Buying and renting an investment property can be an excellent move for your long-term wealth. Owning property is one of the most effective ways to generate earnings in the United States, and that investment is even more profitable when you’re renting the space out to a tenant.
One thing to keep in mind, though, is that there is a fairly strict set of regulations that bind you to specific behavior as a landlord. The same goes for tenants, and the rules are detailed in the Landlord and Tenant Act.
We’re going to go over some of the important things to note as a landlord regarding the Landlord and Tenant Act, giving you more insight into what will be expected of you when you rent out your property.
Essential Points of the Landlord and Tenant Act
The first thing we should mention about the Landlord and Tenant Act is that its guidelines aren’t overly difficult to follow and shouldn’t cause you that much difficulty. In most cases, you shouldn’t have to refer to the act unless a conflict arises. It includes guidelines that give tenants rights and help landlords when tenants aren’t acting in a way that follows the rules detailed in their signed leases. In other words, if both parties understand the lease and are respectful of each other, you shouldn’t have to deal with too many issues.
There are some pieces of the act that you must understand and follow as a landlord, however, and you could get into some legal trouble if you don’t. We suggest that you peruse the Act and make sure you understand it as it pertains to you before you start renting your investment property. Here are some of the essential duties and responsibilities you’ll have as a landlord.
1. The Lease and Its Contents
There’s a great deal of flexibility in the Landlord and Tenant Act when it comes to the contents of a lease and what they mean for a tenant. This makes sense: All houses have unique qualities, and landlords will have different preferences about what can happen on their properties.
Additionally, your state has unique disclosure rules, and your lease has to reflect them. The important thing to keep in mind is to disclose the important issues in the lease. Some issues are at your discretion — whether a tenant can smoke inside or if you’ll be charging non-refundable fees, for example — and must be listed in the lease, but you have a say in whether they exist.
Security Deposit Details
How you handle the security deposit is one of the things where you have flexibility in the Landlord and Tenant Act. It’s your job to list precisely how long you’ll be in possession of the security deposit and place it in an escrow account that generates interest. Your state will also determine how long you can hang onto a security deposit before you must give it back.
A renter’s security deposit is also directly impacted by the manner in which the landlord cleans the house to rent again. This is one of the main hotspots in disputes with tenants over fees. Landlords often charge exorbitant hourly fees for their efforts to clean the apartment, and do so because no one’s there to watch them clean. That means they can claim more damages than was actually there.
Of course, lying about the cleanup fees is illegal, and renters know this. That said, renters in some areas expect their landlords to trim their security deposit excessively and will respond with legal action. This makes it important to clearly detail your cleaning and restoring fees in the lease and follow them to a tee. Make clear documentation of the issues with the house before subtracting damages from a security deposit and keep open communication with your tenant.
Your Requirements in Inspections
Luckily, there are some very clear rules when it comes to the managing of your end-of-lease inspection and charges in the Landlord and Tenant Act. In Washington D.C., you have to give your tenant a written receipt for their security deposit that includes a number of important issues. First, you must make it known that the tenant has a right to have the unit inspected while they are present. You’ll be making the list of damages to deduct from the deposit at the end of the lease, but they could be there to make sure it’s done honestly — so long as they request this meeting sometime during their occupancy. They must do so no less than 15 days before they move out.
Next, you have to give the tenant a written notice of the date you plan to conduct the inspection. Once the inspection is complete and the costs are deducted from the security deposit, the landlord must send the remaining money to the tenant within 45 days of the move-out date. You must also keep the receipts of the deductions and original security deposit for two years after the tenant moves out.
Make Note of Existing Damages
The Landlord and Tenant Act also requires you to inform tenants about existing damages to the home. This is especially important when those damages hold the potential of causing harm to the tenant. Ideally, you would have those issues fixed long before you rented the space to an individual.
The same goes for any kind of health hazard in the environment of the home. Maybe you have lead-based paint, some kind of rodent infestation, bug infestation, or radon. All of those issues must absolutely be made known to the tenant verbally and through the lease and can extend out to the general area of the home. Your rental property could be in a flood zone, for example, and that fact must be made known to the renter.
