Three Reasons to Title Your Investment Property in a Land Trust and Not An LLC

In previous articles, we’ve discussed the main benefits of holding title to real estate investment property in a land trust. A land trust is just like a standard trust, except as the name implies, this type of trust holds title to real estate or real estate related assets.

Real estate notes, deeds and other agreements can be held in a land trust. A land trust can be recorded as either a revocable or irrevocable land trust. The majority of land trust are structured as revocable trusts. However, we’ve also had several inquiries lately about holding title to real estate investment property in an LLC.

While this is an option, based on our own experiences as real estate investors, we know of a few reasons why a land trust is a better title holding vehicle. In this article, we’ll discuss three reasons why you should title your property in a land trust rather than an LLC.

Land Trusts Offer Privacy

One of the main benefits of a land trust is that it offers privacy that you can’t find in an LLC. When you set up a land trust, you’re given the choice to create a name for each trust. This name can be anything, as long as it doesn’t infringe on copyrighted material. In the past, we’ve advised clients to name their trust wisely and in such a way that no personal connections can be drawn from the land trust title and those parties involved in the trust. This creates a layer of protection, since even if someone wants to attack one of your assets, they would have trouble connecting those assets to you. For record keeping purposes, a land trust is documented under its official land trust name. Uncovering ownership details behind a mysterious sounding trust like 321 CWL Land Trust may be more trouble than it’s worth. This is why a vague land trust name can be the secret to preventing lawsuits before they even start.

Land Trusts Can Help You Avoid Losing Everything With A Single Lawsuit

When you put the title to each property you own in its own individual land trust, it separates the liability associated with each. In contrast, if you hold all your property in a single LLC, it not only doesn’t provide anonymity but it also creates a scenario where an attack on one property can lead to an attack on the other properties. This is because all the property is held under the same shared entity. With a land trust, your potential losses are capped at each individual asset. Thus, potential lawsuits are managed, rather than in an LLC where all your hard earned assets are up for grabs.

Land Trust Titles Provide Efficiency

Lastly, a land trust provides efficiency when it comes to financing and selling your property. When each property is held in its own separate land trust, the financing or sale of one property doesn’t impact the other properties, as it may in an LLC holding multiple properties. Our legal team is highly experienced in how to protect and streamline the management of multiple properties. We can help you create a comprehensive asset protection strategy today.

Are Legal Expenses Tax Deductible for Real Estate Investors?

When it comes to legal expenses, what can and cannot be claimed as a tax deduction can be confusing. In fact, the answer really depends on the nature of the legal expense itself. Whether you’ve formed a series Limited Liability Company (LLC) or are using your self-directed 401(k) to make real estate investments, Royal Legal Solutions is here to help.

The Rules

The Internal Revenue Code (IRC) is the governing set of laws created to define what can and cannot be taxed. It is written by our US Congress and approved by the President. The IRC dictates that, with few exceptions, that you cannot deduct personal, living or family expenses on your income tax returns. (Itemized deductions are one of the exceptions.) The IRC does, however, allow the individual to deduct certain ordinary and necessary expenses that are paid throughout the tax year. These include:

Legal Interpretations of These Rules

How the Internal Revenue Service (IRS) views the laws established in the IRC can often seem convoluted. However, case laws have helped to demonstrate the legal interpretation of these rules. While there are other ways in which these rules can be applied, below are a few that are best related to the real estate investor’s interest.

Expert Services

The professionals at Royal Legal Solutions understand how complicated tax laws can be. As part of our expert services, we can help to prepare any tax filings related to your business or investments. If you would like to learn more about how Royal Legal Solutions can help, take our Tax Discovery Quiz.

Keep more of your money with a Royal Tax Review

Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation.    TAKE THE TAX DISCOVERY QUIZ

Unpaid Debt Can Take Your Tax Refund as a Real Estate Investor

At Royal Legal Solutions, taxes are always on our minds. We know what you are thinking. Tax season is months away! However, now is the time to start paying down any unpaid debt you may have. Why? Because certain types of debt will garnish your tax refund check before you even lay your hands on it.

How is this possible?

The Bureau of the Fiscal Service (BFS) is the Treasury Department branch that issues your federal tax refund checks. However, through the Treasury Offset Program (TOP), Congress has authorized the BFS to reduce your refund check in certain cases. In fact, the BFS can reduce or even take all of your refund and apply it to your unpaid debt.

Types of Unpaid Debt

Not all debt will result in the reduction of your tax refund. If you own on your mortgage, for example, your tax refund will not be affected. However, debt related to the below categories can result in a reduction.

What Happens

Being proactive now can help decrease the amount of debt owed, which can then prevent or reduce the likelihood of losing your tax refund. First, you should contact the BFS TOP call center. You can contact them at 800-304-3107 or TDD 866-297-0517 to inquire about whether your debt falls into any of the categories above.

If you fail to pay any debt that will be subjected to TOP, the BFS will likely reduce or take all of your tax refund in order to pay off the amount owed. If there is a balance after TOP garnishes your owed debt amount, the remainder will be issued to you as a check or through direct-deposit.

Furthermore, if the BFS reduces your tax refund, you will receive a notice with the amount and the agency that filed the claim. You can contest this amount by contacting the agency that filed for the offset.

What if Spouses Files Together?

If you file a joint tax return with your spouse, but they are solely responsible for debt, you may still be entitled to part or all of your refund. To do this, you will need to file Form 8379, also known as the Injured Spouse Allocation.

Speak With a Professional Today

If you are worried about the upcoming tax season, you should contact a professional today. For those who invest in real estate, which provides plenty of financial growth potential, figuring out your tax standing now can help you avoid losing your tax returns. At Royal Legal Solutions, our professionals are here to ensure you get the most you possibly can out of a tax return. Not only can we help save your taxes, our experts are able to better help you protect your assets. To find out more, please take our tax quiz to schedule a consultation with us today!

Are Charity Auction Purchases Deductible Contributions for Real Estate Investors?

Charities often hold auctions as a way to gain valuable contributions that help better their cause. If you are a real estate investor, you may wonder whether your auction purchase at one of these charity events can be considered a deductible contribution. Below, Royal Legal Solutions helps clarify how charity donations work on your tax returns.

Charity Auction Purchases

According to the Internal Revenue Service (IRS), some, but likely not all, of the money you paid for an item at a charity auction is considered deductible.

As stated above, the IRS only considers a portion of your auction purchase to be a deductible contribution. Some charities will provide a catalog of items prior to the start of the auction. In this book, you may find a “good faith” estimate on each item’s estimated worth. Assuming you have no reason to doubt the validity of these estimates, this catalogue is an important piece of evidence. Why? The IRS will only consider the portion of your purchase that goes above “fair market value”. However, you need to demonstrate that you knew the value before you paid for the object. Having a catalogue that provides this is a quick and easy way to prove this.

If a property is listed for auction, a proactive sale will include the estimated fair market value. This will include an examination of how developed the property is, as well as its current state. Purchasing this property for $10,000 more than the estimated fair market value means you could potentially claim that additional money as a deductible contribution to a charity.

Providing Assets to a Charity

Another question we often get is regarding charitable donations. Unfortunately, the IRS limits the amount you can claim as a deduction. Unlike purchasing an item, you cannot claim fair market value for items you donate. Instead, you can only claim an amount relative to your tax basis.

When In Doubt, Ask a Professional

At Royal Legal Solutions, we can help you address any tax questions you may have. As a real estate investor, retirement plan owner, or business entity – our professionals understand how the tax laws affect your returns. If you have questions regarding charity contributions, whether through purchase or donation, the experts at Royal Legal Solutions can help you get the most out of your tax filing. If you would like to schedule a consultation with one of our professionals, contact us today!

Getting The Most Out of Employee Business Deductions

As an individual taxpayer, the Internal Revenue Service (IRS) allows you to make certain deductions. For example, you can make miscellaneous itemized deductions in relation to expenses incurred during your employment.

For the most part, taxpayers should only claim these deductions if they were not reimbursed by their employer for these expenses. Additionally, these expenses must be considered ordinary and necessary in order for you to do your job. They cannot include personal expenses.

Deduction Barriers

While the IRS does allow for you to deduct these items, they also have established two barriers that reduce your overall deduction value.

The first barrier, also known as the 2%-of-income, or AGI, tax is the most likely to affect Tier II miscellaneous deductions. (Tier II miscellaneous deductions include, but are not limited to, those related to employee business, investment, some legal and home office expenses.) The 2% AGI barrier totals up all of the miscellaneous deductions and reduces the value by 2% of the taxpayer’s AGI for that year.

The second barrier, AMT, will make all Tier II expenses non-deductible. However, Royal Legal Solutions can help you plan your deductible approach this tax year. Below, we list several strategies that can help you get the most out of your deductions.

Employee Business Deductions Strategies

Overcoming the IRS barriers is easier if you have a set strategy. Let’s take a look.

 

Is My Airbnb Subject to The Self-Employment Tax?

Typically, rental real estate is a passive activity, reported on Schedule E, and is not subject to the self-employment tax (currently 15.3%). However, as we will learn with Airbnb properties, that is not always the case.

When is an Airbnb REI Property Not Subject to the Self-Employment Tax?

For starters, if you are renting part of your home as an Airbnb for 14 days or less, you do not have to report or pay taxes on that income at all. Nice right? Of course, you cannot deduct related expenses either.
The duration of the average stay at your Airbnb also does not cause you to be subject to the self-employment tax.

However, when your average stay is less than 7 days, it is considered a business and not a rental activity, and is reported on Schedule C. Normally, income reported on Schedule C is subject to the self-employment tax, but that’s not always the case for rental properties.

