Author Topic: Landlord liability and lawsuits?  (Read 2805 times)

Bearded Man

  • Handlebar Stache
  • *****
  • Posts: 1142
Landlord liability and lawsuits?
« on: July 18, 2015, 12:04:57 AM »
I carry an umbrella policy since I'm a landlord, however; I can't for the life of me think of what someone could do that might result in a major lawsuit against me.

I mean, people usually don't get hurt around the house, and if they do, it's likely doing something like chopping carrots; not something that would have anything to do with negligence on my part.

I ask because a recent new tenant asked me if I have multiple rental properties toward the end of the tour of the house. I suppose it could be a normal question when I look young but have a house and appear to have the spiel down, but the thought did cross my mind when she asked; is she planning on suing me for some made up claim to get rich off me? These kinds of things cross your mind in the worlds most litigious society...and yes I was sued once for a car accident.

A completely frivolous law suit from a money grubbing illegal immigrant (Police on scene identified her as such because she admitted that was the reason she didn't have a drivers license). I wasn't even at fault, and they tried to come after my insurance company for a payout. My insurance told them to pound sand as they don't won't to develop a reputation that they were the place to make quick cash via a settlement just because it's cheaper to make them go away than to defend themselves in court.

Point being, there are some real ghetto aholes out there that have nothing, care about nothing and will gladly steal any money they can via frivolous lawsuits.

math-ya

  • Stubble
  • **
  • Posts: 106
  • Location: USA
Re: Landlord liability and lawsuits?
« Reply #1 on: July 18, 2015, 04:34:29 AM »
Maybe you didn't shovel, and someone slipped on the ice. Maybe their is some shotty electrical work, and a tenant or maintenance person gets electrocuted. Maybe a dry rotted plank on the porch breaks and someone falls thru. Maybe their is some mold or paint or asbestos or gas leak or infestation that made a tenant sick.
Medical bills add up quickly.
I think if you maintain your properties well, don't hire unlicensed workers for jobs that need it, and keep in contact with your tenants- fixing any issues as they arise, you can severely mitigate this type of risk.
I saw the news story about the balcony in CA that collapsed a month ago and killed some people. It had severe dry rot. Any decent landlord would address a serious safety concern like this. That guy deserves to get his houses taken away cuz he's not responsible enough to be a landlord. I have one older porch on a property that I'm constantly checking and reinforcing.

SnackDog

  • Pencil Stache
  • ****
  • Posts: 957
  • Location: Latin America
Re: Landlord liability and lawsuits?
« Reply #2 on: July 18, 2015, 05:09:01 AM »
Umbrella coverage is cheap. Make sure you have as much as you think you need. Minimize risks however you can.  Rent to high quality people.
The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind. –Thomas T. Munger

forummm

  • Walrus Stache
  • *******
  • Posts: 7358
  • Senior Mustachian
Re: Landlord liability and lawsuits?
« Reply #3 on: July 18, 2015, 07:03:35 AM »
Put each of your properties in its own LLC. Then your risk is limited to the one property that's the subject of the lawsuit. A $5 million policy is pretty cheap. And you can probably write it off as a business expense.

math-ya

  • Stubble
  • **
  • Posts: 106
  • Location: USA
Re: Landlord liability and lawsuits?
« Reply #4 on: July 18, 2015, 07:41:41 AM »
Put each of your properties in its own LLC. Then your risk is limited to the one property that's the subject of the lawsuit. A $5 million policy is pretty cheap. And you can probably write it off as a business expense.

Will separate llcs really help? I have heard that they can go after anything you own, and the only time a llc helps is if there are multiple members- because then it's too difficult to tell exactly who owns what within the business.

Crushtheturtle

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Landlord liability and lawsuits?
« Reply #5 on: July 18, 2015, 08:54:45 AM »
Question: "Do you own multiple rental properties?"

Polite Answer: "That's not important. Are you interested in renting"

Honest answer: "That's none of your god damn business. Are you interested in renting?"

Cathy

  • Handlebar Stache
  • *****
  • Posts: 1044
Re: Landlord liability and lawsuits?
« Reply #6 on: July 18, 2015, 09:19:20 AM »
The most common way you will be exposed to liability as a landlord is by not understanding the law, causing you to do things that contravene it. This seems to be pretty common. Lay landlords often seem to have very confused ideas about the legal nature of renting. Renting a property involves two distinct relationships between the parties: real property rights that arise from the conveyance of a leasehold estate by the owner of the fee simple estate to the sub-tenant; and contract rights that arise from the rental agreement (whether written or otherwise). Additional statutory rights could be a third category. Even professional landlords seem to be very confused about these matters.

