Landlords and Tenants
Businesses must operate within the law. For landlords and tenants located in the United States, that means federal, state, and local laws.
Fair Housing Act
One of the most important and relevant federal laws is the Fair Housing Act (FHA), which prohibits discrimination by landlords, banks, and insurance companies, because of race, color, religion, sex, national origin, familial status, or disability. Prohibited by the FHA when dealing with these protected groups in the process of renting or selling:
- refusing to negotiate, rent, or sell housing (the sublist below is actually part of the FHA law, but seems to be saying basically the same thing)
- making housing unavailable or denying a dwelling (the meaning of this phrase is vague, but, from looking at some specific complaints, it seems to mean to deny housing because of the renter's or buyer's protected status, so this phrase is probably synomous with the previous list item)
- falsely denying that housing is available for inspection, sale, or rent
- stating falsely that housing is not available either for rent or for sale
- setting different terms, conditions, or privileges for different groups of people
- providing different services or facilities to different groups
- providing different housing services or facilities
- denying access to a membership in a facility or for a service, such as the multiple listing service
- persuading owners to sell or rent because of demographic changes, otherwise known as blockbusting
The Fair Housing Act also prohibits discrimination in renting, buying, or securing financing for any housing because of children, or, as it is often phrased, because of familial status.
No one can be threatened, coerced, intimidated, or interfered with, who is exercising a fair housing right or to assist others to exercise the same. Likewise, advertising cannot convey any indication of a limitation or preference based on the protected group status. Discriminatory advertising is prohibited even for single-family and owner-occupied housing that would otherwise be exempt from the Fair Housing Act.
Those with a disability — including mobility and sensory impairments, mental illness, chronic alcoholism, AIDS, or related diseases — should be permitted to make reasonable modifications to their dwelling or common use areas, even if it is at the expense of the landlord. However, in some cases, when reasonable, the landlord may require that the disabled tenant restore the property to its original condition before moving. Landlords must also provide reasonable accommodations in policies, rules, practices, or services so that the housing can better accommodate the disabled person. So a blind person should be able to keep a guide dog even if there is a no pets policy or disabled people living at an apartment complex with unassigned parking should be able to obtain reserved parking located near their home.
However, anyone who is a direct threat to the health and safety of others or who uses illegal drugs can be denied housing regardless of protected group status.
If an applicable state or local law is more stringent, then that applies.
Buildings or communities other than those designed for older persons, may not discriminate based on familial status, such as families with one or more children younger than 18. However, at least one adult of the family must be a parent or person who has legal custody of the minors or is a designee of a parent or legal custodian, with written permission. Familial status also applies to pregnant women or anyone securing legal custody of a child under 18.
Housing designed or marketed to older persons is exempt against familial status discrimination if:
- the HUD secretary determines that the dwellings were designed and occupied by elderly people under a government program
- is occupied solely by people 62 or older, or
- at least 80% of the occupied units have at least one person who is 55 or older and the management of the community demonstrates an intent to market the property to people who are at least 55.
New Building Requirements
Buildings with an elevator and 4 or more units that were 1st occupied after March 13, 1991 must have:
- public and common areas assessable by disabled people
- doors and hallways wide enough for wheelchairs
- all units must have:
- an accessible entrance and exit
- assessable light switches, electrical outlets, thermostats and other environmental controls
- reinforced bathroom walls that will support grab bars
- kitchens and bathrooms usable by people in wheelchairs.
If a building with at least 4 units has no elevator, then the standards apply only to the ground floor units.
Section 8 Housing Program
The Department of Housing and Urban Development (HUD) oversees the Section 8 housing program, offering rental assistance to low income families, where approved tenants pay a portion of the rent with the program covering the rest.
A major advantage of the Section 8 program to the landlord is the assurance of the government portion of the rent. However, the government will not reimburse the landlord for the tenant's portion if the tenant does not pay. Other disadvantages include low allowable rent and no reimbursement for repairs if the tenant damages the property.
Although the law prohibits discrimination based on protected group status, landlords can establish minimum requirements for their tenants, including:
- minimum income and creditworthiness
- stable employment record
- good rental references
- requiring tenants to maintain an insurance policy to cover personal property
Good rental references can be advantageous in selecting good tenants, but many previous landlords will be reluctant to give specific information, to prevent liability. Requiring that tenants have insurance for their personal belongings lowers the likelihood that they will sue the landlord if their personal property is damaged or destroyed. Because all people must be treated equally under federal law, the landlord should print the list of requirements and give them to each prospective tenant.
The relationship between the landlord and the tenant and their respective obligations are determined by a lease, giving the tenant the right to possess the property for a specific reason for a specific duration. In regard to leases, the landlord is the lessor and the tenant, the lessee. Any buyer of property that is already occupied by tenants will be bound by the lease between the tenants and the previous owner.
Because landlords generally provide the lease for residential tenants, certain contract principles apply to such leases. First and foremost, any provisions that violate state or local laws will not be enforced. Even if the lease terms do not violate the law, leases that are too favorable to the landlord or too burdensome to the tenant may be declared unconscionable, causing the court not to enforce the unconscionable provisions. The legal basis for unconscionability results from the unequal bargaining power between the landlord and tenant, since most tenants do not generally choose properties according to the terms of the lease, which they often do not even see until they accept the rental, and even if they did shop around for lease terms, they would find that most landlords provide basically the same provisions, since most leases are standardized. Another legal principle that favors the tenant is that any ambiguity in the lease will be construed against the maker of the lease, which in most cases will be the landlord.
There are different types of leases. Most residential leases are fixed-rent leases (aka gross leases) where the tenant pays a fixed amount periodically to use the property. Commercial and industrial properties often use a net lease, where the tenant not only pays for the monthly use of the property, but also some or all of the expenses to maintain the property, such as taxes and utilities. Retail leases are often percentage leases, where a minimum amount must be paid periodically plus a percentage of the tenants' gross or net income. Graduated leases provide for rent increases in the future based on an indicator, such as an economic index or changes in the appraised value of the property. Graduated leases are most often used for long-term leases, such as those for office space. An index lease is adjusted according to an economic index; a reappraisal lease adjusts the least amount to changes in the property's value.
Leases typically have the following provisions:
- names of all the people who will be using the property and who will be responsible for paying the lease
- joint and several liability clause, where each signatory is responsible for the full amount of the rent and compliance with the lease
- beginning and end dates and what happens at expiration
- the amount of notice that the tenant must give before moving out
- the approval by the landlord of any additional tenants after the lease is signed
- fees for late payments and bounced checks
- the amount of the security deposit
- whether pets are allowed and any additional rent increase because of the pets
- any deed restrictions or laws that would apply to the tenants and their use the property
- a provision that would allow the landlord to enter the premises at a reasonable time and with sufficient notice
The amount of the security deposit is generally limited by state law for residential tenants and the funds must usually be held in trust accounts.
Managing the Property
The landlord should also establish relationships with repair people that may be needed to repair the properties, especially if emergency repairs are required. Many landlords hire property managers to manage their properties. Although this saves much time and headaches for the landlord, it also reduces profits. Property managers are often hired when the landlord has little time to manage the property or the property is located far from the landlord's home. Considerations for property managers include:
- fees and the services provided
- experience and training of the managers
- references from other clients
- when rents will be transmitted to the landlord
- the company's credit rating; and whether the company has an active broker's license.
The property manager may also want an upfront payment for a repair fund, so that repairs can be made without continually contacting the landlord.