Landlords

Legal Issues and Lawsuits – 7 Mistakes Landlords Make

It’s every landlord’s worst nightmare; legal issues. Being sued or having lawsuits brought against you can be time consuming, drain your funds and is simply not a pleasant experience.

Run a property business long enough and whether through no fault of your own or through something you have done wrong you are likely to face some form of legal issue.

These can be fairly minor and easily solvable or they can be lengthy legal battles that require more of your time and effort. In this article I am going to look at the more common reasons you can face legal action and how to avoid these issues.

At this point it is worth pointing out that I am not a lawyer or a legal expert, but am simply giving advice on handling the problems you may face when dealing with lawsuits. This article in no way is meant to represent an alternative to legal counsel and as such when faced with legal problems my first port of call would always be to speak with your legal advisor.

Lawsuits

The lawsuits that you may face can take a few guises and it is important to have your legal team in place before any action is called on you. Any landlord treating their property as a business should have a good, well qualified legal representative that they can turn to in times of need.

Ensure you know the person you need to speak to when dealing with problems and ensure that you keep records (written) of all conversations that you have with your tenants, broker and property manager. Having this evidence to call upon may prove invaluable when dealing with legal wrangles.

It is worth remembering that it is often unlikely that your tenant will be keeping a blow by blow record of your dealings with each other so having this yourself could help you fight your side in court.

Ensure you have a keen understanding of your broker’s or property manager’s procedure for dealing with lawsuits and their record keeping process in case you need to call on them for any reason in relation to the lawsuit.

Deposits

Deposits often prove a tricky area for both landlords and tenants and claims are something that are very easy to argue over. There are of course more reasons for legal issues surrounding the deposit than simple claims. We will discuss some of these below.

Laws

Knowing the laws in your area is the most important thing when it comes to deposits. Most states will have rules in relation to where a deposit is held, hold long you have post-tenancy to claim deductions and what you can and can’t claim for.

Your broker should be able to confirm your states relevant laws and help you draft a thorough contract to ensure you meet your requirements. Stick to the rules when it comes to deposits as the legal process can often be heavily in favour of the tenants and is frequently very black and white meaning it is not only easy to break the rules it is also very easy for tenants to sue you for breaking those rules.

Use a qualified broker and know the rules. Using a good broker is your first line of defence for dealing with deposit issues and having a solid contract will help you to avoid any issues as you should be in a position to understand and meet all of your obligations.

If you are unsure of your role within the terms of the contract or have questions ask them. Do not sit on an issue and hope it will not surface. Arm useful with all the information you need in relation to deposits at the start of the tenancy and you should be in a position to ensure that you are not sued due to breaking your states rules.

Not Returning Funds in Time

Some tenants may cause issues at the property and be unreachable when they vacate making it hard for a landlord to comply with the timeframe set out in the contract. Not returning funds in a timely manner is a common reason of dispute when it comes to deposits. Whether the tenant is contactable or not you must comply with the rules laid out in the contract and you must follow the return schedules specified by your state’s laws.

To avoid issues when the tenants are not reachable ensure you take multiple contact details for your tenants plus a forwarding address or even a long standing registered address (often the tenant’s parents) so that you can ensure you are able to reach the tenants to organise deductions as soon as the tenancy has ended.

Instruct your broker to have an inventory carried out on the day your tenants vacate the property and have your broker or property manager start the process of claiming deductions and returning the deposit as soon as the inventory is back. If you can be seen to be making an effort to get things moving it would be difficult to claim that you willfully let the return of the deposit slip.

Unregistered Deposit

Most states will specify how and where you must hold or register the deposit. This should be noted in the contract and your broker should be able to advise you of your state’s relevant laws.

Ensure you put in place the things that you are required to by law and you will negate the ability of the tenants to sue you for an unregistered deposit. Again this is very black and white and should you ignore the advice and simply not do as you are required to the law makes it very easy for tenants to claim against you.

So, put simply follow and meet your obligations for registering the deposit and you will be fine.