Umbrella insurance is not a ticket to avoid liability. The insurance policy will only cover what it says it covers. There are typically many exceptions.

Whether somebody is lawfully present in the United States is going to be irrelevant to almost every lawsuit outside of immigration litigation. There is no principle of law that says that persons unlawfully present in the country are entitled to fewer rights in a landlord-tenant or lessor-lessee relationship. In fact, Cal. Civ. Code § 1940.3(b) prohibits a landlord from, among other things, inquiring about whether a prospective or actual tenant is lawfully present in the country.
« Last Edit: July 18, 2015, 09:49:25 AM by Cathy »
This post contains only general information on the issues raised by this topic. This post does not provide help tailored to your specific situation. There are many facts that could be relevant to your specific situation and I am not in possession of those facts. If you need help tailored to your specific situation, you should retain an appropriate professional and not rely on this post.

Bearded Man

  • Handlebar Stache
  • *****
  • Posts: 1142
Re: Landlord liability and lawsuits?
« Reply #7 on: July 19, 2015, 01:39:31 AM »
Put each of your properties in its own LLC. Then your risk is limited to the one property that's the subject of the lawsuit. A $5 million policy is pretty cheap. And you can probably write it off as a business expense.

Will separate llcs really help? I have heard that they can go after anything you own, and the only time a llc helps is if there are multiple members- because then it's too difficult to tell exactly who owns what within the business.

They don't help in most states, all they will do is get a charging order against you. There are still companies that offer LLC asset protection services to those who don't realize that they don't protect anything in most states anymore. Off shore or alaska trusts are the only way to protect your money; that and not owning anything, only controlling it.

Cathy

  • Handlebar Stache
  • *****
  • Posts: 1044
Re: Landlord liability and lawsuits?
« Reply #8 on: July 19, 2015, 11:19:20 AM »
They don't help in most states, all they will do is get a charging order against you. There are still companies that offer LLC asset protection services to those who don't realize that they don't protect anything in most states anymore....

I think there might be a misapprehension here. The limited liability aspect of an LLC refers to the fact that if there is a judgment against the LLC, it can only be executed against the LLC and not the member(s) of the LLC unless the judgment creditor can pierce the corporate veil pursuant to the applicable legal tests. That is real asset protection.

However, an LLC or other company structure is not intended to help in the situation where the judgment is against a member of the LLC. If there is a judgment against a member of the LLC, it can be executed (through various procedural devices) against the LLC because the LLC is part of the member's assets. These company structures are not intended to allow the owner of a company to avoid collection of judgments against the owner.

Here's another more obvious example of this principle. Let's suppose you have $1,000,000 of AAPL stock. You are a co-owner of AAPL. If I obtain a judgment against you for $500,000, the Court can certainly order you to transfer your AAPL stock to me, or sell it and pay me the proceeds. The fact that you have your money inside AAPL does not protect it from me, a judgment creditor against you. Conversely, if I obtain a judgment against AAPL, I could not execute it against you (although the execution of it against AAPL will reduce the value of your position in AAPL).

Note that there is a different body of law that governs who is liable for things in the first place. Let's suppose you trespass on your tenant's apartment because you don't understand the law relating to entering a leased property in which you no longer have a possession interest. Who is liable for this tort: you or the LLC who signed the lease, or both? That comes down to the application of the law of agency, which I'm not going to get into here. However, please note that the argument that you are personally liable for this tort is a much different argument from piercing the corporate veil (although the plaintiff may try to do both).

This is just general information and not advice. The details vary based on jurisdiction so this information should not be relied on.
« Last Edit: July 19, 2015, 03:22:50 PM by Cathy »
This post contains only general information on the issues raised by this topic. This post does not provide help tailored to your specific situation. There are many facts that could be relevant to your specific situation and I am not in possession of those facts. If you need help tailored to your specific situation, you should retain an appropriate professional and not rely on this post.

historienne

  • Bristles
  • ***
  • Posts: 257
Re: Landlord liability and lawsuits?
« Reply #9 on: July 20, 2015, 12:24:29 PM »
Question: "Do you own multiple rental properties?"

