Landlord Insurance: Ways to Minimize Your Liability Part 2

Landlord Insurance: Ways to Minimize Your Liability Part 2

As a continuation of our previous article,  we’ll continue to look at more ways that landlords can be held liable and strategies to avoid legal action before it occurs.

Make Your Property Accessible for the Disabled and Impaired

While it varies by state and municipality, you may be required to follow the Fair Housing Act’s “design and construction” requirements to accommodate tenants with mobility impairments and other disabilities. As a general rule of thumb, multi-family building that were designed and built for their first occupancy after March 13^th, 1991 must comply.

To further minimize your liability, take the initiative and consider the request from a disabled prospective tenant to modify your building. While a chair elevator for the stairs may be too big and expensive of a request to honor, adding grip bars to the walls and showers can prevent an accident from occurring. It also shows your intent to go beyond your required duties as a landlord, which not only makes your tenants happier, but also can aid you if you are sued for being negligent.

Preparing for Emergencies

It’s a familiar saying, but failure to prepare is preparation for failure. Take measures to safeguard your property, employees, and tenants before an incident occurs. Some ways to ensure that disaster doesn’t catch you off-guard are:

• Make sure to document the location of the shut-off valves for your utilities (gas, water, electric, etc.) and provide documentation to your tenants in case of a problem. This can minimize damage and injury.
• Ensure that emergency exits are obvious, structurally-sound, and obstruction-free.
• If you notice suspicious activity on your property, be sure to notify the police. Small indicators, such as constant short-term visitors to your property, can often be signs of criminal activity that can be detrimental to the health of your other tenants at the same location.
• Backing up your documents and computer files in at least two separate places (preferably off-site) to make sure that a break-in or catastrophe won’t set you back or eliminate your documentation for court proceedings.

Reduce the Risk of Crime and Vandalism at Your Property

To keep your property and your tenants safe, you must comply with state and local laws concerning security measures. Recently, courts have been known to hold landlords liable for crimes on their rental properties because there wasn’t sufficient security to prevent theft, injury, and so forth by opportunistic criminals.

Some methods to reduce crime and institute a safe environment are:

• Installing new locks for every new tenant
• Lock up garbage and dumpsters to prevent non-tenants from rummaging through your tenant’s personal records, data, and information.
• Pay particular attention to the “broken windows theory,”  which means that not keeping up with repairs may signal to criminals that other security measures have not been taken, and thus the property (and residents) are vulnerable. This includes removing gang-related graffiti and shoes on telephone poles promptly to discourage territorialism.
• Discourage your residents from leaving their valuable in plain sight by encouraging curtains, storing their valuables inside, etc.
• Make sure the intercom system is not directly labeled with tenants and their apartment numbers.

In addition, you must screen potential tenants AND your employees carefully. Conducting a thorough background check and looking for violent or larcenous behavior are clear indicators for trouble in the future. Also, make sure that tenants comply with a visitor policy that discourages overnight guests for a long period of time.

Choosing Your Prospective Tenants Wisely?

One way to open yourself up to liability has almost nothing to do with rent, locks, or a guest policy. If a prospective tenant believes that you violated their civil rights in your screening process, you may legal action taken against you and/or your business. Even if you know that the case is groundless and that you have a high likelihood of winning, defending yourself can be costly for your time, energy, and money, resulting in higher premiums if your insurer is forced to act on your behalf.

But how do you defend yourself against this type of liability? Short of treating every potential tenant the same, your best course of action is to educate yourself on the basics of Fair Housing laws in your state. In addition, there’s a few precautionary measures you can take:

• Written screening criteria: By conspicuously stating your screening criteria in a written tenant selection plan and providing a copy to applicants, you can reduce the amount of confusion and ill-will if tenants don’t match up for reasons you specified.
• Business reasons: As a landlord, you are a business owner and can operate your properties for legitimate financial reasons, including substandard credit, negative references from prior landlords, and so forth. However, do be sure to inform the applicants your reasons for rejecting them, offering a possibility for renting in the future to diffuse ill-will.
• Flexibility: Not all tenants will fit neatly into your guidelines, so it helps to be flexible when determining whether a prospective tenant requests reasonable accommodation. One common example of granting a reasonable exception to a “no pets” policy would be for an individual that needs a guide dog to accommodate their vision impairment.

Conduct Your Business with Discretion

Sometimes it may not be an accident that creates a liability issue for landlords. Instead, landlords who don’t maintain careful records and consistent terms may be exposing themselves (and their business) to undue risk. Here’s a few best-practices for conducting your business with discretion:

• Use a written lease or rental agreement with tenants that clearly spells out what you expect from tenants (ex. rent is due on the 5^th of the month)
• Enforce lease clauses consistently. By creating clear and direct rules for tenants to follow, you are able diffuse any tenants that seek to find loopholes in your policies.
• Don’t be afraid to enforce your terms if tenants refuse to comply. A single lawsuit could be a significant financial loss, and it may not even be caused by your negligence.
• Follow the rules of the law when it comes to eviction, as this can open a can-of-worms depending on state laws. For instance, if you choose to evict a tenant prematurely, they may be granted the ability to stay LONGER at your property, making potential rent lost to an old tenant and collection difficult without going through legal proceedings.

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As you can see, there’s many ways that landlords can be exposed to liability and subsequently brought to court. That’s where hiring an expert in insurance can mean the difference between paying out-of-pocket or avoiding legal proceedings altogether. Contact the insurance advisors at Riskblock today to help you determine where your investment property can protect itself and generate income for years to come.