Legal Compliance for New Real Estate Investors

Landlord legal compliance is especially important for new investors who haven’t been involved in this industry before.  If you will make a mistake with legal compliance, you can have a very unpleasant experience with various government entities.

In this country, the laws which you have to deal with as a landlord are Federal, State and Local. On the Federal level or the bigger ones, you are going to get into Non Discrimination. This basically means you can’t discriminate based upon certain classes of people. State and local areas may also have additional non-discrimination classes. Now, it’s foolish to discriminate at any point. What you are looking for is you are looking for a quality tenant who is going to pay the rent, and who is going to take good care of the property.  Non Discrimination laws are really designed to protect tenants from people who have unethical business practices.

As an investor, what we look for in people is good quality individual and the capacity to pay the rent. We care less about their family status or the race, color or creed. These are some of the things that are going to be in the non-discrimination arena.

Some of the other things that we should be concerned about in Federal area are things like Lead based paint, carbon monoxide detectors and smoke detectors. There are rules and regulations in place that you have to follow under the building codes in order to be compliant. Now, you can find additional regulations under the State regarding things like lead based paint. Some states require landlords to remove it. Other states like Wisconsin simply requires that you provide disclosure to your tenants and make sure its encapsulated. You do want to be aware that those types of things have to be disclosed to the tenants and you have to follow the regulations.

The Federal and State level regulations are generally easy to follow because they don’t change that much. What does change on a regular basis are your local ordinances, depending upon where you are. For instance in Nevada the regulations aren’t very onerous. The landlords are able to pretty much run their business the way they see fit as long they do not discriminate or violate building codes and things of that nature.

On the other hand, I am a licensed broker in the state of Wisconsin and the ordinances are more onerous here.  Some cities have also piled on creating a difficult situation for the landlord.  These ordinances are hassles for the landlord, and it adds to the cost for the tenants.  I and other landlords simply pass on the cost of government compliance to the tenants.   For example, if you have a multi-unit building, you need to have a locking front door if there’s a common entrance.  You may need to use special light bulbs, provide special notices and services, etc.  So, depending upon the locality, you will have few or many regulations.  All things being equal I prefer easier jurisdictions.

Now, once you get a hang of dealing with the government mentality it becomes less troublesome. However, in the college towns across the country the tenants know the law, and if you don’t follow it, they can do anything from refuse to pay rent to via rent abatement or force you to evict them.  They can be sitting in your unit for months and you would never be able to collect the rent because you have violated some ordinance. You do need to be aware of these and incorporate them in your business practice to make sure that you don’t have any trouble.

Now, what you really need to do is you need to talk to your real estate attorney, not a general practice attorney. General attorneys are not experts in real estate. You want to find attorneys who specialize in real estate. You need to have a real estate attorneys either draft your lease in compliance with Local, Fed or State regulations, or you want to make sure that they review your lease and make any edits necessary to keep you compliant.

Landlord Associations are also a great benefit to the new investor. They are the people who have been through the hoops before. They know what you are going to need to comply with. Generally, joining a landlord association cost $100 - $300 a year. It’s well worth the money because they often have the compliance rental forms, the check-in forms and everything you are going to need to be a successful landlord and remain legally compliant. Remember, you can get into an awful lot of trouble if you violate the law. Make sure that you know your federal, state and local regulations and be compliant.  Either verify your questions or concerns with your attorney or your landlord association to ensure that your experience as a new investor is positive and profitable versus negative and expensive.