Whether you operate your rental property as your main business or as a side concern, working as a landlord is a small business. It takes a professional approach and organization for every business to avoid costly mistakes and failure. In most rental properties, landlords are focused on handling basic issues such as collecting rent and making repairs, but they should not overlook the business side of their work, or the legal issues that can arise.
Business licenses, insurance coverage, and tax filing are all basic requirements for nearly every business. Additionally, here are some vital areas to consider.
1. Agreements and contracts
Being a landlord is a business in many ways, including accounting, taxes, and marketing your property. Contracts are among the most important components of any business. Having contracts with all your business partners is seriously important, but even more important is the requirement of simply having these contracts in place. No matter how long or how well you know a potential building supervisor or contractor, never hire them on a handshake, and never rent to anyone without a written lease contract. All parties benefit from contracts, and no business can afford to take risks without them. Do not simply find some generic legal templates on the Internet – make sure you seek legal assistance from expert lawyers for all your contracts, because law and practice change with time and a lawyer is one who can check if a contract is in compliance with the recent law and practice.
2. Annual property inspections
The standards of living conditions, as well as functionality of major systems of rental properties should be checked yearly as a matter of course. Both the tenant and landlord benefit from an inspection: tenants can highlight any necessary maintenance or repairs, while you can make sure the lease is being upheld and no obvious lease violations exist.
It is easier and less costly to fix the inevitable problems that are identified during regular inspections, so landlords avoid any surprises or disputes at the end of a lease. Tenants should be given adequate notice of any inspection in advance, you shouldn’t invade their privacy, and do record and share with them the walkthrough of the property.
3. Dealing with contractors
It is possible that most landlords cannot handle all repairs on their own and may need to hire a contractor to do the work. If you plan to hire contractors to do repairs or renovations on your rental property, be sure that the contract clearly states that the work will be completed at an agreed-upon price, or under the main agreement you have with the contractor. As in any contract between businesses, you should make sure that there is a dispute resolution provision as well and it is construed properly.
4. Managing your property
Depending on the number of units or tenants, you may need to hire outside help to oversee your properties. You also become an employer when you hire someone as a supervisor. Now you have employment contracts to manage and must deal with payroll and tax matters.
Additionally, you can use an independent contractor corporation to handle the day-to-day tasks associated with renting out and maintaining the property, taking the administrative burden off your plate. Property management companies can be expensive and their services are more likely to be of value to owners of multiple properties with a high level of profit potential.
5. Conflict Resolution
A dispute over the terms or fulfillment of a contract is possible with contractors, tenants, or anyone else you may sign a contract with. In light of this, you should think about addressing dispute resolution in your contract so that you’re prepared if a dispute arises. Communication is especially important for resolving problems before they escalate into serious legal disputes. Arbitration, mediation, and negotiation are all methods to handle actual disputes. Each has its own advantages and disadvantages. In any case, make sure that you have specifics in contract language so that both parties are aware of how a dispute can be resolved.
Especially when it comes to contracts, you cannot leave your landlord business to chance. At LEGID, lawyers with expertise in real estate can help you avoid costly and critical mistakes in legal documents.