In an era where HDTV makes flipping houses look as simple as flipping pancakes, more folks are investing in real estate as another source of income. However, it’s not uncommon for investors to swap flipping for leasing.
On the surface, purchasing, refurbishing, and eventually leasing a property is a great way to generate a steady source of secondary income. The problem is a lot of investors don’t fully consider the responsibilities and risks that come with leasing residential property.
Residential leaseholds are governed by the Uniform Residential Landlord and Tenant Law (the “Act”). The Act was created to establish the rights and responsibilities of both landlords and tenants in the residential lease context. Though the Act’s limitations go both ways, landlords have more to worry about than tenants, which make having a full understanding of their duties and limitations absolutely critical.
The starting point for every landlord is having a lease contract that clearly addresses terms of tenancy, while at the same time not violating the Act’s provisions. For instance, landlords must ensure that the lease agreement doesn’t make the tenant responsible for any of the landlord’s maintenance and repair duties, permit the landlord unrestricted access to the property, or allows the landlord to summarily evict the tenant. Additionally, the Act prohibits landlords from including terms on tenant waivers and indemnification clauses. Use of such terms leaves landlords susceptible to stiff legal penalties and attorney fees.Once a lease agreement is in place, landlords must fulfill all duties of maintenance and repair throughout the entirety of the lease term. This generally involves maintaining functioning utilities, keeping common areas in a safe and clean condition, and providing requested and necessary repairs. Here again, a breach can lead to liability and costs.
Another concern for landlords is how to deal with problem tenants. Tenants that breach lease agreements, miss rent payments, or damage property must be addressed correctly. The legal process typically involves providing the tenant a series of notices and an opportunity to cure, only after which the landlord can start the eviction process. Failure to follow the process can result in legal action, even despite the tenant’s preexisting issues.
If you’re considering investing in residential property, don’t navigate the waters alone. Let an experienced real estate attorney guide you through the process so your time and effort is secure and well rewarded.
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