Are you a landlord? Do you run your business in a haphazard and lax manner with no regard to how your tenants and other potential litigants perceive you? Are you totally clueless about how to reduce risks and limit personal liability? Then you’re what we refer to in legal circles as a high-profile target. You’re basically walking around with a “SUE ME!” neon sign on your forehead. To understand the importance of taking a proactive approach towards rental property liability protection, you need to be aware of some of the flimsy and not-so-flimsy reasons that can result in substantial damage awards.
The number one reason for lawsuits is disagreements as demonstrated by one of our clients. You can do very little to prevent them from happening, even on your best behavior. If you don’t have an asset protection strategy in place, then you might as well hand over the keys to your castle to a complete stranger. We recommend setting up a Series LLC and shell companies to hide your assets from litigants.
You will be held personally responsible for injuries to tenants and guests that occur on your property. If the litigant can prove that the injury was caused by negligent behavior on your part, then you might be in for it.
Sometimes, it’s not even necessary for the litigant to prove negligence. If they can show that you know, or should have known, about a dangerous condition on your property and you failed to remedy it or give adequate warning, then you will have to pay up.
Any vehicle used by your business including those of employees and agents can result in a claim that can expose your business to a liability. It may have nothing to do with your tenants but you may have little recourse if you have not adopted smart liability protection strategies.
Pets and other animals can also expose you to liability. This is the reason why most landlords prohibit dogs on their property. While you won’t necessarily assume liability for your tenant’s dog, all that the litigant needs to prove is that you “knew” or “should have known” the dog was dangerous or that you exercised some control over it. As you can imagine, it wouldn’t take much doing to prove this.
It’s not your responsibility to protect tenants from criminal acts. However, the law has evolved to a point where it’s possible in some circumstances to take responsibility for the tenant’s security. You’re expected to keep the common areas such as stairways, hallways, and elevators safe from criminals.
You may assume liability for the bad behavior of a tenant. If you are aware of any obnoxious, unlawful or other bad behavior by tenants, you should take the necessary steps to protect the other affected tenants. Failure to do this could result in a lawsuit.
There are plenty of lawsuits based on liability claims that can arise from other sources such as invasion of privacy, libel, slander, and discrimination based on religious beliefs, race, or even evictions. This is why you need to establish an LLC as the first step towards protecting your investment from liability claims. We can help you come up with an asset protection strategy that will hide your personal assets and make you an undesirable target.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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