Claims

This seems like a very basic issue but claims can be and are messed up frequently. Claim only for what you are allowed to and claim only the amounts due. It is not uncommon for landlords that are trying to claim more than the fair amount to have their whole claim rejected.

Know what you can claim for and have official quotes or invoices to prove the amounts you are intending to claim. Also, having timed and dated inventories at the commencement and end of the tenancy will make your claims vastly easier. Avoid lying, over-claiming or misrepresenting claims as this will likely play out badly for you should your tenant fight back by suing you.

Have your contract worded to show exactly what you can claim for and ensure that you only claim for what you are able to. Playing your deductions claim “by the book” will avoid the possibility of the tenants suing you for claiming too much or wrongful claims.

Arm yourself with the information you need for a successful claim, inventories, thorough contracts, inspection records and invoices will help you to avoid being sued for claim related deposit issues.

Illegal Clauses and Unlawful Entry

Another common legal problem faced by landlords involves illegal contract clauses. Be careful to have your legal representative check over the contract before it is signed as you must make sure that the clauses in the agreement are considered lawful.

It is not uncommon for tenants to have contracts checked and should their representative have issues with any of the clauses you may find yourself being sued due to something you tried to put into the contract.

Have the contract checked carefully as it is not uncommon for tenant’s lawyers to try to have clauses struck from the agreement. If successful depending on the clause that is removed you could be left in a very difficult situation.

Working with a broker and legal team that are fully up to date with ever changing property laws and regulations is incredibly important and can help you avoid issues with illegal clauses.

Unlawful Entry

This is a very simple issue. Once you hand the property over to the tenants it is no longer viewed as yours. You are not able to come and go as you please and the tenants have the right to refuse you entry should they wish.

Have the rules that relate to access added to the contract and ensure that you stick to them. Always apply for access in writing so that you have prove that you applied for access correctly. Email works best as it has a time signature that you can use to show that you gave the required notice when seeking access.

If in doubt do not access the property. You must ensure that your request for access is approved prior to entry and your contract will breakdown how you go about getting access approved.

If tenants are being unresponsive inform them that you are giving them the required notice and that you intend to visit the property at a specified time and that they must contact you if this is not possible. Forcing their hand is often a good way for you to get a response for unresponsive tenants.

In conclusion, follow the rules in the contract that relate to access and ensure that all clauses in the agreement are lawful and match the rules and regulations in your area. As with claims, etc playing it “by the book” will avoid any unwanted legal issues.

Uninhabitable Properties

This is a big bone of contention for tenants as they will often view even minor works as making the property uninhabitable. Most states will have very clear definitions on what constitutes an uninhabitable property. When dealing with tenants and lawsuits in relation to uninhabitable properties follow these guidelines closely.

Do not force tenants to remain in properties that fall outside of these rules or force tenants to pay rent for uninhabitable properties. If you follow the rules you should be able to avoid any major problems when it comes to uninhabitable properties.

Seek legal advice and the help of your broker or property manager when dealing with uninhabitable property claims as they should be able to show records of how the property has ended up in this condition and whether or not the tenants can claim that the problem was caused by your error.

As with the above, following your state’s rules closely will help you to tackle any legal issues head on and if you have a strong legal and property team working with you you should be well positioned to fight any claims head on.

Conclusion

In conclusion, whilst legal issues can be a nightmare landlords that pre-plan and have a framework in place to deal with legal problems often come out on top. If you know the rules and stick to them then you should be well placed to fight any lawsuit that the tenants may serve on you.

Ensure you keep thorough records of all your interactions with your tenants in case you need to use them as evidence and ensure your property managers, etc. do the same. Plan ahead and be ready should the worst happen. This will put you in the driving seat when dealing with issues.

If you do break the rules and choose to leave yourself open to lawsuits this is simply something that I cannot give advice on. In my opinion you should always aim to know and follow the rules closely and avoid any chance that you may face legal problems from your tenants.

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