Polite Answer: "That's not important. Are you interested in renting"

Honest answer: "That's none of your god damn business. Are you interested in renting?"

As a tenant, though, there are plenty of non-shady reasons to be interested.  I always preferred to rent from landlords that owned multiple properties.  They tended to be more professional, get things fixed more quickly, etc. Basically, I wanted to be doing renting from someone who viewed it as a business and understood that our mutual obligations were governed by 1) the lease we signed and 2) landlord-tenant law.  The times I rented from someone who owned just the one property, I had trouble with things like withholding the security deposit without good cause or documentation, and expecting us to allow access to the property without sufficient notice.  They still thought of the property as their house, even though they were renting it to me, which gave them unreasonable expectations about my duties as a tenant.  And for the record, I was a great tenant!  Always left apartments spotless, never a day late on rent.  I just want my landlords to follow the law and the lease we signed.

NoNonsenseLandlord

  • Bristles
  • ***
  • Posts: 396
  • Age: 57
  • Location: Eagan, MN
    • No Nonsense Landlord
Re: Landlord liability and lawsuits?
« Reply #10 on: July 20, 2015, 05:34:35 PM »
Probably a HUD fair housing complaint is the most likely issue.  An umbrella policy will not cover that.  It may be a $10K fine, or a full blown lawsuit.

Be sure to have a consistent method of screening, for everyone.  Advertise on-line, so you get the word out to all areas, not just your local area.

And obey the lease, do not irritate the tenant.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 3443
  • Age: 9
  • Location: WA
Re: Landlord liability and lawsuits?
« Reply #11 on: July 20, 2015, 05:57:55 PM »
Question: "Do you own multiple rental properties?"

Polite Answer: "That's not important. Are you interested in renting"

Honest answer: "That's none of your god damn business. Are you interested in renting?"

As a tenant, though, there are plenty of non-shady reasons to be interested.  I always preferred to rent from landlords that owned multiple properties.  They tended to be more professional, get things fixed more quickly, etc. Basically, I wanted to be doing renting from someone who viewed it as a business and understood that our mutual obligations were governed by 1) the lease we signed and 2) landlord-tenant law.  The times I rented from someone who owned just the one property, I had trouble with things like withholding the security deposit without good cause or documentation, and expecting us to allow access to the property without sufficient notice.  They still thought of the property as their house, even though they were renting it to me, which gave them unreasonable expectations about my duties as a tenant.  And for the record, I was a great tenant!  Always left apartments spotless, never a day late on rent.  I just want my landlords to follow the law and the lease we signed.
I agree. When looking to rent I am interviewing the landlord as much, if not more, as he is interviewing me. It depends how it's asked and the general vibe of the conversation is currently going, but it's completely acceptable to enquire as to how much landlording qualifications and experience you can expect from the counterparty of the transaction.

norcalmike

  • 5 O'Clock Shadow
  • *
  • Posts: 52
  • Location: Santa Cruz , CA
Re: Landlord liability and lawsuits?
« Reply #12 on: July 24, 2015, 01:59:49 AM »
Question: "Do you own multiple rental properties?"

Polite Answer: "That's not important. Are you interested in renting"

Honest answer: "That's none of your god damn business. Are you interested in renting?"

As a tenant, though, there are plenty of non-shady reasons to be interested.  I always preferred to rent from landlords that owned multiple properties.  They tended to be more professional, get things fixed more quickly, etc. Basically, I wanted to be doing renting from someone who viewed it as a business and understood that our mutual obligations were governed by 1) the lease we signed and 2) landlord-tenant law.  The times I rented from someone who owned just the one property, I had trouble with things like withholding the security deposit without good cause or documentation, and expecting us to allow access to the property without sufficient notice.  They still thought of the property as their house, even though they were renting it to me, which gave them unreasonable expectations about my duties as a tenant.  And for the record, I was a great tenant!  Always left apartments spotless, never a day late on rent.  I just want my landlords to follow the law and the lease we signed.

On the flip side, I currently rent from a landlord that owns multiple properties. He is the classic slumlord. He refuses to take pride in his properties and keep them in good condition. This is one of the reasons I am moving. Our place is the scourge of the neighborhood. It embarrassing.
I still plan on renting due to the high cost of owning in the town I live and work. So i am looking at investing in my own rentals in other areas so i can at least hold property somewhere.
I promise to never be a slumlord.
Better late than never