Owning a multifamily rental property can be a profitable investment, but it also presents a significant liability if it’s mismanaged. It’s important to adhere to all applicable laws, including those pertaining to the rights of your tenants. By following best practices, you can not only protect yourself from losing lawsuits but avoid most of them entirely.
1. Set Up Recordkeeping from the Start
First of all, it’s important to keep thorough records of the financial and practical aspects of your property. Some of the documents that either you or a designated property manager should keep up to date include:
- Balance sheets
- General ledger
- Rent roll
- Profit/loss statements
- Cash flow statements
- Accounts receivable
- Legal documents
- Maintenance work orders
By keeping these records, you’ll have the data necessary to make sound business decisions regarding your property while also having sufficient records on hand to mitigate liability.
2. Defuse Renter Conflicts Early
In the event of a conflict between different tenants on your property, it’s best to defuse the situation before it leads to fees or legal action. Doing so could help prevent the high costs of tenant turnover by making your property a positive living environment.
3. Keep Up on Property Maintenance
Tenants are entitled to certain rights, including having livable conditions in their unit. Keeping the property safe and hospitable for tenants is key to avoiding losses from breaches of contract and lawsuits.
By keeping up on property maintenance—as well as maintenance records—you’ll not only reduce the odds of a lawsuit but also improve your position in the event that a premises liability suit does occur.
4. Learn About Fair Housing Laws
Refusing to lease to people based on their race, ethnicity, disability, etc. is illegal, and doing so could result in legal action. Being aware of fair housing laws is key to keeping liabilities in this area to a minimum.
Even if you are fully compliant with all relevant laws, there’s still a chance of discrimination lawsuits from those you evict or turn down. By making sure your processes adhere to the law and promoting accountability among your staff, you’ll be in a better position in the event that you face discrimination charges.
5. Familiarize Yourself with Zoning Laws
Zoning laws vary by location, and they are especially pertinent if you are developing a plot into a multifamily property. However, even if you have no construction to do, they can still be relevant as you maintain the property. Small matters such as replacing exterior lighting, putting up signage, or handling landscaping can be affected by local zoning ordinances, so keep those in mind when managing your property.
6. Follow Correct Procedures for Evictions
Every process you engage in on your rental property should comply with all applicable laws, including evictions. In Illinois, you must go through legally prescribed processes in order to evict someone, which means certain actions—such as rekeying units or forcibly removing people yourself—are illegal.
7. Consult with a Real Estate Attorney
A real estate attorney—such as us at Hart David Carson LLP—can help you make sound decisions when it comes to managing multifamily properties, whether you need to draw up lease agreements or figure out proper procedures. Consulting with a lawyer can help you minimize liability in the long run.