As long as you are simply renting out your Airbnb and providing no additional services, you will avoid the 15.3% self-employment tax, even if it is reported on Schedule C.

When Is an Airbnb Investment Property Subject to the Self-Employment Tax?

For a rental property to be subject to the self-employment tax, you would provide substantial (beyond regular rental real estate services) to long-term tenants.

These services can include:

This is because you are now providing a more hotel-like service, which is considered a business and subject to the self-employment tax.

So if you are renting out a property using Airbnb or a similar service, and want to completely avoid the self-employment tax, then it is important not to provide substantial services to your guests.

A Few Tips on Mitigating the Self-Employment Tax on Airbnb Rental Properties

So what if you do provide substantial services to your guests, now what?

Well, there are a handful of things that can help you mitigate the self-employment tax. The first is making sure you are properly tracking and deducting all your rental expenses, including depreciation. As we know this “phantom expense” can cause a property to show a loss for tax purposes, or at the very least significantly reduce the net income.

The next is putting your Airbnb properties in an S-Corp, or an LLC taxed as an S-Corp. By doing this you can split your income between W-2 wages, which are subject to the self-employment tax, and distributions which are not.

While not really a tip, but something to keep in mind, if you’re already earning $118,500 or more before your Airbnb income, you will only pay the 2.9% Medicare portion of the tax because the Social Security portion of the tax is capped on $118,500 $137,700 (updated for 2020) of income.

The Bottom Line On Self-Employment Tax on Airbnb Rentals

As long as you are not providing substantial services to your guests, you shouldn’t have to worry about the self-employment tax on your Airbnb.

However you will want to work with a tax professional who understands how to properly report these properties come tax time.

Be sure and check out our article, Tax Consequences For Section 280A and Airbnb Vacation Rental Assets.


Author: Thomas Castelli, CPA is a Tax Strategist and member of The Real Estate CPA, an accounting firm that helps real estate investors keep more of their hard earned dollars in their pockets, and out of the government's, by using creative tax strategies and planning.

Keep more of your money with a Royal Tax Review

Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation.    TAKE THE TAX DISCOVERY QUIZ

How Full-Time Real Estate Investors Save Thousands in Taxes by Electing to be Treated as a Real Estate Professional

The tax code can be a wonderful thing for real estate investors, especially for those who invest full-time. This is because there is a special rule that can save taxpayers, active in a real estate trade or business, thousands of dollars in taxes.

Why is The Real Estate Professional Status so Important?

As you may already know, rental real estate often creates a loss for tax purposes due to depreciation. And while most investors are limited in the amount of passive losses they can deduct from their ordinary income, real estate professionals can deduct passive losses against their ordinary income without limits.
If you are not a real estate professional, you can deduct up to $25,000 of passive losses against your ordinary income if your AGI is $100,000 or less. This phases out $1 for every $2 of earnings until your AGI hits $150,000, then the deduction is completely eliminated.

Example:

If you made $95,000 in active income (i.e. your job) and had $50,000 in passive losses from real estate you could reduce your taxable income from $95,000 to $70,000, and assuming you’re in the 24% tax bracket, that’s $6,000 in tax savings.
The remaining $25,000 would be suspended until it can be used in future years, and if your income was $150,000+, you would receive no deduction.
However, if you are considered a real estate professional, you could deduct the entire $50,000, saving another $6,000 in taxes.

Who is Considered a Real Estate Professional?

Being a real estate broker, agent, or simply working in a real estate trade or business does not make you a real estate professional for tax purposes.
A real estate professional, for tax purposes, is a person who works at least 750 hours, and more than half their annual working hours in that real estate trade or business. For this reason most individuals with full-time jobs do not qualify for this status.
However, employees who work in a real estate trade or business can use their working hours towards this requirement if they own at least 5% of the company.
For the losses from real estate activities to be deductible against ordinary income, the real estate professional must materially participate in each activity. Therefore limited partnership interests may be excluded.
Married couples can elect this status, if one spouse can meet these requirements. This typically works well when one spouse cannot elect this status being they work a full-time job, and the other doesn’t

Example:

You are a full-time real estate investor and spend 1,000 per year on your real estate business, and you are also a part-time blogger and spend 250 hours in your web business.
Because you spend over 750 hours, and more than half their annual working hours in that real estate trade or business you can elect to be taxed as real estate professional.

The Bottom Line

Qualifying as a real estate professional can save you thousands of dollars in taxes if you invest in rental real estate. However, due to the complexities in qualifying, you will want to consult a tax professional before planning to use, or electing this status.


Author: Thomas Castelli, CPA is a Tax Strategist and member of The Real Estate CPA, an accounting firm that helps real estate investors keep more of their hard earned dollars in their pockets, and out of the government's, by using creative tax strategies and planning.

Keep more of your money with a Royal Tax Review

Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation.    TAKE THE TAX DISCOVERY QUIZ

Housing Discrimination Complaints: What Landlords Need to Know

No matter what walk of life you come from, you’ll probably be a tenant or a landlord at some point. As a tenant, you must stay on top of security deposits, rent increases, eviction policies as well as a number of state-specific ordinances.

Landlords have a number of responsibilities to handle as well. While every rental agreement may differ, there are a few issues that fall under the umbrella of housing discrimination that all landlords need to know. Today, we’ll go over important housing discrimination complaint facts. If you are a landlord or plan on becoming one, don’t wait until a complaint is filed against you. This quick guide can spare you from a costly housing discrimination complaint and serve as an important component in your overall asset protection strategy.

History of Housing Discrimination Complaints

In order for landlords to protect themselves from housing discrimination complaints, they should become familiar with the laws that govern these complaints. There are two main pieces of legislation that deal with housing discrimination complaints. First, is the Fair Housing Act of 1968. The act, which is also known as Title VIII of the Civil Rights Act of 1968, was created in response to rampant intentional and perhaps unintentional discriminatory housing policies.

These harmful policies went on for decades, harming a number of minorities, especially African Americans. In fact, the Fair Housing Act came on the heels of the assassination of Dr. Martin Luther King Jr. President Lyndon B. Johnson signed the Fair Housing Act as an extension of the protections found in the 1964 Civil Rights Act. On September 13, 1988, the Fair Housing Act was amended to also prohibit discrimination based on family status and disability. These laws were milestone pieces of legislation that were grounded in good motives.

However, as is the case with other well intentioned laws they can become overly complex and nuanced. This is why we recommend seeking experienced legal counsel when faced with housing discrimination complaints or tenant eviction cases.

What Does the Fair Housing Act Protect Against?

The Fair Housing Act provides protection for the following protected categories:

  1. Race
  2. Color
  3. Nation of Origin
  4. Religion
  5. Sex
  6. Family Status
  7. Disability

Landlords should keep in mind that disability refers to both mental or physical disability. Also, denying housing to a pregnant woman or a family with small children can be grounds for a discrimination complaint under the family status clause. The Fair Housing Act covers these protected categories not only in the tenant selection process, but throughout the landlord/tenant relationship. For instance, when it comes to renewing a lease, the Fair Housing Act is still applicable.

Avoid Housing Discrimination Complaints in Rental Ads

The rise of digital advertising can be a double edged sword for landlords. While it’s easier to get the word out about your rental units and perhaps cast a wider net of potential tenants, it can also lead to language that can be considered discriminatory. Let’s consider the scenario of a landlord named Rita. Rita has a spectacular piece of waterfront property up for rent. The property has attracted a number of older retired couples in the past. Thus, Rita puts what she thinks is a harmless blurb in an ad stating that retired couples with no children would be given priority in the application process.

While it may seem like Rita is simply trying to cater to her past clientele of tenants, this ad’s language can be considered discriminatory against families with young children. One way to avoid this unintentionally discriminatory language is to focus rental ads on describing the rental property, rather than the preferred tenant. Landlords should also keep in mind that the anti-discrimination laws that cover an initial rental ad also apply to the tenant phone screening or in-person interview.

One helpful tip landlords can use to avoid housing discrimination complaints is to create a standard tenant screening process. This helps avoid the chance of screening some applicants with one standard while using a different standard for other applicants.

Consequences of a Housing Discrimination Complaint

The consequences of a housing discrimination complaint can be dire. Complaints are made to the Department of Housing and Urban Development or to the tenant’s state/local housing agency. After this complaint, an often times lengthy investigation follows. The process usually results in a compromise between the landlord and tenant. The landlord can move forward by agreeing to pay off the accusing tenant or the landlord can agree to rent the property to the tenant. However, if a compromise is not reached, the case can end up in court.

The Department of Housing and Urban Development will hold an administrative hearing to determine the validity of the discrimination complaint. Also, if this administrative hearing has not yet begun then the tenant can also sue the landlord at the state or federal level. A negative ruling can lead to the following penalties:

  1. Forced rental. The landlord may be forced to rent out the property in question to the accusing tenant.
  2. Pay for damages. The landlord may be forced to compensate the accusing tenant for emotional distress as well as any monetary losses caused by the tenant having to rent another property.
  3. Pay civil penalties. The landlord may be forced to pay a state fine. In some cases, the first offense starts at $16,000.
  4. Pay for punitive damages. In rare cases of extreme discrimination, the court can award the accuser with thousands of dollars in punitive damages and force the tenant to pay their attorney fees.

Be sure to check out our article, When Should a Landlord Hire a Lawyer?

Know Your Options

As you can see, housing discrimination complaints can be grounded in subtle actions or the language used by landlords in the tenant selection process. Landlords can guard themselves by knowing the seven protected categories and ensuring that their tenant selection process doesn’t discriminate against any of these categories. Landlords can also stick to a standardized selection process. If a housing discrimination complaint has been filed against you, be aware of your options.

