Owning rental property can be a rewarding part-time or full-time business for many families. It’s a traditional way many American families have gotten ahead. We recommend it. We enjoy it. But watch out. If you don’t avoid the pitfalls, you can have some bad nightmares. What you don’t know can hurt you. Here are the 10 worst mistakes you can make.
1. Accepting a new tenant without careful, thorough screening.
The most serious and costly danger to a landlord is having a tenant who stops paying rent and uses completely legal tactics to delay eviction. You can use a tenant selection service (found online) or a rental agent or do background checks yourself. You need to check with former landlords, not the applicant’s current landlord, who may give a positive recommendation in order to get rid of a problem tenant. You need to verify income with their employer. Use a rental application form to make sure you cover everything important to screen for. If someone else does the screening, double-check their work.
2. Discriminating when you select a new tenant.
If a prospective tenant thinks you have discriminated against him or her for illegal reasons (race, sex, age, marital status, family status, religion, nationality, ethnicity, sexual preference, gender identity, disability), the cost of defending yourself against such a suit, or the cost of settlement, can be very high. It is acceptable, however, to decline to rent to someone who can’t afford the rent or with a background of trouble with landlords. Just be sure to apply the same standards for screening consistently to all of your applicants.
3. Not having a lease or rental agreement.
Written leases or tenancy-at-will agreements give you more rights as a landlord than oral agreements. Examples: (1) An owner has no right to enter a tenant’s apartment without written permission, typically included in a lease. (2) Even though utilities are separately metered, the owner is liable for all of a tenant’s utility costs unless there is a written agreement saying the tenant pays. (3) Only a written lease can give an owner the right to approve sub-tenants and approve or reject pets. Use a standard lease form written with Massachusetts laws in mind.
4. Taking a security deposit without following all legal requirements.
Owners who don’t follow the legal rules exactly on security deposits risk paying triple damages and legal fees in a dispute. Many owners choose to take the last month’s rent instead. If you take a security deposit, check out the law carefully and follow all the rules: receipt, apartment condition statement, escrowing, notice to tenant and timely return of the deposit. After all this, many tenants will just use their security deposit as a last month’s rent anyway.
5. Not deleading an apartment when a child under six lives in it.
It is against the law not to delead an apartment when a child under six lives in it. But the cost of deleading is often so high that many owners simply don’t do it. And many tenants won’t bother their owners about it. But if you decide not to delead, you risk not only paying for the deleading anyway but also losing months of rent and paying for a lawsuit if your tenant decides you were negligent in the matter. Note: It is illegal also to discriminate against families with children under six by not renting to them.
6. Not responding to a tenant’s repair request.
Good relations with tenants make all the difference in the world. So even though repairs are often a nuisance (and some tenants can be especially annoying), it is good practice to always respond to every tenant request and fix the problem promptly. Failure to do a repair only aggravates the tenant and may cause them to turn to the local health inspector, at which point they are entitled to withhold rent…and the whole relationship becomes contentious, legalistic and ultimately very expensive.
7. Not acting promptly when a tenant stops paying rent.
You are entitled to the rent. You should call or notify your tenant if they are more than a few days late in making their monthly payment. And if they are more than two weeks late, give them an official, legal 14-day notice to quit. Use a standard notice-to-quit form or, better yet, a lawyer. It is extremely rare that landlords ever get paid the back rent they are owed in an eviction. So act promptly to reduce your period of lost rent.
8. Losing your temper – ever – with a tenant.
It is best always to be professional and courteous with your tenants, even when they are being absolutely unreasonable. If you cannot keep your temper, it may be time to hire a lawyer to help solve your problem. Losing your temper may cause your tenant to turn to their legal remedies, which are always harsh on landlords.
9. Not thinking twice before you refuse to settle a dispute with a tenant.
It is almost always better to settle a dispute with a tenant (even if it’s not the best deal for you) than to fight out a dispute in court. The landlord-tenant laws in this state are simply not fair to landlords, and tenants usually have access to free legal services lawyers who will fight their case against you with tax-and-charity dollars for as long as they want with all the laws on their side. In the end, it may cost you tens of thousands of dollars. It’s not worth it just to win a point of pride. Usually, the only time it is really important to fight to the end is to get rid of a nonpaying tenant. Even then, a settlement where you pay them to leave may be cheaper than paying even more to your own lawyer to fight to the bitter end.
10. Not using a lawyer when you get into trouble with a tenant.
Just about any trouble. Some landlords say they have good luck doing their own evictions. And that’s just what it is: luck. The technicalities are rampant. You don’t know them. Your tenant’s free lawyer knows every one of those technicalities backwards and forwards. You need to find a lawyer who has experience in landlord-tenant law. If you start without a lawyer, you may end up hiring one anyway, which will ultimately cost you more.