Becoming a landlord has a lot of financial appeal. In 2015, over 22 million rental properties were owned by single investors, and over 25 million rental properties are owned by entities and corporations. What does that mean? It means there are a lot of landlords in the US! And while owning rental properties can help plan for retirement or offer financial freedom, they come with certain legal and ethical responsibilities as well. Before you purchase your first single family home or multi-family property to rent, it’s essential you know the legal requirements of all landlords.
Fair Housing Act
The Fair Housing Act prohibits discrimination by landlords based on protected classes. It is a federal law that a landlord can’t deny housing to an individual based upon race/color, religion, sex, national origin, familial status, or disability. In fact, substantiated discrimination by a landlord comes with a cost for the landlord: a landlord can be sued in state or federal court. Furthermore, advertisements for the property can’t include discriminatory language. Landlords can’t charge different rates based on protected classes either.
Exemptions to the Fair Housing Act
While the Fair Housing Act is designed to protect the public, there are a few exemptions for landlords.
- The owner/landlord does not own more than three single-family houses at one time.
- The house is rented without the use of a licensed real estate agent.
- “Rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other if the owner actually maintains and occupies one such living quarters as his or her residence.”
- “Religious organizations, when they favor persons of the same religion in the sale, rental, or occupancy in their noncommercial dwellings (unless membership in such religion is restricted because of race, color, or national origin).”
- “Private clubs (not in fact open to the public), when they favor their members in the rental or occupancy of incidental, noncommercial lodgings.”
- It’s important to know, however, that regardless of the exemptions, no landlord can use discriminatory language in their advertising.
Americans With Disabilities Act
While people with a disability are already covered under the Fair Housing Act, the protections extend beyond that. It’s important for landlords to understand the broad definition of disability. In fact, the definition includes mental and physical handicaps. Federal law goes even further to protect those with disabilities. Federal law states that a landlord can’t refuse to let a person make reasonable modifications to a dwelling or common use areas. The modifications do not have to be paid for by the landlord, and the tenant is obligated to have the property restored to its original condition upon moving out. A few common modifications are allowing service animals in a “no pet” rental property or allowing the construction of a wheelchair ramp to make the home accessible.
City Codes and Ordinances
Not only does a landlord have to abide by federal law, but many cities have their own landlord ordinances. It’s important for many cities and jurisdictions to track rental properties as opposed to owner occupant homes, so many cities require landlords to register their rental properties with the city. These registrations may also include inspections to ensure the home meets code. Furthermore, city ordinances and registration may control how often and how much a landlord can increase the rent, eviction processes, and how the property is maintained. Before you purchase a rental property, it’s important to check with your local city, county, or jurisdiction to determine laws and ordinances for landlords.
While there are many city, state, and federal laws a landlord must follow, it shouldn’t discourage an investor from purchasing a rental property. In fact, these laws are put in place to protect the public, the landlord, and the community. However, it’s important to note that ignorance of the laws- at any level- does not alleviate a landlord from his/her legal responsibility.