10 Potentially Costly Mistakes Landlords Should Avoid

Landlord-tenant laws are important, and help to keep things fair for everyone involved.   

But for some landlords, the concept of staying in compliance with the law can be stressful. After all, rental property laws and regulations are constantly changing and many regulations differ from state to state (or city to city), and ensuring that you’re complying with them can be challenging. The good news, though, is that today, it’s easier than ever to stay current on legislation in your state. Many landlord-tenant laws can be found easily online, and by conducting your due diligence, and brushing up on the laws in your state (or region) you’ll be able to rest easy at night, knowing that you’re overseeing your rental in a way that’s in compliance with the law. This can also help you to confidently navigate issues as they arise. Of course, as a landlord, it’s also a good idea to hire an experienced attorney. An attorney who is experienced in landlord-tenant law should be able to help inform you of your responsibilities as a landlord, help with lease preparation, help you navigate evictions, and more with confidence. 

To help you stay on the right side of the law, we’re highlighting some of the most common legal pitfalls that you might encounter as a landlord. We'll also look at practical tips that can help protect your rental investment from legal trouble.

Common Legal Issues to Avoid as a Landlord 

1. Neglecting to Get Permission to Run a Background Check 

Thorough tenant screening can help you land great residents, but you’ll want to make sure you’re screening applicants in a way that’s fair and in compliance with the law. One mistake landlords make is skipping the step of getting permission from applicants before running a background check. This isn’t just a courtesy, it’s required by law under the Fair Credit Reporting Act (FCRA). 

What to do instead? Make sure you get permission from applications first, ideally in writing, before moving forward with a background check. 

2. Overcharging for Background Checks 

Another potential issue? Overcharging for background checks. While it’s reasonable to ask applicants to cover the cost, some states have limits on how much you can charge. For example, California currently caps the fee at around $60, adjusted annually for inflation. In New York, $20 is the most that landlords can charge for a background check.  

What to do instead? Be sure to check if there is a limit on how much you can charge in your state before conducting background checks. 

3. Asking Problematic Questions 

A question like “Are you planning to start a family?” may sound harmless, but it can be perceived as discriminatory. The Fair Housing Act prohibits discrimination based on familial status, meaning you can’t make decisions based on whether someone has children, or plans to. 

Religion is another sensitive area. Asking about a tenant’s religion can be seen as steering and may even violate fair housing laws. Asking about a prospective tenant’s citizenship or immigration status is also problematic.  

Attorney Ann O’Connell of the UC Berkeley School of Law gives a few examples of potentially illegal questions about race or nationality: “What’s your background?” “Where is your family from?” or “You speak English very well,” are examples of questions that you should refrain from asking them.  

 What to do instead? When asking for information from prospective tenants, whether it’s in writing or verbally, focus on their rental history and ability to pay, not personal details like their family status or religion. 

4. Discrimination in Ads 

Discrimination in rental ads is a serious issue that landlords need to be mindful of. Mentioning preferences like “looking for a single professional” or “ideal for young couples” might seem innocent on the surface, but they can be seen as excluding families with children or older individuals. These kinds of phrases may still be seen as discriminatory, and a violation of fair housing laws.  

What to do instead? To avoid problematic ads, review your listings and use neutral language that focuses on the features of the property rather than the type of person you’re looking for.  

5. Problematic Clauses in the Lease Agreement 

Your lease agreement should be airtight, but not at the expense of breaking the law. Clauses that waive a tenant’s right to sue for damages or limit their ability to file complaints about living conditions are not only unethical but may also be illegal. Imposing huge fees for minor infractions like a rent payment that’s only a few days late may also land you in hot water. Make sure your lease agreements comply with state and local laws and prioritize fairness and transparency. After all, a solid lease agreement should protect both parties involved.  

What to do instead? You might consider having your lease looked over by an attorney to ensure it’s in compliance with the law. 

6. Not Respecting Tenant’s Right to Privacy 

It’s tempting to want to keep a close eye on your property, but being a helicopter landlord can lead to serious consequences. Tenants have the right to enjoy privacy and peace in their rented living space. Entering a tenant’s unit without proper notice or a valid reason, such as during emergencies, is an invasion of privacy and violates the law in many jurisdictions.   

What to do instead? Be sure to provide tenants with adequate notice before conducting inspections.  

7. Neglecting Property Maintenance 

When tenants call about a leaky faucet or a broken heater, how quickly do you follow through? Ignoring maintenance issues isn’t just bad for tenant relations, it could land you in trouble legally as well. Landlords have a legal obligation to maintain a habitable environment. This means no mold, pests, or faulty wiring. Every U.S. state except Arkansas has laws that allow tenants to sue their landlord for an uninhabitable rental. Tenants might withhold rent, sue for damages, or even move out without notice, leaving you with vacancy and potential fines.  

What to do instead? Always respond to tenant requests for maintenance and repairs promptly. 

8. Mishandling Security Deposits 

Security deposits are meant to cover damages, not be a source of rental income. Most states require landlords to return the security deposit within an allowable time limit. If the entire amount or a portion of it will be held, many states require landlords to provide a written explanation and itemized list of repairs and costs. Some states take things a step further, and require landlords to keep tenant security deposits in an interest-bearing account. 