You may also want to see our article, How Landlords Protect Themselves From Lawsuits.

Criminal Acts and Activities: Landlord Liability FAQ

The dozens of day to day responsibilities required to be a landlord can cause important liability concerns to go unattended. Criminal acts and activities may not be an everyday occurrence, but that doesn’t mean landlords should wait for a crime to occur before they start thinking about protecting themselves from a lawsuit. More lawsuits are being filed against landlords in an attempt to hold them accountable for crimes occurring on their rental property. These crimes can involve both outsiders who break into the property or tenants’ criminal activity. In this educational guide, we will answer common landlord liability questions when it comes to criminal acts and activities. We’ll address everything from landlord responsibility for drug use and preventive measures. A lawsuit and settlement can cost hundreds of thousands of dollars. Don’t expose yourself to this risk. Read this guide to understand your liability and take steps towards creating an asset protection strategy.

What Are a Landlord’s Legal Responsibilities for Protecting Against Criminal Activities

While laws differ from state to state, landlords in most states do have some level of legal responsibility for criminal acts and activities. Landlords hold some responsibility for protecting their tenants from the criminal actions of outsiders that occur on the property. These include robberies, vandalism, and violent attacks such as shootings or rapes. Landlords are also responsible for crimes committed by current tenants against other tenants. More specifically, landlords can be held responsible for allowing a tenant’s illegal drug activity on their property. These illegal drug activities can threaten the safety of other tenants. Also, landlords have a wider responsibility towards their surrounding neighborhood. For instance, landlords can be held liable for allowing their tenants to continue with dangerous and illegal drug activity, which spills over to the surrounding neighborhoods.

Where Do Landlord Liability Laws Originate?

The above mentioned legal responsibilities stem from the following categories:

  1. Building Codes
  2. Ordinances
  3. Statutes
  4. Court Decisions

Landlord Liability for Drug Dealing Tenants

Drug dealing tenants pose several business and legal consequences. Here are a few consequences all landlords should keep in mind:

  1. Negative impact on property value. The presence of drug dealing can drive away current and future tenants. The low demand can into turn lower rental prices.
  2. Confiscation of rental property. In some states, law enforcement can seize rental property where drug dealing occurs. However, this happens in only extreme cases.
  3. Criminal penalties. Landlords who knowingly allow illegal drug activity on their property risk being charged by authorities for aiding the crime.
  4. Heavy fines. Landlords can be charged heavy fines on federal, state, and local levels for allowing illegal drug activity.
  5. Lawsuits. Both tenants and neighboring individuals can file a lawsuit against a landlord for allowing illegal drug activity. Filers can claim that the property is a public nuisance and threat to public safety.

Landlords should also note that the above mentioned consequences are not only triggered by direct drug dealing, but also illegally manufacturing or growing drugs. Thus, landlords shouldn’t turn a blind eye to illegal drug activity. A meth lab or illegal crop of marijuana can cost landlords thousands of dollars and criminal charges.

Preventing Landlord Liability in Tenant Drug Cases

In our own experience working with landlords, we’ve found that some simple preventive measures can be put in place to avoid landlord liability in tenant drug cases. Establishing preventive policies during the tenant screening process and acting early in response to potential illegal drug activity is key to preventing costly liability issues. Here are some ways to prevent potential illegal activity through a careful screening process.

  1. Screen tenants wisely. Landlords should balance their duty to follow anti-discriminatory laws established by the Fair Housing Act and a need to screen tenants likely to engage in unlawful activity. It is illegal for landlords to deny a tenant housing because they are a recovering drug addict, since addiction is seen as a disability under the Fair Housing Act. Also, it is illegal to deny housing due to a past arrest. However, landlords can still weed out potential problem tenants by analyzing their rental history and employment status. Past convictions, poor references by past landlords, or an inability to hold down a job can all be early warning signs.
  2. Don’t allow cash payments. While some tenants may choose cash payments to avoid the hassles of writing a check, others can be using cash as their form of “clean” money.
  3. Explicitly forbid illegal drug activity. Landlords should make it plain and clear in their rental agreements that engaging in illegal drug activity will result in eviction.
  4. Respond to complaints promptly. Landlords should pay close attention to the complaints of tenants as well as other neighbors. Upon learning about suspicious activity, seek the advice of law enforcement.
  5. Know the signs of illegal drug activity. Frequent foot traffic in and out of the rental property can be a sign of drug dealing on the premise. Landlords should not only pay attention to the amount of visitors but the duration of their visits. Short, frequent visits throughout the day can be a sign of a drug shop where drug customers come in and out to pick-up or drop-off illegal drugs.

Get Professional Help

As you can see, some practical steps can be taken to prevent potential liability issues relating to illegal tenant drug activity. The screening process is especially important in steering away drug dealers, but it should be done in a way that doesn’t violate anti-discriminatory housing laws. However, with the heavy proliferation of illegal drug activity, even careful landlords can find themselves in legal trouble. Our legal experts can assist with current drug related cases and help prevent future liability problems. Contact our experienced legal professionals today.
 

The Fair Housing Act's Protected Classes: What Landlords Need to Know

Over several years of helping landlords fight and win cases, we’ve noticed that the term “protected classes” leads to a lot of confusion. In this educational guide, we’ll discuss what all landlords need to know about the Fair Housing Act’s protected classes. We’ll clarify what each protected class means and examples of potential discriminatory actions against each class. In addition, we’ll discuss what is NOT a protected class under the Fair Housing Act. Before we get into those details, let’s first review the history of protected classes under the Fair Housing Act.

History of Protected Classes

Protected classes are those groups of citizens who are protected against discrimination due to their membership in one of the following classes:

  1. Race
  2. Religion
  3. Color
  4. Nation of Origin
  5. Sex
  6. Familial Status
  7. Disability

Before these protected classes were established, the general concern over housing discrimination came to light around 1966. At this time, war veterans noticed that those of color were being discriminated against when seeking housing in certain neighborhoods. This led to public marches for housing rights. These marches revealed that the Civil Rights Act of 1968 wasn’t extending to housing rights. In 1959, the California Fair Employment and Housing Act set precedent for the protected classes later found in the Fair Housing Act. The Fair Housing Amendments Act was signed on September 13, 1988. It added the last two protected classes, familial status and disability to the Fair Housing Act.

Race, Color and Nation of Origin in Housing Discrimination

Landlords may agree that discrimination towards these protected classes may not be as blatant as they were prior to or in the earlier days of the Fair Housing Act’s enactment. However, they do still exist in subtle forms. Landlord should know the difference between these protected classes and ensure that their tenant selection process and overall housing policies don’t discriminate based on membership in any of these three classes. Race refers to being White, Black, Asian, Pacific Islander, etc. It’s important to note that racial discrimination includes discrimination for perceived race or being biracial. The question “what are you?” can be a sign of racial discrimination. Also, racial discrimination can occur because of association with particular races.
 
For instance, a landlord who is hostile to a tenant’s black in-laws and prohibits them from visiting the property due to their appearance, can be accused of discrimination. Meanwhile, color discrimination is discrimination based on the lightness or darkness of an individual’s skin. For instance, renting out apartments to lighter skinned African Americans but not darker skinned African Americans is a specific form of color discrimination. Lastly, discrimination based on nation of origin means discrimination based on not only where you are from, but where your family is from and your language or customs. For instance, creating more favorable rental terms for native English speakers is an obvious case of discrimination. Refusing to rent out property to those who cook a specific customary cuisine can also lead to complaints, even if the reasoning is rooted in practical concerns over food odors.

Disability and Familial Status in Housing Discrimination

These two protected classes are more commonly discriminated against today. In fact, a 2015 study by the National Fair Housing Alliance found that discrimination due to disability made up more than half of all housing discrimination complaints filed with the Housing and Urban Development Department. Discrimination based on familial status made up around 10 percent of annual complaints. A common example of discrimination based on disability is when a landlord refuses to allow a tenant to modify their bathroom to include railings.
 
This example is more obvert, but also note that discrimination based on mental disability can be grounds for a complaint. Meanwhile, the familial status protected class was included in the Fair Housing Act as a means of protecting families with children under 18. Like in the case of other protected classes, landlords should be aware of both obvious and more subtle forms of discrimination based on familial status. For instance, denying a rental property to a tenant who otherwise qualifies for a unit because he/she has a toddler child is an obvious discrimination. However, cases have existed where landlords group families with small children into less desirable back of the lot properties. While this may be a defensive move to counter noise complaints, it unfairly restricts access to units that are otherwise available to other families.

What is Not Protected Under the Fair Housing Act?

In order to avoid unnecessarily accommodating some groups of people, landlords should also be aware of what is not considered a protected class. This can help prevent accommodating groups that may end up hurting your rental business. One group that is not protected under the Fair Housing Act is renters who participate in illegal drug activity. Current illegal drug use is not protected, although recovering addicts are considered a protected class since the addiction can be considered a disability. As you can imagine, this can be a complex exemption to interpret from case to case. If you’re a landlord dealing with a drug use case, don’t let your biases drive your decisions.
 
Our legal experts can provide sound advice based on current federal and state housing laws. In addition, the Fair Housing Act doesn’t consider source of income to be a protected class. Thus, in some cases a landlord can reject a potential tenant who wants to use housing choice vouchers. Although source of income isn’t a protected class in the Fair Housing Act, some states and counties do consider it a protected class. Landlords should be aware of not only the Fair Housing Act’s protected classes, but also any additional anti-discrimination policies enacted by their state and county.

