By Rachel Grainger Puryear, the Free Range Lawyer
Do you have an extra room in your house that you have considered renting out to a new housemate? Or have you thought about buying an investment property and renting it to families? You are not alone. Real estate investment can be a powerful tool for building wealth. Renting out property can be good money, but it is not necessarily easy money.
In law, as is the case in medicine, an ounce of prevention is worth a pound of cure. While many small landlords have great success in renting, others have gotten into legal troubles which turned out to be quite costly. Most of the time, it is because they do not adequately familiarize themselves with, and stay up-to-date with, landlord-tenant laws for their jurisdiction. So, here are a few things that small landlords new to renting should consider. This set of posts is not exhaustive, but covers basics.
This set of posts can also be considered a guide for tenants to better understand their rights.
Know the Fair Housing Laws:
The Federal Fair Housing Act of 1968 prohibits discrimination in housing, in an effort to give all Americans equal opportunities to access housing. The Act prohibits discrimination in housing based upon race, color, national origin, religion, sex, familial status (i.e., families with children and unmarried cohabiting couples), and disability. Of these, the area that tends to create the most confusion for landlords and tenants is what obligations exist regarding accommodation for tenants with disabilities.
Many states have added additional classes to be protected from discrimination – California also prohibits discrimination based upon sexual orientation, gender identity and expression (i.e., to protect transgender and gender non-conforming persons), source of income (i.e., to protect persons receiving public benefits), age (over 40), medical condition, ancestry, genetic information, and any other arbitrary discrimination. States may add classes of people to be protected from discrimination, but they may not refuse to protect any classes of people from discrimination that the Federal Fair Housing Act protects.
Note that a landlord could end up violating Fair Housing laws even if they did not intend to discriminate, and such violations can carry costly consequences. Therefore, it is important to understand Fair Housing laws before renting.
Here’s a link to more information about Fair Housing:
Know the Laws on Rent Control, Just Cause Eviction, and Other Tenant Protection Policies:
Not every city or municipality has rent control, and/or just cause eviction.
If no rent control law is on the books, landlords may raise the rent by as much as they like, so long as it does not violate a lease or any other applicable laws. Likewise, if no just cause eviction statute exists, landlords may terminate a tenancy in accordance with legal procedures for any reason not violating a lease or any other applicable laws (like fair housing).
Rent control statutes limit the amount by which a landlord may raise rents every year, and typically limit rent increases to intervals – usually once per year.
Just cause eviction statutes limit landlords to only terminating tenancies for certain reasons – such as failure to pay rent, habitual late payment of rent, creating a nuisance; or sometimes for reasons not the fault of the tenant, such as when the landlord wants to move a family member into the unit instead. Different statutes will vary, but will generally include the most serious of lease and rental violations.
Rising rents in many cities have prompted increasing numbers of municipalities to enact rent control and just cause eviction ordinances, as well as stronger tenant protections generally. Even if an area has no rent control or just cause ordinances now, it might later on. Prospective landlords should accordingly consider not just whether such ordinances exist now, but also whether there is strong local advocacy occurring for rent control and just cause eviction, and if voters are increasingly supporting such measures. Gentrification and sharply rising rents in an area often prompt such advocacy.
Additionally, some rent-controlled municipalities have gone so far as to require landlords to pay relocation expenses for tenants whose tenancies are terminated under certain no-fault circumstances. Under such laws, a landlord might pay to the tenant months or years worth of the difference between market rate rent, and the rent that the tenant was paying (the latter of which might be much less than market rate for a longtime rent-controlled tenant). For certain tenants, such as families with children or tenants who are elderly or disabled, the payment might be enhanced or even multiplied from what would be paid to other relocating tenants. As you can imagine, this can be quite expensive for landlords who simply want to sell or move into their property, especially if that landlord had rented a unit to tenants who often have a harder time finding units. The existence of such laws requiring relocation payments, or their likelihood of future enactment in a city, is definitely something for a prospective landlord to know and think hard about. However, notably, a San Francisco judge recently found such a law to be unconstitutional, so there may be successful future challenges to such laws:
Here are some links with more information about rent control and just cause eviction:
Information about San Francisco’s Just Cause Evictions laws, as SF has one of the more extensive protections:
Stay tuned for the upcoming second part of this post, which will cover the more day-to-day responsibilities that landlords have to their tenants – civil code rules on habitability, privacy, and more; leases; and screening of tenants.
As always, dear readers, thank you for following me. I hope you enjoyed this, and learned something valuable.
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Please note that the above is offered for educational purposes, and as a means of encouraging intellectual curiosity about the law. The information presented may not take into account every exception, variation, or complication which could apply to someone’s legal matters. Accordingly, nothing in this post or blog is ever intended as, nor should be construed by or relied upon by anyone, as legal advice. If you need legal advice, please consult an attorney who can give you assistance specific to your needs.