If you own rental property, protecting your investment is a full-time job. Whether it’s property damage, insurance claims or tenant lawsuits, there are plenty of ways you can lose. Fortunately, there are also plenty of things you can do to reduce your risks, like these risk management tactics:
- Provide a safe environment. Landlords have a duty of "due care" to take reasonable steps to protect tenants from foreseeable danger. That includes regularly inspecting and maintaining your property to keep it safe, fixing any dangerous conditions, reporting any suspicious activity to police, promptly responding to tenants’ security concerns and repair requests and taking precautions against criminal behavior by tenants or others who enter the property. You also need to take steps to keep your business, your property and your tenants safe in an emergency, such as a fire or flood.
- Eliminate environmental hazards. Inspect your property for environmental risks, such as lead-based paint, asbestos, mold, carbon monoxide and radon. Comply with all federal and state laws, install carbon monoxide detectors, maintain appliances and vents, repair water leaks and comply with asbestos regulations.
- Comply with Fair Housing laws. State and federal laws prohibit discriminatory practices when selecting tenants, such as discrimination based on race or color, national origin, sex, religion, familial status or disability. You must also make your rental property and rental units accessible for disabled tenants and comply with requests for reasonable modifications to accommodate them. A civil rights lawsuit is likely to be costly; so learn the basics of Fair Housing laws and treat everyone the same.
- Screen tenants and employees. Carefully screen potential tenants for income, credit history, criminal record and negative references from previous landlords, and conduct a thorough background check on potential employees. Make sure anyone working for you is properly classified as either an employee or an independent contractor.
- Get your policies on paper. Document your policies and procedures for screening, renting and hiring in writing. Use written lease or rental agreements, and consistently enforce your rules regarding health, safety and pets.
- Secure adequate insurance. Make sure you’re sufficiently covered. Property, general liability and landlord liability insurance are vital. You may also want to consider an umbrella policy to extend your limits in the event of a large claim. Don’t wait until you suffer a loss to find out if you’re adequately covered.
Take action now to minimize your rental property risks. It doesn’t require a huge investment or a staff of experts. It’s just a matter of knowing your liabilities and taking a few proactive, commonsense steps.
Learn more about Higginbotham’s real estate insurance programs or request a complimentary quote. We are your real estate experts for shopping centers, multi-tenant office and retail buildings, residential complexes and mixed-use developments.