Get an Asset Protection Lawyer

As you can see, knowing what is and what is not protected under the Fair Housing Act is critical in both protecting against housing discrimination complaints and protecting your business interest as a landlord. Understanding the more common complaints based on disability and familial status is especially important. However, as we’ve mentioned before even the most careful, well-meaning landlords can face lawsuits. This is why having a good asset protection lawyer is critical. Contact our experienced legal professionals today.

HUD Guidance Memo on Landlords’ Use of Arrest and Conviction Records

Do you use arrest and conviction records to assess potential tenants before allowing them to rent your property? You might want to read this as a misstep can destroy your business and your life.
The use of criminal history to assess existing and prospective tenants was delved into by a guidance memo published on April 3, 2016 by the Department of Housing and Urban Development (HUD). While such a memo doesn’t have any legal bearing in a court of law, it does hold sway with judges. The contents of the memo mirror those of the Enforcement Guidance memo published by the Equal Employment and Opportunity Commission so it didn’t catch those in the legal fraternity by surprise.
Here’s what you need to know regarding your dealings with your tenants on this issue.

Tenant Applicants with a Criminal Record

Tenants and rental applicants who have a criminal record have not hitherto received protection from housing discrimination. The HUD memo highlighted the fact that federal fair housing laws only protect individuals from discrimination based on color, race, familial status, religion, national origin, disability, and sex. Those with criminal records are exempted from this privilege.
The implication of this under federal law is that landlords had the freedom to adopt policies targeting those with a criminal history. For example, a rental applicant who had been convicted or arrested would be given no chance. Noteworthy is that some local laws such as those of San Francisco (the 2014 “Ban the Box” ordinance) prohibits questions about arrests on housing applications for homes that are  subsidized by the city.
Only people with a drug use conviction are exempted from this practice. The overriding theory for this is that drug users are actually dealing with a disability. This is a protected class as previously indicated. Drug dealers, on the other hand, do not enjoy this privilege. Fair housing lawyers have been trying to nullify landlord policies that reject tenant applicants with an arrest or conviction record for a while now. The inherent challenge has been how to do it given that these people don’t have the “protected class” status.  
In 2015 a U.S. supreme Court case held that housing discrimination was demonstrable where the landlord had clear bias against one group and where the landlord had a policy that seemed neutral at face value but had the effect of discriminating against a protected class.
A good example of real-world intentional discrimination is where a landlord’s policy states that

“I don’t rent to Blacks/Asians/women/gays, etc.”

Indirect discrimination or disparate impact is where the policy states

“I don’t rent to groups of people living in [an area where the majority of the population are a racial minority].”

It’s easy for the rejected applicant to prove discrimination in the first example by using the landlord’s stated policy as evidence. For the second example, the rejected applicant would be required to prove that the policy was discriminatory due to the large number of people belonging to a racial minority living in that area.

Disparate Impact and Arrest and Conviction Records

The memo captured this new way of proving discrimination. It is hinged on pointing out statistics that show that exceedingly more Hispanics and Blacks are arrested and/or convicted than their White counterparts. As a result, when a landlord includes the no arrest or conviction rule in their policy, these class of people are harmed disproportionately compared to Whites. While such a policy may seem neutral, it is actually a discriminatory policy against protected individuals.

Arrest-Without-Conviction

The memo did not touch on the issue of turning away rental applicants and tenants who have relevant convictions. However, it did disagree with the rejection of applicants based on arrests without convictions. According to the memo this is inappropriate because an arrest simply shows that someone was suspected of an offense. While it’s required of the landlord to keep guests, residents, employees, and repair persons safe from would-be troublemakers, it would be a disservice to reject an applicant based on an arrest. An arrest is not a justifiable reason for rejection and is therefore not relevant during the screening process.

Conviction

With convictions, landlords are allowed more leeway. Some convictions are indeed relevant to the landlord’s obligation to protect residents and other people in his property. For example, if the applicant has been recently convicted of assaulting a neighbor, the landlord has a justifiable cause to deny them tenancy. The same goes for a person who has a domestic violence conviction.
However, if the conviction is a few decades old then there is no valid reason to deny the applicant tenancy as chances are very slim that they will cause problems in future. The HUD memo goes further to suggest that landlords consider factors such as the age and nature of conviction before denying housing to an applicant. What was the applicant convicted for? How long ago was it? What circumstances surrounded the conviction? Have they been reformed and crime-free since the conviction? These are some of the questions landlords should ask before making a decision.
This would require a case-by-case evaluation of applicants. This is a job many landlords would loathe to do since they don’t have clear guidelines on how to go about it. On the other hand, landlords would have to make some judgment calls during the evaluation. For example, they would have to decide how old is old enough with regard to a conviction and hope that their decision stands in court if it is challenged.

White Applicants with Criminal Records

So, what is the effect of the HUD guidance on Whites with a criminal record? The memo seems to suggest that only Hispanics and Blacks can raise a discrimination claim as they are unduly disadvantaged by policies denying tenancy to those with criminal records. The implication of this is that a White applicant cannot argue that their race has been targeted disproportionately if they are denied tenancy as a result of an arrest record.
Does this mean that a landlord should only apply the no-arrest policy to applicants that are White? The memo does not delve into this issue, but we can always come up with a common-sense answer. For one, it is a recipe for trouble and confusion since you can’t tell landlords to discriminate applicants based on their race where different rules apply to different groups of people. As a rule, if a practice (rejection of arrest-only applicants) is unfair and consequently illegal for one group of people, it should be illegal to everyone.
Secondly, the United States Supreme Court has always been willing to extend the benefits of a rule that in a way affected one group of tenants to another group of tenants. For example, White tenant applicant challenged a prospective landlord’s practice of denying blacks tenancy. The grounds for the challenge were that the policy denied the White applicant the benefit of living in a racially-integrated community. They went further to note that the person blacklisted was not the only victim of the discriminatory housing practice. The high court agreed with the White plaintiff’s argument and the case was given the green light to proceed to trial.
Given the expansive provisions on who can challenge discriminatory practices by a landlord, it is clear as day and very likely that White applicants will find a way to benefit from the HUD memo.

Does The Federal Fair Housing Act Apply To Your Rental Property?

You have a lot of leeway when it comes to screening potential tenants for your property. You can deny tenancy to an applicant based on their credit score, financial ability, renting history, and criminal history. However, it’s not an anything-goes affair.  The U.S. federal government does impose some limitations. There are some personal characteristics of the applicant that must not be a consideration during the screening process. Failure to follow the guidelines stipulated by the federal government can get you into trouble.

The Fair Housing Act (FHA) is the primary law that protects the rights of tenants across the U.S. Since it’s a federal law, it applies in all 50 states, Puerto Rico, and the District of Columbia. Under the FHA jurisdiction, the law applies to almost all housing situations. You should pay attention to the FHA because there is a high chance it applies to your rentals.

Below we go over some of the areas where the FHA applies. This will help determine whether it applies to any of your properties.  Or better yet, talk to one of our qualified attorneys to help you along.

When Does the FHA Apply?

Small Buildings Occupied by Owner
If a building has less than five apartments and the owner occupies one of them, then it’s unlikely that the FHA is applicable to your property.

Single-Family Homes
If you have a single-family home rented out or sold without a broker, then the FHA is unlikely to apply to your property.

Religious Organizations
If you’re operating under a religious organization and have rental property that you’re operating for non-commercial purposes, then you can limit occupancy or give preference to people of your religion without any legal ramifications. However, this is only limited to religion according to the FHA. The religious organization is still not allowed to discriminate based on color, race, or national origin.

Private Clubs
Do you run a private club that owns apartments? If the apartments are not meant for commercial purposes, then the FHA allows you to limit occupancy and give club members preference over other people.

Senior Housing
FHA (42 U.S. Code § § 3601-3619 and 3631) helps protect tenants from being discriminated against based on several protected classes that include familial status. This means that you cannot decide to reject applicants who have kids. “Familial status” refers to a household with at least one child under the age of eighteen. However, this provision may not apply to you if your property is classified as senior housing. Exempt properties fall under the FHA rules of 55 and older or 62 and older communities. Properties that participate in local, state, or federal housing programs are also exempt from the provisions.

Other Considerations

Local Fair Housing Laws

Whether or not your property is subject to the provisions of the FHA, you still need to go a step further and find out if there are any state, city, county, and town fair housing laws. You may be surprised to discover that there are other local laws you might need to adhere to. These laws may cover more situations and stipulate rules for a wider array of properties than the FHA does.
For example, the FHA usually does not apply when the property is owner-occupied and has less than five apartments. However, the fair housing laws in Massachusetts provide for owner-occupied properties with less than three apartments (Mass. Gen. Laws ch. 151B, § 11).

Profits

Adopting fair housing laws could have economic benefits to landlords. Even if your property is exempt from fair housing discrimination provisions, you could still opt to comply with the rules. Apart from the fact that you’ll be fair to the tenants, FHA advocates argue that there is an economic benefit to following the provisions of this law. By being an inclusive landlord, you stand a better chance of growing your bottom line.

Reputation

As a landlord, you should always try to be fair to your tenants as it could affect your reputation. FHA rules ensure that your tenant screening policies and any other rules you might have are fair and legal.  

Royal Legal Solutions Can Help

The bottom line is that you can be sued for plenty of reasons. While you can always play safe and treat your tenants fairly, there’s a chance you might still end up in court for alleged discrimination by a tenant. Should a judgment be made against you, then you will be in for it. You could easily lose your property and livelihood. You don’t want to be caught unaware by a discrimination suit. We’ll help you comply with the FHA and structure your business the right way to protect your assets. 

Does the Manager of a 401(k) LLC Need a Real Estate License?

LLCs are magnificent legal creatures with a number of fantastic uses. One potential use is that they can act as an investment vehicle for your 401(k). They can also hold other LLCs. It is by no means out of the ordinary to establish a separate LLC for each property held in the 401(k).