Specific Expectations for Utility Bills
Homes that house more than one tenant can become complicated when it comes to utility bills. It might be the case that you factor those bills into the rent and pay them yourself, or it might be the responsibility of the tenant. Water, electricity, gas, and garbage are all items that might have to be factored in. It’s important that you list the separation of these costs clearly when you’re writing out the lease.
If a tenant identifies an issue with the distribution of the bills, it’s your responsibility to respond accordingly. For example, one unit might be using an excessive amount of electricity while the other unit pays more when the bill comes. These are fair issues and should be addressed.
The bottom line is that tenants understand what they’re expected to pay.
2. Making Repairs
As the landlord, it’s your responsibility to make repairs in order to keep the unit inhabitable, comfortable, and safe. Some examples are rodent or bug infestations, broken locks, structural issues with the home, or pipe bursts and leaks. These are issues that can cause harm or danger to your tenants, and it’s your responsibility to make repairs — not theirs.
If you don’t make the repairs yourself, or you expect your tenant to handle such issues, your tenants have the right to withhold their rent until action is taken. They also have the right to take you to court and sue. Tenants must make you aware of these issues — not just sit with them until they become dangerous — before they decide to sue you. Additionally, the issue must not be their fault if they plan to sue you.
They won’t have an easy time taking legal action immediately if they cause the damages, either, but you have the legal responsibility to take care of the problems once they’re made known to you. If you don’t do anything, you could face punishment for neglect.
3. Evictions and Lease Violations
When a tenant fails to pay their rent or breaks the terms of your lease, you might have the grounds to evict them. The ability you have to evict a tenant often depends on the clause of the lease that was broken. If it’s nonpayment, the conditions you’re under might be different than if the tenant is actively breaking the law inside your property.
That said, Maryland law allows tenants one month to remain in the house after the established breach of the lease. If the tenant is causing clear and imminent danger to themselves, you, or your other tenants, that time frame is cut down to two weeks without the option to cure. Curing is the process of making good on the lease and getting back into agreement with the tenant. There are many cases where a person falls on hard times or there’s a misunderstanding and the lease can be cured.
How lenient you want to be in that regard is up to you, so long as you follow the rules of the law before posting an eviction. Note that you cannot self-evict a tenant. You have to go through the proper legal avenues, and will likely be sued if you do not.
4. Screening Applicants
It’s important to screen your applicants when you’re trying to find suitable renters. Having some insight into a person’s rental history can cue you into how they will treat your property and whether renting to them is a good idea. There are a number of things you have to keep in mind when you start to screen applicants, though.
You’re Allowed to Charge a Fee
An application fee should simply cover the costs you’ll suffer when conducting a background check or spending time screening someone. These fees are a great way to siphon off applicants who aren’t actually interested, as only people who are genuinely interested in renting a place are likely to pay $20 or $25 to get screened for it. That application is also where you should acquire a potential tenant’s permission to conduct a background check.
You will need the person’s signature or written consent to conduct a background check. Remember, you don’t have to do a background check on someone to rent to them. It’s up to you whether you would like to take that step, but your investment property could really take a hit in value if you rent to someone who doesn’t have a history of respecting property. It’s good just to look and check with previous landlords to investigate how a person has treated previous units.
You Cannot Discriminate
You cannot discriminate against renters based on their sexuality, race, family status, source of income, age, or religion. You certainly can have some requirements about the background check of tenants, though. It’s okay to refuse people based on issues like the possession of pets, a history of poor relationships with landlords and evictions, or a history of violent criminal acts, should you find any of those in the background check.
Further, you can make determinations based on the financial stability of the tenant as well. Some people might want to rent your place, but may not have a stable income. It’s usually a good sign if the rent of your unit only takes up around 30 percent of the tenant’s income. To investigate the financial stability of a person, you can look at their credit history to check for non-payment or a history of bankruptcies.
Again, remember that your property is going to serve as someone’s home. It’s not just an investment that sits in the bank and develops interest. You’re going to be working with people and developing relationships, understanding them, and providing a safe home for them to live in. With that in mind, it’s good to have empathy and understanding for those with checkered pasts who are moving in the right direction.
Interested in Learning More About the Landlord and Tenant Act?
Understanding the Landlord and Tenant Act is just the beginning of being an effecting landlord. There’s a lot involved in getting a return on your investment while providing a comfortable living space for tenants.
We’re here to help you be the best you can be. Explore our site for more insights into buying and renting investment properties.