If you own real estate or want to make an investment in rental property now, there
are new landlord rules that you really must familiarize yourself with. That’s because even if you have been doing everything right up until now, recent law changes may expose you to a great deal of landlord liability. This is true even if you are only renting out your house while you are waiting to sell it.
The main issue of course is renter safety. Of course you should be very careful when you look for tenants. But even if you do a great job in that department, you could still find yourself in hot water. You simply must comply with safety codes, regulations and disclosure requirements. The problem is that there are Federal and State regulations to contend with. Many states require you to install carbon monoxide detectors for example. In California, this law applies to both single family homes and multi-unit dwellings. Even if your state doesn’t require
you to install these monitors, you probably should do so anyway.
Many states force you to have smoke detectors that are set up in such a way that all of them go off if any one of them does. And advanced technology allows landlords to prevent fires as well. There are circuit interrupters that stop fires from starting by shutting down the power if the electric circuits malfunction. These are known as “Arc-fault circuit interrupters”. These interrupters were only required in bedrooms but now they must be used in most rooms of the house or apartment.
Many city councils are trying to keep a lid on the number of rentals in different neighborhoods. They are starting to charge an annual inspection fee and a one-time conversion fee if you take an owner occupied dwelling and turn it into a rental.
If you plan on renting out a property that is already subject to Homeowners Association rules, review these carefully before you rent out the property. These rules may restrict or
prohibit you from taking action.
Some municipalities allow landlords to prohibit smoking on their property while others do not. Other cities have rules that govern how long tenants can place political signs on the property they are renting.
Last July, a new National rule went into effect that requires landlords to share credit score information about the tenant if that information was relied on to deny the rental application.
You can see that the rules are varied and confusing. The best course of action is to become an expert in the local laws. This may seem like a pain but if you want to own property, you simply have no choice. Become part of as many property owner’s associations as you can and become active. Discover good sources of information and stay connected. That is truly the only way to stay on top of this ever-changing landscape.
this new bureaucratic red tape, there is a great deal of demand for rentals and as a result, rents are rising. So don’t let this liability issue scare you off. If you are a landlord, how are you dealing with all the new bureaucracy? How do you stay on top of the red tape and changing rules?
Visit the California Institute of Finance’s Website to learn more about our MBA In Financial Planning program.
Neal Frankle is a Certified Financial Planner with more than 25 years of experience, author of the Wealth Pilgrim blog, and a featured contributor here on the “Advisor Blog”.