Texas law requires landlords to return the security deposit within 30 days, and failure to do so can result in the tenant being awarded three times the amount of the deposit. New York landlords must return the deposit within 14 days of the tenant vacating the property. Non-compliance could result in significant fines and landlords are ordered to return the full deposit amount, regardless of any damages incurred. 

Looking for more information on security deposits? Here’s an in-depth look at security deposits and refunds. 

What to do instead? Familiarize yourself with laws on security deposits in your state. 

9. Improper Eviction 

Each state has specific procedures that must be followed when evicting tenants so be sure to check these before you start the process. It’s also illegal to change the locks or threaten a tenant to get them to leave. Landlords must follow proceedings in accordance with state law. Typically, this means they will need to terminate the tenancy by providing written notice, and then move to file an eviction if the tenant doesn’t remedy the problem or move out. 

What to do instead? Check your state’s laws on evictions and ensure that you follow them. 

10. Failure to Make Disclosures 

In many areas, landlords are legally obligated to disclose certain information to potential renters to ensure their safety and well-being. Here are a few things your tenants should be aware of before they sign the lease agreement: 

• Presence of lead-based paint in properties built before 1978 

• History of mold and bed bug contamination 

• Information on radon gas and the presence of high levels of volatile organic compounds (VOC) in the unit 

• Upcoming renovations or repairs that may disrupt tenants’ use of the property 

Get your FREE guide on Risk Management for Landlords: Identifying and Mitigating Potential Hazards and Liabilities.  

What to do instead? Make sure you disclose important information to tenants before they sign the lease agreement. Check your state laws to see which disclosures are required. 

How to Avoid Legal Pitfalls as a Landlord 

1.  Stay Updated With Renting Rules and Regulations in Your Area 

The laws and regulations in rental property management are not set in stone. What was true three years ago may not be relevant today. In 2023, Minnesota signed several new landlord-tenant laws involving changes in inspections, lease terminations, fee disclosures, pet policies, and heating, among other things. Washington has also rolled out new renter protection ordinances in 2023, changing rules on security deposits and the eviction process.  

Ignorance of the law can result in hefty fines and potential lawsuits. Here’s a list of some of the most important landlord-tenant regulations and laws every landlord should know about:  

• The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, or disability in housing-related matters. The U.S. Department of Housing and Urban Development (HUD) website offers a wealth of information for landlords, including fair housing guidelines, landlord-tenant laws, and resources for affordable housing programs. 

• Fair Credit Reporting Act (FCRA) regulates how landlords can use consumer credit reports and background checks when screening tenants. 

• Americans with Disabilities Act (ADA) protects people with disabilities against discrimination in all areas of public life, including housing.  

• Local building and safety codes govern the construction, maintenance, and occupancy of rental properties and ensure they’re safe and liveable for tenants. 

• Local landlord-tenant laws, which cover a range of issues such as rent control, security deposit limits, and lease requirements, can vary significantly depending on the city or state. You can typically find information on local laws by visiting the city or state government website or contacting local housing authorities. 

2.  Implement Regular Inspection and Maintenance Schedules 

Regular property inspections help you catch potential issues early. It also shows your tenants that you’re committed to keeping the property safe and liveable. Set a schedule for regular property inspections, paying attention to common trouble spots like plumbing, electrical systems, and structural integrity. Don’t forget to inform your tenants in advance, or include a clause on maintenance schedules in your lease agreement. 

3.  Document Everything 

Documentation is your best defense in case of disputes. Suppose a tenant claims you never responded to their repair request for a leaky roof. Having a timestamped record of their request and your subsequent actions can protect you from false accusations. Keep detailed records of all interactions with your tenants, including lease agreements, repair requests, and communications about rent payments. 

5.  Get Proper Insurance 

Not all landlord insurance plans are the same, so be sure to get a policy that covers your needs. Property insurance protects against damage from fire, theft, or natural disasters. Adding extra protections like liability coverage can help cover costs that result from accidents or injuries that happen on your property, while a loss of income clause may cover lost rental income if your property becomes uninhabitable due to damage or other covered incidents. 

6.  Get Advice from Real Estate Lawyers and Accountants 

When in doubt, ask the experts. A real estate lawyer can help you create lease agreements that comply with both federal and local laws, ensuring clarity and protection for you and your tenants. When it comes to keeping up with taxes, speak to an accountant who specializes in real estate. 

7.  Work With a Rental Property Management Company 

Looking for an all-in-one solution that will streamline your rental operations and help you navigate the legal landscape? Teaming up with a property management company might be your best bet. Property Managers can handle all aspects where it’s easy to fall into legal traps.   

Their services typically include, but aren’t limited to: 

• Screening tenants fairly and thoroughly 

• Preparing compliant lease agreements 

• Documenting and keeping track of repairs, payments, and tenant communications 

• Responding to tenant concerns and repair requests promptly 

Want tips on hiring a reliable property manager? Read The Ultimate Guide to Finding a Good Property Manager. 

Legal issues can easily derail your financial goals and plans; but with the necessary precautions, you can help to keep your investment thriving for the long haul. And don’t forget that you can always enlist an attorney to help keep you in compliance. 

 Looking for help managing your rental? A Renters Warehouse property manager can handle tenant sourcing and screening, tenant communication, lease enforcement, and more. Get started today with 24/7 hassle-free property management today. 

This article is meant to inform and is not intended to provide legal advice. Renters Warehouse is not a law firm. Readers should consult with an attorney licensed to practice in their jurisdiction with any questions about their specific situation.