However, some folks wonder if they’re going to buy property with their 401(k) LLC, do they need to have a real estate license. The short answer is: no.

Why You Don’t Need a Real Estate License to Buy Real Property for your 401(k)

Not only do you not need a real estate license to purchase real estate with your 401(k), but if you use your real estate license to purchase property, it could be flagged as a prohibited transaction by the IRS.

Retirement accounts such as 401(k)s and IRAs are prohibited in investing in businesses that you are receiving a profit from or properties that you yourself (or your family members) derive a benefit from.

Being both the manager of the 401(k) LLC and simultaneously executing transactions with your real estate license on behalf of the 401(k) would be red-flagged by the IRS as a prohibited transaction.

What If You Execute Transactions with Your Real Estate License for Another LLC of Which You are an Employee?

Even then, the answer is no. Neither an owner of real estate nor a principle of an LLC needs to have a real estate license to execute trades related to real property. That includes selling, leasing, or renting.

Even those who have an LLC business that is not related to their 401(k) LLC would not necessarily need a real estate license for the purpose of executing trades.

Why not?

Well, the answer is sort of simple. An employee who is executing trades, managing properties, showing houses, or otherwise engaged in real estate transactions would need a real estate license. You as the owner or principle, however, do not.

Basically, because you own the property or the company that owns the property, no one really cares if you have a real estate license or not. In fact, if you’re using your real estate license to execute trades from your 401(k) it would probably work your disadvantage since it would be a conflict of interest according to IRS rules.

If you’re still fuzzy about the issue, it’s always best to contact a tax professional.

State-by-State Fair Housing Agencies

The Federal Housing Act prohibits landlords from discriminating based on color, race, national origin, religion, age, disability, sex, and familial status. These attributes are referred to as a protected category. This means that you should avoid doing the following when dealing with tenants:

If a tenant believes they have experienced housing discrimination, they can always contact HUD for assistance. They can also go through the tons of housing and discrimination resources available on the HUD website. In addition, they can contact their state’s fair housing agency as detailed below. The matter may be handled by the state attorney general’s office, a civil or human rights agency, or a fair housing commission.

 

While the Federal Fair Housing Act applies in all U.S. states, there are slight state by state variances in landlord-tenant statutes. Here are some resources to guide you on how to deal with tenant discrimination in your state.

State by State Fair Housing Agencies

Alabama

Detailed information on the Alabama landlord obligations and tenant rights.

Alaska

Important fair housing resources for landlords in Alaska from the regional HUD office based in Seattle.

Arizona

An overview of the Arizona fair housing laws from the office of the Attorney General.

Arkansas

Learn about the fair housing laws and the Arkansas Civil Rights Act (1993).

California

Details about how the Department of Fair Employment and Housing in California investigates complaints on tenant discrimination.

Colorado

Read about the fair housing training given by the Civil Rights Division of Colorado.

Connecticut

Details on the manner in which the Commission on Human Rights and Opportunities deals with tenant discrimination complaints.

Delaware

Go through the fair housing laws and the diversity training program of Delaware.

District of Columbia

Learn how to go about making a tenant discrimination complaint and how long it takes at the Office of Human Rights.

Florida

The fair housing laws in Florida and how investigations are carried out.

Georgia

Read on the fair housing rights of tenants in Georgia.

Hawaii

The details of fair housing laws in Hawaii and the landlords exempted from the provisions.

Idaho

How discrimination complaints and fair housing laws are handled in the state of Idaho.

Illinois

Go through the brochures detailing the tenant discrimination laws and the complaint process in Illinois.

Indiana

Useful information on the handling of the fair housing laws by the Civil Rights Commission of Indiana.

Iowa

Find out about the protected classes under the Iowa fair housing laws.

Kansas

Important information about the fair housing laws for landlords in Kansas from the regional HUD office.

Kentucky

Find out how the Commission on Human Rights in Kentucky handles complaints about tenant discrimination.

Louisiana

Resources about the fair housing laws in Louisiana.

Maine

Here’s some information about the complaint process for tenant discrimination in Maine.

Maryland

Information and resources about fair housing from the Commission on Civil Rights in Maryland.

Massachusetts

How complaints about fair housing are handled in Massachusetts by the Commission Against Discrimination.

Michigan

How the Civil Rights Department of Michigan handles fair housing discrimination.

Minnesota

Some useful information about fair housing for landlords in Minnesota.

Mississippi

Fair housing tips for landlords in Mississippi from the Regional HUD office in Atlanta.

Missouri

A snapshot of the process of filing a discrimination complaint in Missouri.

Montana

Information about fair housing in Montana for landlords.

Nebraska

The process of filing a tenant discrimination complaint in Nebraska.

Nevada

Information from the HUD Regional office in Denver about fair housing.

New Hampshire

Learn about the New Hampshire fair housing information from the Regional HUD office in Boston.

New Jersey

The rule on Multiple Dwelling Reporting and other important information about the fair housing law in New Jersey.

New Mexico

Resources for landlords in New Mexico about fair housing regulations from the HUD regional office in Fort Worth.

New York

Tenant discrimination laws in New York and how to go about filing a complaint.

North Carolina

An overview of the state fair housing laws in North Carolina.

North Dakota

Important information about how the Human Rights Division in North Dakota handles tenant discrimination complaints.

Ohio

Tips for landlords in Ohio on how to respond to a tenant discrimination complaint.

Oklahoma

Information and resources from the HUD Regional Office in Fort Worth about fair housing laws.

Oregon

How fair housing laws are handled in Oregon.

Pennsylvania

Information about landlord discrimination and tenant rights in Pennsylvania.

Rhode Island

Fair housing laws in the state of Rhode Island.

South Carolina

Details from the HUD regional office in Atlanta about the process of filing discrimination complaints.

South Dakota

Fair housing rules for landlords in South Dakota from the HUD office based in Denver.

Tennessee

A guide on how to file complaints about tenant discrimination in Tennessee.

Texas

Valuable information about procedures and complaints about housing discrimination in Texas.

Utah

How to file housing discrimination complaints in Utah.

Vermont

Learn about housing discrimination in Vermont.

Virginia

Laws governing landlord discrimination and procedures for filing a complaint in Virginia.

Washington

A breakdown of the complaint process for tenant discrimination in Washington.

West Virginia

How tenant discrimination is handled in West Virginia by the Human Rights commission.

Wisconsin

Tips for landlords about fair housing discrimination from the HUD office in Chicago.

Wyoming

Fair housing tips for landlords in Wyoming from the HUD regional office in Denver.
At Royal Legal Solutions, we can help you navigate the legal minefield set before you in your dealings with tenants. Contact us today and we’ll help you understand and comply with all legal requirements in your state.

Knowing the Fact That the Feds Are Tracking Secret Buyers of High End Real Estate

There are some real estate investors that are secret because they use cash to buy their properties. They do this to keep it off the radar. However, the federal government will now be tracking these secret real estate investors because they feel that illicit money is going from hand to hand during these secret property transactions. Because of this, the government now requires the names of everyone who pays with cash to make sure they are doing it legally. Or so they say, right?

Areas They Are Targeting and Tracking

So, what areas are they targeting and tracking currently? The first place they started targeting and tracking was Manhattan in New York. However, they are also tracking Miami Dade County in Florida. Manhattan is where this illegal money handling started. Although that may be the case, they will track everyone who pays for a property when buying real estate, in cash. These cash purchases protect the buyer from letting anyone know who they are. Now, they will not be able to shield their identity since the government is getting involved.

Is Money Laundering Going on in the Real Estate Industry?

The federal government will be investigating to determine whether or not there is money laundering going on in the real estate industry. Since cash is being used, no one knows the identity of the buyer. However, that has changed because they require the names of everyone who uses cash so they can keep their investigation going. The Treasury Department and the federal government will be using as many resources as they can to investigate this further.

Secret Real Estate Buyers Using LLCs and Shell Companies to Hide

These so-called secret real estate buyers are using Limited Liability Companies and what they call Shell Companies, to hide the fact that they are buying luxury real estate properties with cash. According to Spoiled NYC, the first high-end luxury apartment was sold through these so-called Shell companies for $18.2 Million and used the name "LLC, 432 Parkview." However, they will no longer be allowed to do this since they are now being targeted and tracked by both the Treasury Department and the federal government.
What do you think about these secret real estate buyers using cash for their properties to hide their identity? Now that the Treasury Department and the federal government are involved investigating, and requiring names of cash purchasers,  if there is money laundering going on, it will now be put to a stop.

Dealing With Tenants Who Have an Addiction to Drugs or Alcohol

With the sheer prevalence of substance use disorders and addiction in the United States, most real estate investors will have to confront the issue of a tenant suffering from the disease of addiction at some point. The Centers for Disease Control estimate that one out of every eight of American adults are currently struggling with alcoholism, and an additional one out of ten are addicted to narcotics. Our nation is also in the midst of an increasingly fatal opioid drug crisis that has claimed thousands of lives. So, what can a landlord do when confronted with evidence of a tenant's addiction? This article will explore the rights of addicted tenants and discuss some of the basic strategies for managing such tenants.

How Your Tenant's Addiction Can Affect You

Many landlords simply do not want to deal with a tenant in active addiction. Some of these concerns are based on stigma or stereotypes about people who use drugs and alcohol. Others are more practical. It is often true that a person struggling with substance abuse is unreliable. Addiction leaks into every facet of a person's life as the disease progresses. Problems with daily tasks and finances are extremely common among alcoholics and addicts. As a person's addiction grows more severe, they are more likely to make a mess of your property, neglect their financial obligations to you, fail to report problems with the property, and even become hostile or belligerent in their communications with you.

