might be renting out a stand-alone rental property, or perhaps you’re an owner-occupant. In both cases, you are still responsible for paying property taxes. On top of that, the income you receive from rent is also taxed and must be paid. The good news is that there are rental property tax deductions available for landlords that can help reduce your costs.
2. Landlord Responsibility to the Tenant
Perhaps just as important as your financial landlord obligations is fulfilling your responsibilities to your tenants. By meeting their needs, you’ll likely minimize vacancies and see more long-term renters.
With that said, here are some of the most essential responsibilities to keep in mind.
Warranty of Habitability
In all residential leases, there’s a warranty of habitability. This warranty, backed up by law, ensures that the property you’re renting out is
habitable and fit for renters and that it remains in that condition during the entirety of the lease.
Occupancy Standards
Occupancy standards vary across states and cities. These are rules that dictate the number of people that can live in a property or in a specific bedroom. While this is typically determined based on square footage, it can also vary depending on your location.
Routine Maintenance
Just like occupation standards, property maintenance standards vary depending on the municipality. Included in these standards are rules and guidelines on outdoor furniture, snow removal, or lawn care. Trash accumulation and parking rules are often included in this as well.
Inform your tenants of the guidelines, but also take it upon yourself to ensure the property is being maintained according to local standards.
Lead Paint
Renting out a property that was built before 1978? You’ll need to give your tenants a lead paint disclosure form as well as a document that explains the risks of lead paint.
3. Landlord Legal Responsibilities
Though financial and tenant landlord obligations are important for the success of your business, being educated on both landlord and tenant rights is crucial. Two of the most important are:
The Fair Housing Act (FHA)
This was signed into law to make sure no prospective or current tenants are rejected or subjected to discriminatory treatment, and covers seven protected classes: race, color, religion, national origin, sex, disability, and familial status.
Legally, landlords cannot solely advertise their property to certain groups of people or alter the terms or requirements for different tenants. You also cannot legally deny a tenant from having a support dog.
Fair Credit Reporting Act (FCRA)
The FCRA was signed into law to regulate the collection and sharing of consumer information by credit bureaus.
What this means is that you are required to give notice of adverse action, should you do any of the following after obtaining and analyzing the prospective tenant’s credit report:
- Deny the application
- Require a cosigner
- Require a higher deposit
- Raising the rent higher than for another prospective tenant
Though these are laws on the federal level, there are also common state laws and regulations that you’ll need to keep in mind:
- Right to Enter: This provision exists to safeguard a tenant’s privacy in the home. This restricts a landlord’s right to enter to make repairs, conduct inspections, or show the property to prospective tenants.
- Security Deposits: Most states have specific rules on handling security deposits. You need to be educated on these laws to protect your ability to use that money in case of any property damage.
- Evictions: Evictions have state-specific provisions and requirements. If you are considering evicting a tenant you need to give them proper notice in order to make sure you are successful in the eviction process. With that said, evictions take time and cost money often resulting in months of lost income for landlords.
Make Your Rental Income a Priority with Steady
As a landlord, you’ll have numerous obligations and responsibilities that, if done right, can help your business be more successful. With that said, you can’t always prevent a tenant from defaulting on rent. You can however, prepare for it.
With a rent default insurance policy through Steady, you can protect your rental income in the event that a tenant can’t pay. Additionally, Steady allows you to pay for the coverage that you want with customizable policies from 1.5 months to 6 months for however many properties you wish.
As a landlord, you have a responsibility to your tenant, but you also have a responsibility to yourself and business. That’s why you should protect yourself with Steady.