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Whether you’re a landlord, a tenant, a property manager, an insurance agent or a lawyer, these unwritten laws to live by will help you better understand the rental property industry while avoiding costly mistakes.
Landlords and property managers have a lot of rules that may seem very basic and easy to follow, but as time goes on, the rules that were once as clear as day become blurred.
Law #1: If It’s Not Written, It Doesn’t Exist
Even though it’s one of the most common and most important laws in property management, many landlords still don’t abide by it.
In real estate property management law, there is a requirement that a landlord must have a written lease agreement. This means that a landlord cannot rely on a verbal agreement to evict a tenant. The law states that a written lease agreement is a contract that must be adhered to by both the landlord and tenant. If a landlord tries to evict a tenant without a written lease, they are in violation of the law.
This is very simple and easy-to-follow that makes everything clear and transparent for both the landlord and the tenant. However, not abiding by this can lead to a lot of problems and complications. It is very important for both the tenant and the landlord to provide written documentation for any and all communication. It makes everything clear and transparent. This also helps protect both the landlord and the tenant from any problems that may arise.
Law #2: You Can’t Make Excuses
You won’t be able to rely on “bad tenants” or “the economy.”
The reason why the excuse game works is because few people want to admit they made a bad decision. It’s easier to blame someone or something else and easier to pretend that you made the right decision. As well as easier to blame the economy or your “bad tenants.” The problem is, you can’t make excuses. You shouldn’t make excuses. The only way you’ll ever improve your business and maintain tenant satisfaction is by admitting your mistakes and trying to correct them. It’s a process, but doing so will empower you to move forward. Take the steps you need to take to improve your business.
Law #3: The Number Of Tenants Does Make a Difference, Especially When Increasing
It’s one of the most common mistakes made by landlords; you can’t simply add one more tenant and expect that everything will be the same.
First and foremost, even though the lease agreement isn’t new, this person is and therefore they need to go through the new actions the rest of the tenants did. This includes a credit, background, rental history, employment, reference and any other checks to ensure this tenant meets your criteria. If this new tenant does meet your criteria, not only will they have to sign the rental documents but all of the current tenants have to sign to acknowledge and accept that the new tenant is allowed to move into their home with them.
More tenants equal more wear and tear on your investment home. Are you going to increase the rent and/or the security deposit? If so, all new documents are to be signed by all parties prior to the new tenant moving in. Note, this includes income qualification.
The new tenant may request to do a walk-through with you or ask for a move-in checklist to cover themselves when the lease agreement is over and it’s time to move out. So, be prepared to be present.
Law #4: Proper Property Insurance Matters
As a property owner, manager or renter you must make sure to have the right type of insurance on your rental property. Avoid getting the wrong type of insurance coverage or the wrong amount of coverage at all costs.
Have you considered getting property insurance and liability insurance? The right insurance can save you hundreds of dollars. Understanding the different options available to you to mitigate coverage holes is super important. Shocker, investment insurance is much more complex than your typical homeowner insurance.
Take the time now to find time to discuss your insurance options with a licensed insurance professional that understands property investment. This is something that is way more advantageous to do now rather than after an incident occurs.
What coverage do you need?
Property Manager or Owner Listed as Additional Insured
Who would want to be held liable for negligent acts or errors committed in the management of the property? No one!
Just as the property manager or owner does not want to be forced to cover attorney and other defense fees out of pocket if any suits arise. Adding the correct additional insured compliments insurance policies and it helps against claims expenses.
100% Replacement Cost
Replacement costs are the costs necessary to repair or replace your entire home. When you insure your home for its replacement cost, your insurer will reimburse you for the cost of rebuilding or repairing your rental property. This is based on the size and structure of the home that was lost or damaged.
General Liability
This is standard coverage in most landlord insurance policies. It provides coverage for your expenses if you are found legally responsible for anyone’s injury on your property. Plus, it covers you if you end up being required to pay for damage done to someone else’s property.
Accidental and Sudden Discharge of Water or Steam
This is coverage for when someone’s pipe bursts and nobody is around to see it for a few days. Pipe bursts and other plumbing issues can cause extensive water damage to a home or business. Note, this is not typically covered by your basic policy so might want to ask your agent to add this to your policy.
Dwelling Vs Homeowners Policy
A dwelling insurance policy for your property instead of a homeowners policy could be the better route to go. Dwelling insurance is great in a variety of circumstances other than coverage of an insured’s primary residence. This is particularly great for vacation homes, which are one of the most common situations, as well as rental properties.
Vacancy Clause
Unoccupied and vacant home insurance are specialty insurances intended to provide financial protection from damage or loss of a home that is uninhabited or unrented. It is important to note typical homeowner’s insurance policies won’t cover fire, vandalism, liability or other types of claims on an unoccupied or vacant property.
These 5 unwritten laws are for anyone working in the rental industry, whether you are a landlord, property manager, tenant, or even a renter looking for a new place to live.
As a landlord, there are many things that you can do to keep your tenants happy and ensure that they stay in your property for the long term. As a piece of the property management puzzle, it is important to stay informed about what you can and can’t do, so that both you and your landlord, tenant, team, etc. are on the same page.
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