So many landlords don't want a substance-abusing tenant in the first place. However, there are laws that protect your addicted tenant's right to housing. Knowing these laws is vital to handling your business relationship with the tenant in a fair and legal way.

Can You Evict a Tenant Over Their Addiction?

Upon discovering that a tenant is an alcoholic or addict, many landlords want to evict the person immediately to avoid some of the consequences discussed above. However, addiction is a recognized disability under the Fair Housing Act. This federal law was designed to ensure that people with disabilities are not discriminated against. While discrimination certainly still occurs, engaging in discrimination as a landlord could land you in court. Even restricting access to your home based on suspicion that your tenant has a current or former addiction could expose you to liability.

Without fair housing laws, people with mental and physical disabilities would not be able to access housing. So, what can you do in the case of addiction, as it is considered a disability?

Do Discrimination Laws Mean I Have to Put Up With Bad Tenant Behavior?

Discrimination laws are designed to protect groups of people, not their behaviors. A simple analogy might be to consider a tenant who is blind. You cannot evict the tenant for their blindness, but if that same blind tenant happens to be bashing holes in your wall with a sledgehammer or otherwise violating their lease, you can indeed evict them based on the behavior.

Behaviors that are against the law are not protected by discrimination laws. For instance, a person who is using and dealing cocaine in your home is committing multiple crimes. If the person is using a substance illegally, that's a whole different ball of wax than a person whose drinking habits or legal prescription drug use you might not personally approve of.

What to Do if You Suspect Your Tenant Is Abusing Drugs or Alcohol

These six practical tips can help you navigate your relationship with an addicted tenant.

1. Understand the Difference Between Active and Former Addiction.

Landlords should be aware of addiction recovery. People recover from alcoholism and addiction often, meaning they no longer use drugs or alcohol. People in recovery often make great tenants, as they have addressed their problems. Understanding this distinction will help you, but the remainder of this article will discuss active users.

2. Screen All Applicants Fairly.

Treat all applicants equally to avoid discrimination accusations. If you're concerned about drug and alcohol use, ask all applicants the same questions. The little old lady with blue hair and the 20-something in a sketchy trench coat with circles under his eyes should get identical screening processes.

3. Be Aware of Your Own Biases.

Stigma against addiction alone is not a reason to take action against a tenant. Everyone has biases of some sort, particularly with how common these problems are. Don't take out your feelings about an alcoholic family member or a tenant without evidence.

4. Document Evidence You Find Troubling.

Focus on the behavior, not the person. Never rely on gossip. Just because a neighbor says they saw your tenant at the methadone clinic or an NA Meeting doesn't mean it's true. These behaviors are also normal for people in recovery, who generally abstain from drugs and alcohol altogether.
If you're concerned about a tenant's behavior, collect appropriate evidence. If maintenance sees drug paraphernalia, ask for a photograph. Take pictures of property damage.

5. Take Action Against Dangerous Tenants.

The law does not give any tenant the right to engage in behavior that is violent, destructive, or dangerous to others. Profound destruction of property, threats to neighbors, and regular drunken fights that wake the neighbors or summon the police are not behaviors you should tolerate. When out of your depth or in immediate danger, call law enforcement for help. Contact an attorney if you're uncertain of the best course of action.

6. Be Willing to Make Only Reasonable Accommodations.

Of course, this goes for tenants with any type of disability. Allowing a tenant with limited mobility to install a ramp or shower bars isn't just the kind thing to do--you may be legally obligated to make such accommodations.

However, active addicts are notorious for manipulations. If a tenant requests something outlandish or unfeasible based on their disability status for addiction alone, you don't have to cower or cave. The hard and fast rule for accommodation requests is that they must be both reasonable and directly related to the disability. You don't have to do anything absurd, like allow the addicted tenant to not pay their rent on time because they "need" the money to fund their habit. Just say no. When confused about the law, get professional help.
The bottom line here is simple. Treat the tenant with compassion, but be firm in your boundaries. Boundaries are essential for handling active addicts. If a tenant confides in you that they are in recovery, take care to treat them the same as you would any other. But never tolerate behavior that puts you or your property in danger.

When Should a Landlord Hire a Lawyer?

While there are some landlords out there who make a career out of being a landlord, most folks who rent out properties do so because it’s a lucrative form of investment. They own one or a few rental properties and are largely self-educated when it comes to the legal side of the business. In other words, they don’t necessarily keep a lawyer on retainer to answer simple everyday questions. It wouldn’t necessarily be cost-effective to do so.

For those landlords, the question of hiring an attorney is always one of cost versus benefit. Attorneys are expensive, but in certain instances, they can save you thousands of dollars and expedite unpleasant processes. So the question for most landlords becomes: when exactly should I hire an attorney?

When You’re Evicting a Tenant

Eviction is a nuclear option. Not only is the tenant being forcibly removed from the premises, but the eviction will stay on their record for the next seven years. Judges will require a high standard of misconduct committed by the tenant. While eviction lawsuits are expedited, the rules governing eviction lawsuits are strict.

Landlords who have experienced an eviction in the past have a better chance of successfully evicting a tenant. Still, unless you’re a lawyer, there are always going to be unforeseen wrenches thrown into the works. Even if you are a lawyer there may be unforeseen wrenches. Lawyers, of course, are better at anticipating and managing them. Hence, why they’re useful.

If this is the first time that you’ve ever been forced into the position of evicting a tenant, then having a lawyer guide you through the process can make a huge difference. In addition, there are some complex evictions in which even experienced landlords would want to have a lawyer help them. Those include:

When You’re Being Investigated or Sued for Housing Discrimination

The penalties for engaging in illegal housing discrimination are steep. Not only will a landlord potentially face a $16,000 decision, but they can likewise owe other damages to the plaintiff. If it’s HUD or some other agency that’s doing the investigating, it’s a good time to consult a lawyer in order to make sure that your bases are covered.
Worse still, is the likelihood that this information will become a matter of public record and be talked about in the news. Not only would a landlord face damages, but discriminatory practices could potentially damage their reputation in the community. This could, in turn, create problems for their business.

A lawyer will help a landlord manage the process as quickly as possible to avoid it blowing up in the press.

Be sure to check out our article, Housing Discrimination Complaints: What Landlords Need to Know.

Premises Liability Lawsuits

Personal Injury Lawsuits

There are a number of reasons that a landlord can be sued, but one of the most common is a failure to maintain a safe and healthy residence. Tenants can bring premises liability lawsuits if they result in personal injury. In most cases, the tenant will need to be able to show that they attempted to contact the landlord and resolve the issue through some form of communication. For instance, if a damaged railing results in an injury to a resident, they would have to inform the landlord that there was an issue in the first place.

The question that underlies all personal injury lawsuits is the role of negligence. The courts will hold a landlord liable when they knew or should have known about a potential safety problem. Negligence can be inferred circumstantially when a landlord’s responsibilities include certain routine maintenance, or the safety problem was a routine event that could have been foreseen. Otherwise, the tenant needs to explicitly make the landlord aware of the issue. Only if the landlord fails to respond could they then be held liable for injuries that occur on their premises.

Nonetheless, personal injury lawsuits are complex issues and having a lawyer handle them for you will produce the best results.

Property Damage Lawsuits

If a landlord’s failure to maintain his property results in damage to the tenant’s property, the tenant has a right to sue the landlord for damages. Some landlords require that their tenants carry renters insurance which may cover property damage to tenant’s belongings done on the premises.

Liability Insurance

Most landlords carry some form of liability insurance that protects them against potential injuries or property damage caused by their properties. Insurance companies will generally provide a lawyer on your behalf to settle the damages. Insurance companies may, however, not be willing to cover damages when the negligence is obvious or gross, or it violates one of the terms of your policy. At that point, you would need a lawyer.

The Bottom Line

Landlords that own major investments all over the city or make a living off of real estate generally have an attorney on retainer or are themselves, attorneys. For smaller investors, having an attorney on retainer may not make a whole lot of financial sense. There are nonetheless a number of problems that befall landlords in which having an attorney can save them thousands of dollars. In other words, they’re worth the cost.

Protecting your investment means successfully navigating these tricky situations. Defending yourself, in many situations, simply isn’t an option.

You may also want to see our article, How Landlords Protect Themselves From Lawsuits.

State Laws on Landlords' Access to Rental Property

There are many valid reasons why a landlord may need to enter a tenant's property. Perhaps the landlord must assist with maintenance or a necessary repair, enter to take pest control measures, or even help attend to an emergency involving the tenant. Of course, these reasons must be balanced against the rights of tenants to have an expectation of privacy in their own residence. Many people already know that the Fourth Amendment guarantees American citizens the right to be protected from "unreasonable search and seizure." However, that right applies to conduct by the police and other law enforcement agents collecting evidence in criminal cases.

Relationships between tenants and landlords, on the other hand, are determined by civil courts. Most of the law on these issues is determined at the state level. This means that the answer of when a landlord can rightfully enter a tenant's house or apartment varies from state to state. It is vital that both parties understand these issues, and this article will contain information that applies to both landlords and tenants. The following will review some common reasons a landlord may need to enter a property, and under what circumstances he or she may do so. For your convenience, we have listed each state's listed requirements. Note that these are general guidelines that can change over time, and your personal situation will be best explained in your lease agreement. Read on to learn the details.

When Can A Landlord Enter Your Property?

Broadly speaking, a landlord has the right to enter a property in three specific situations:

  1. To make necessary repairs and renovations. Federal law requires rental properties to be "habitable." While the definition of "habitable" can vary depending on your location, landlords are generally responsible for ensuring your home has hot water, electricity, climate control, and other items necessary to a basic standard of living.
  2. To assess the need for repairs and renovations. This goes hand-in-hand with the first major reason a landlord may enter. Note that it is not uncommon for landlords to delegate the matter of repairs. A property manager or even maintenance staff member is typically allowed the same access as the landlord would be personally. Landlords who perform their own repairs are an increasingly rare phenomenon. Typically, this type of detail will be covered in your lease agreement.
  3. In the event of an emergency. This could include a wide range of circumstances. If a landlord learns 911 has been called to your home, they may enter to check on the property or get an idea of what's going on. Similarly, if the landlord happens to be collecting the rent and sees your collapsed body through the window, they may enter to help you. In the case of a medical emergency, most people would prefer that the landlord check on them. Many states also have "Good Samaritan Laws" that protect any person who attempts to render aid in this type of emergency.


Of course, these reasons for entry must be balanced with tenant privacy. Most states have some type of statute requiring that the landlord give the tenant advanced notification. Generally, this notice must be given 24-48 hours ahead of time. Where no time period is specified, "reasonable" notice is acceptable. Even in states where no such laws exist, many landlords provide notification as a courtesy to their tenants.

Are There Exceptions to These Rules?

Because these laws are determined at the state level, we must look to statute to get the most accurate picture of tenants' privacy rights and statutes. Aside from the four common reasons landlords may enter a property we discussed above, there are two more that are specific to certain states.

  1. To show the home to prospective tenants or buyers. This is particularly likely to happen when a tenant's lease is nearly up.
  2. When the tenant is away from the home for an extended period of time. Landlords may enter a home in this situation if the property is located in Wyoming, Tennessee, Hawaii, Iowa, Kansas, Kentucky, Montana, Nebraska, New Mexico, Pennsylvania, Rhode Island, Alabama, Florida, the District of Columbia, or Alaska.

Some states do not regulate privacy in landlord-tenant law at all. Texas and Wyoming, at the time of this writing, have no specific statutes at the state level for any of the issues covered here. Of course, regulations still exist at the local or county level. If you live in either of these states, your best bet is to consult your area's website or seek the guidance of a real estate attorney in your area.

Bottom Line: Check Your Lease Agreement and Communicate

The best way to get information about your specific rights, whether you're a tenant or a landlord, is to refer to your lease agreement. Good communication between landlords and tenants is also crucial. Even where certain privacy rights are not guaranteed by law, many tenants can simply ask their landlord to notify them in the event that the landlord needs to enter. More often than not, reasonable people will respond well to reasonable, polite requests.

If you still have questions after reading your lease agreement and state regulations, the best thing to do is to consult a qualified real estate attorney. Royal Legal Solutions offers assistance to both landlords and tenants. Many of our clients consult with us at every phase of the real estate investing process, from drafting the purchase agreement all the way through managing rental properties and tenant issues. Feel free to ask any general questions you may still have in the comments section below. For advice on your specific situation, contact us today to speak directly with a senior advisor.

Tenant Injuries: Landlord Liability and Insurance FAQ

Even a good landlord occasionally finds themselves in a tricky situation. When a tenant injures themselves, there are a number of situations in which a landlord could find themselves liable for the injuries. This is especially true in instances when the tenant has just moved in. Central to the question of liability for premises and personal injury lawsuits is the role of negligence.

In order for a tenant to make a successful case against their landlord, they must be able to prove that the landlord was negligent in their duties to maintain a safe residence. What precisely does this entail?

The Role of Negligence in Premises Liability for Landlords

In order for a landlord to be held negligent in a premises liability suit, the tenant/plaintiff must be able to prove that either:

  1. The landlord knew about the safety hazard and did nothing to correct it
  2. That landlord should have known about the safety hazard

The first criterion pretty much speaks for itself. A tenant makes a landlord aware of an issue, the landlord doesn’t act on that information, and then a tenant or guest is injured because of the safety hazard. This is when the landlord could be liable for the damages.

The second criterion means that negligence can be inferred circumstantially under different situations. For instance, a landlord cannot claim ignorance of the fact that there is lead-based paint on their premises. Nor can they claim ignorance of the fact that any materials that were used in the construction of the property are potentially hazardous. The landlord is expected to know this information and to disclose it to anyone that is paying to reside in the property.

In addition, negligence can sometimes be inferred when a landlord does not provide a careful inspection of the premises before a tenant moves in. If the tenant is injured or has property destroyed due to a preventable and obvious problem on the premises, they can be held liable for damages and injuries.

How to Minimize Premises Liability for Landlords

It should not be a shocking revelation that landlords who keep their premises in excellent condition seldom lose or even have to fight premises liability lawsuits. Making a careful inspection of the property before a new tenant moves in and responding to tenant issues promptly will absolve a landlord of most negligence claims against them.

What you should do:

The Role of Insurance in Protecting Landlords from Liability

One popular way that landlords protect themselves is by investing in General Liability (GL) policies. GL policies protect owners from safety issues that may occur on the premises. They cover the cost associated with potential damages awarded to tenants and the cost of defending yourself against the claim.

What level of coverage should you purchase?

Personal Injury Lawsuits vs. Landlords

A tenant will win a personal injury lawsuit against their landlord when they can prove:

  1. It was the landlord’s responsibility to repair the defect that caused the injury.
  2. The landlord was notified of the problem.
  3. Fixing the problem would not have been unreasonably difficult or expensive.
  4. The injury was the likely result of failing to fix the problem or the injury would not have occurred if the problem had been fixed.
  5. The tenant suffered legitimate injuries as a result of the accident.

If a tenant can prove all of these, or that the landlord should have known about the problem the tenant is entitled to recover:

If, as a result of the injuries, the tenant is left permanently disabled, damages can be awarded into the millions in favor of the plaintiff. If the injuries are caused to a child on the premises, and the result is a permanent developmental disability, you can find yourself in serious financial trouble, to say the least.

The truth is, most premises liability claims against landlords can be easily avoided by carefully inspecting the property before a new tenant moves in, ensuring that you respond to the tenant’s issues promptly, and covering your bases in terms of having the proper levels of insurance. Landlords who follow this simple advice will never have to worry about fighting a premises liability lawsuit.

Tenants' Rights to Privacy and Repairs FAQ

Real estate investors often serve as their own landlords. If you're doing this with your real estate investment properties, it is crucial to understand your role and the legal obligations that come with it. One of your primary duties will be the maintenance and repair of your property. Staying on top of maintenance is essential for having good relationships with your tenants and protecting the value of your investments. Similarly, tenants have their own set of obligations about maintaining the property they occupy. While obviously repairs are inevitable, it is crucial that landlords are aware of tenant privacy rights. Below, we will discuss some of the most frequently asked questions about property repairs, the responsibilities of both landlords and tenants, and under what conditions a landlord may enter a property.
 

Who Is Responsible for Repairs of a Rented Home?

Both the tenant and the landlord have certain rights and responsibilities when it comes to the routine upkeep of the property. While there will be some variation between the states, or even local ordinances and regulations within a state, there are some basic principles that are nearly universal. Let's begin by discussing the typical obligations of landlords.

Landlord's Maintenance and Repair Responsibilities

Generally speaking, the landlord is responsible for keeping the property habitable. Of course, this term is somewhat subjective. But the consensus seems to be that a "habitable" property is one that has the accommodations and amenities for basic human needs. These include access to water, electricity, and other utilities. Landlords are also required to abide by any local building codes for safety reasons. Working locks and smoke detectors are common examples of these ordinances. States with extreme climates, such as Texas or Alaska, may also require the landlord to weatherproof the home and maintain functional central heating and cooling.


Tenant Maintenance and Repair Responsibilities

While the landlord is ultimately responsible for the habitability of the property, tenants have certain responsibilities as well. Some of these are fairly obvious, day-to-day tasks. No tenant could reasonably expect their landlord to do their household chores or cleaning, even though those things certainly impact how "liveable" a property is.

Even major appliances can sometimes be the tenant's responsibility. This is particularly true if the tenant brought the appliance with him/her upon moving into the rental property. Furnished homes may be more complicated in this regard, and these details are usually addressed in rental agreements.
 

What Happens if Landlords Fail to Make Necessary Repairs?
The consequences for failing to make necessary repairs as a landlord can be quite serious. The fall-out can be annoying, costly, or even ruinous. Typically, it is cheaper and overall easier to make repairs rather than delay or resist doing so if your legal obligation is clear.

Some of the unfortunate consequences of shirking your responsibilities as a landlord include the following:


If you're a landlord, the safest and wisest choice to make is always to make repairs as quickly as possible. If you're notified of the need for repair, take immediate action and maintain good communication with your tenant. Documenting communication with your tenant about these issues can also assist you in the event of a lawsuit. If your tenant tries to sue you, you will later be able to show you did your due diligence. The same suggestion applies to tenants as well. If you request a repair, document your end of communications. Taking the time to make a written record of events in the present can prevent many legal headaches in the future. Since most lawsuits are born out of misunderstandings rather than outright fraud, documentation and good communication protect both landlord and tenant.

When May a Landlord Legally Enter Their Tenant's Residence?

Privacy rights of tenants vary based on location. A qualified attorney can help you understand these rights, but here are some of the basics.

1. Do Landlords Have to Notify Tenants Before Entering the Property?

Under ordinary circumstances, a landlord will notify a tenant prior to entering a property for any reason. 24-hour notification is a common practice. Some states also allow landlords to enter to determine whether repairs are needed.

2. What About Emergencies?

While we certainly hope you don't experience a personal or medical emergency as either a landlord or tenant, these things do happen. Many rental agreements spell out certain protocols for emergencies.

Even the police can enter your home if they have "exigent circumstances." An example of exigent circumstances might be if an officer approaches the door, but hears somebody screaming for help inside. While ordinarily law enforcement would need a search warrant to enter your property, these "exigent circumstances" are an exception to that rule.

While obviously police and landlords fulfill completely different roles and are defined and regulated by different types of law, the principle remains the same.

For more details about the laws that state when a landlord can enter occupied property in your state, please refer to our article "State Laws on Landlord's Access to Rental Property" here on the Royal Legal Solutions blog.

We hope that this has shed some light on the basics of privacy and repairs. If you would like to comment on this subject, feel free to share both your positive experiences and horror stories below. Please also feel free to ask any remaining questions you may have. As usual, if you need personal advice about your specific situation, make plans to consult with one of our real estate attorneys today.
 

Landlord-Tenant Statutes, State by State

Wise real estate investors know the importance of guarding against lawsuits. You may already employ an asset protection strategy to protect your investments. Even so, it is always a good idea to be familiar with the laws governing landlord-tenant relationships in your state. You can search your state's website to read the text of the most current statutes, but we realize you're busy and probably don't want to spend your free time deciphering legalize. So we're here to help you understand the most common types of state statutes in plain English.

Federal Laws All Real Estate Investors Should Know

There are federal laws that apply to all landlords and tenants, regardless of where they live in the United States. If you're a landlord, here are some of the most critical federal laws to be aware of:


While these laws are universal, the details vary depending on state. Let's dive into some common statutes and how they are worded in different states.


Landlord-Tenant Laws That Vary By State

While each state has hundreds of pages of law governing the rights and obligations of both landlords and tenants, we're going to cover some of the basics here. Many of these are the same types of a statutes, with different details. Below, we will cover some of the most common types of statutes and provide resources for you to review how they may affect your rental properties.

Security Deposit Limits and Lawsuits

Nearly every state has regulations regarding security deposits. Some of the most common types of statutes will place a hard limit on how much a landlord can require a tenant pay for a security deposit. Ordinarily, the limit is calculated based on rent. While some states will have a dollar amount maximum security deposit, many more simply say deposits may not exceed 1-2 months worth of rent.

Security deposit statutes also outline the circumstances under which a landlord may keep the deposit. Similarly, each state has a finite limit on how long a landlord may take to return a security deposit. These can range anywhere from a week to 60 calendar days.

Disputes over security deposits and their return typically occur in Small Claims Court. Most states will restrict the amount of money that a tenant can recover in damages to anywhere from $1,000-$15,000. Some states, such as Connecticut, have no limit at all on how much a tenant can recover in these types of lawsuits. Occasionally, suits are brought in different venues. In Florida, these types of disputes are settled by the Magistrate's Court. Similarly, security deposit suits in Delaware are handled in Justice of the Peace Court.

Late Rent and Bounced Checks

Bounced check and late rental fees are a common practice. The purpose of these laws is to encourage tenants to pay rent in a timely manner. Some states allow for a "grace period" for tenants to pay late rent before eviction proceedings begin. Florida and Georgia have both guaranteed tenants a right to a three-day period. This allows the tenant to make the payment without threat of immediate eviction.

Eviction Issues: How Long Do Tenants Have to Move Out?

Some common causes of eviction include:


Regardless of your location, you will generally have some time to remove your belongings from the property. How much time will depend on your state's eviction statutes.

"Repair-and-Deduct" or Other Living Condition Issues

If your home needs a vital repair (such as for a leaky roof or a water heater), it is generally the landlord's obligation to attend to this. If a landlord neglects these responsibilities, many states allow tenants to deduct the cost of making a necessary repair from the rent. This concept is known as "repair-and-deduct" rights. Tenants can even sue the landlord for the cost and inconvenience caused if they are forced to make such repairs. Repair-and-deduct rights are not universal. Check this list of state statutes to see if your area offers these rights.

Bottom Line: Understand Your State Laws

That wasn't too painful, was it? Of course, the law is always adapting. Everything that is factual at the time of this writing is subject to change, and by no means is this a conclusive list of the real estate law that may affect you. It would be impossible, for instance, to account for all local ordinances in this space. For this reason, we recommend that real estate investors build a dream team that includes a CPA and an attorney to ensure total legal and tax compliance. A qualified real estate attorney can help you understand the nuances of landlord-tenant law as they apply to your particular investments.

At Royal Legal Solutions, our attorneys aren't just lawyers, but fellow investors. We're here to help you understand and comply with the legal obligations you face as an investor. Begin building your real estate dream team by consulting with one of our real estate attorneys today.
 

Becoming Judgment-Proof Against Litigation

 

Becoming Judgment-Proof Against Litigation

Becoming Judgement-proof may sound strange, but as a real estate investor you are in one of the most litigated industries in the United States of America. The United states is one of the most litigious countries in the world. You are exposed, especially if you hold assets in your personal name.

Hi, my name is Scott Smith, and I'm an asset protection attorney in the real estate industry, and I'm a real estate investor myself. What I do for my clients is make them judgement proof. That means if anybody were to sue you, they'd get nothing. This is the peace of mind that you can't get any other way when you're ever threatened with a lawsuit.

You might not know this, but a lawsuit is ranked one of the top three things that people find the most distressing events in their life, up there with divorce and bankruptcy. I can help you prevent from ever having that worry, and I do this in the same way that the really rich do it.

Using LLCs to Become Judgement-Proof

The truth is that the rich don't own assets, they only control them. They do this through a network of LLCs and trusts, which protect their assets and allow them to hide them from anybody looking to come after them.

Now imagine the disappointment of anybody looking to sue you when they find out that it looks like on paper you don't own anything. In fact, it would look like you would even qualify for food stamps. Who'd sue somebody that looks like they own nothing?

I can help you set this up, my name is Scott Smith, I'm with Royal Legal Solutions, contact us today and let's get going.

Lead Disclosures for Rental Property FAQ

Lead-based paint and heavy metal poisoning are one hazard that the government will expect landlords either to have professionally removed or disclose before renting out the property to tenants. This is going to be especially vital for tenants who are renting with children. Children suffering serious injuries due to lead poisoning has to be a landlord’s worst nightmare. Especially if the landlord did not disclose that information to his or her tenants before renting the property.
The law involving lead-based paint is established at the Federal level. This does not, however, prevent state and local ordinances from imposing stiffer fines or making the thresholds for culpability lower.
If you’re a landlord buying or renting older houses, it’s your responsibility to determine whether or not there is lead in the paint. This fact must be disclosed according to Title X Residential and Lead-Based Paint Act of 1992.

Exemptions to Title X Lead-Based Paint Disclosure Regulations

There are some properties that are not covered by Title X. Those include:

For obvious reasons, lead-based paint disclosures are designed to protect children from potential lead poisoning. The general rule of thumb is, if a child cannot or is not expected to live on the premises, then the landlord would be in the clear for disclosure. This includes vacation spots, single room apartments, and senior living facilities.

Lead Poisoning Symptoms

One of the reasons why the fines and regulations on lead-based paint disclosure are as heavy-handed as they are is due to the fact that lead toxicity can have a severe and lifelong impact on the development of children. In other words, many of the problems that are caused by lead poisoning may not be reversible.
Children who are affected may suffer from lifelong learning disabilities and developmental delay. On top of that, they may experience:

Lead poisoning can cause problems during pregnancy as well, including premature birth, low birth weight, and miscarriage.
While children are primarily impacted by lead poisoning, adults can be affected too. Adults can experience abnormally high blood pressure, muscle and joint pain, abdominal pain, mood disturbances, and low sperm count.

Lead Disclosures and Renovations

Landlords renovating properties that were built prior to January 1, 1978, must disclose lead hazard information to any and all occupants of the property at the time of the renovation. This includes apartment complexes where common spaces are being renovated. All tenants that would be affected by the lead hazard must be informed within 60 days of the renovation. If it’s a common area that’s being affected, then the landlord must distribute a notice to every occupant in the building.
 
The EPA defines a “renovation” as any disturbing of a painted surface under the Toxic Substances Control Act. The EPA also provides a pamphlet that must be handed out to tenants before the renovations begin. The title of the pamphlet is: Protect Your Family from Lead in Your Home”.

Other Potential Health Hazards in the Home

Lead is not the only potential health hazard one can find in a home. On top of lead, landlords can be held liable for asbestos as well. OSHA is the agency responsible for setting the standards concerning asbestos. The landlord is responsible for testing, disclosure, and maintenance of all buildings constructed before 1981.

Lead in Your Rental Property? These are Your Responsibilities

If you’re a landlord who is renting an older home the responsibility to inform your tenants about the possible dangers in your home falls squarely on your shoulders. In addition, the EPA is quite specific about how this is supposed to be done.
 
Before either signing or renewing any form of rental agreement, a landlord must disclose any knowledge of lead paint or other hazardous chemicals or materials on the property. In this instance, a landlord claiming that they didn’t know about a potential hazard will not save them from negligence liability. As a landlord, it’s your job to know.
The procedure for disclosing the presence of hazardous materials in a rental property is a formal process. It requires that both you and your tenant sign off on the disclosure. An example form for this process can be found on the EPA’s website. The landlord is then required to keep the signed copy of the disclosure with their rental documents for the next three years.
In addition, the landlord is required to provide every tenant with the EPA approved pamphlet that discusses the dangers of lead paint. That can be downloaded and printed for free from here.
What are the penalties for failing to comply with this regulation?
They’re steep. The state will fine landlords $16,000 per violation. In addition, if a tenant is insured because of undisclosed lead poisoning, the landlord will be liable up to three times their total damages.