Landlord reference checking is a simple step but some landlords skip over this critical screening thinking it unnecessary if the credit report is satisfactory. The fact that an applicant looks good on the credit report does not guarantee you’ve found a good tenant. Being in a hurry to offer tenancy without conducting all necessary tenant screenings has the potential for claims of liability and negligence.

Some applicants hope that a landlord will be too busy to check rental references and the applicant can slide by, therefore avoiding a negative reference or calling attention to the fact that the applicant is in process of being evicted.

Reference checking with previous landlords is an essential tenant screening. A landlord wants a stable, responsible tenant who is ready and willing to pay rent as agreed, maintain the rental premises to acceptable standards, and conduct himself as a good neighbor.  There is no better source of direct information regarding a former tenant’s (now your applicant) interactions with a landlord and neighboring tenants.

If past behaviors give indications of expected future behaviors, then past rental behaviors are a measurement of risk associated with a future tenancy. Former landlords can provide the type of information needed to assess potential future risk. While the applicant’s interview and his application information may preliminarily qualify him to rental standards, details of a previous tenancy as provided by the landlord may tell a different story.

Former Landlords

If the applicant has been a renter for several years, calling previous landlords may provide more honest answers to questions about the former tenant’s rental behaviors. The tenant moved on but his records and his reputation likely remained with the landlord.

While some previous landlords could be hesitant to provide detailed information about a former tenant due to legal and privacy concerns, a landlord should be able to confirm basic information regarding dates of tenancy, rent payments, and the handling of the security deposit.

Current Landlord

An applicant may request that the current landlord not be contacted. The applicant may not have given notice or may not want the current landlord to know he is looking for a new place. There is also the possibility that the applicant thinks the current landlord will give unfavorable information about the tenant/applicant, which may or may not be justified depending upon the circumstances. While the request is understandable, the landlord should adhere to his stated tenant screening policies. If one exception is made, other exceptions might follow. However, the timing of the decision to contact the current landlord could depend upon whether the applicant meets other qualification criteria. If the applicant fails to meet minimum criteria there is no need to continue the screening process. If the applicant meets other criteria, the current landlord should be contacted. Any information obtained from the landlord interview would be analyzed with information from other screening reports for final evaluation.

Landlords need to keep records on all applicants, current tenants, and past tenants. Documentation related to all applications, whether withdrawn, rejected, or accepted, should be retained, including date/time of contact and unit(s) shown. A log should also be kept of all calls from prospective applicants, even if they never visit the property. Records should be kept that show periods when vacant properties were available. The best defense against a Fair Housing claim is being able to produce a set of records that shows consistent nondiscriminatory application of written screening and selection criteria.

While the documentation retention period will usually be in the range of 2 to 5 years, it may vary from state to state and from time to time because of changing requirements for both federal and state laws. The types of records of concern will also vary.

A well-documented tenant file may include:

• Property address/unit designation information,
• Rental application,
• Copy of tenant’s photo identification document,
• Reference checks,
• Credit report,
• Background check (if applicable by statute),
• Employment check,
• Income verification,
• Signed lease agreement,
• Contact information,
• Vehicle information,
• Emergency contact information,
• Cosigner/Guarantor agreement if applicable,
• Monthly rent amount,
• Rent due date,
• Security deposit amount,
• Other fees, deposits,
• Lease agreement term – beginning and ending dates,
• Signed Move-in checklist,
• Signed receipt of keys,
• Correspondence,
• Tenant requests,
• Repair and Maintenance records,
• Inspection reports,
• Notices and warnings, and
• Notices of request for landlord entry.

Maintaining complete, detailed, and up-to-date tenant information is essential to document the individual’s tenancy, the landlord’s compliance with legal obligations, and more likely to result in the landlord prevailing in any legal conflict with the tenant.

Most aspects of landlord tenant relationships are regulated by state statutes and local laws including in many states, the landlord’s right to access the rental property. In addition to applicable statutes, the landlord’s lease agreement should contain language that specifies the landlord’s right to entry and procedures for notice requirements.

If a tenant refuses the landlord’s request for notice to enter and provided the landlord has complied with all requirements by state laws, the landlord’s course of action can depend upon the circumstances of the landlord request and the nature of the tenant’s refusal to cooperate. In general the landlord has the legal right to peacefully enter the rental premises for legitimate business purposes during reasonable hours. It is a good practice for the landlord to bring along a witness to observe the work being done and to counter any claims by the tenant of theft or inappropriate conduct.

Statutes of some states may allow the tenant to refuse a written request for entry, but could require the tenant to prove justification for his decision. If the tenant repeatedly refuses landlord access to the rental unit, the tenant could be held in breach of his lease terms and conditions, thus providing a cause of action for the landlord to proceed with an eviction lawsuit. If the landlord chooses to file for eviction, the landlord should make sure he has complied with state landlord-tenant law regarding his reasons for entry and required notice periods and can provide written supporting documentation of the events.

Under no circumstances should a landlord use force to enter the rental unit.

Federal, State, and Local Laws

Many landlord problems stem from a lack of knowledge regarding management of rental units and a failure to keep current with applicable federal, state, and local laws. A landlord must know the laws that govern his business. The legal relationship between landlord and tenant is spelled out in state statutes, local ordinances, safety and housing codes, common law, contract law and case law.

Tenant Screening

Filling vacancies with good tenants is the most important single factor in minimizing landlord problems. A majority of landlord-tenant problems and financial losses can be traced to inadequate tenant screening procedures. Many landlords, anxious to fill vacancies, create problems for themselves by rushing through the screening process, putting themselves at risk for a troublesome, perhaps costly tenancy.

Lease Agreement

Many landlords do not utilize adequate lease agreements. Using a generic lease or a lease that contains outdated information can cause problems for the landlord. A landlord should customize his lease agreements to the rental property in order to protect his business.

The landlord’s lease agreement is a binding contract between landlord and tenant. It should explicitly address the responsibilities and rights of landlord and tenant, detailing obligations and duties of each party. A good detailed written lease agreement reduces the chance of misunderstandings regarding duties and responsibilities of both the landlord and the tenant.

Lease agreements must include tools for enforcing the lease terms and conditions.  A lease agreement cannot contain any clauses that violate landlord-tenant laws, fair housing laws, tenants’ rights, and any other applicable federal, state, or local laws. A good lease agreement should include a severability and survival clause in the event a lease clause is deemed illegal or ruled unenforceable.

Policies and Practices

Rent Rules

While the lease agreement should clearly define rent policy, it is important that the rent policy be fairly and consistently enforced in a non-discriminatory manner with all tenants through the use of rent rules. Clearly defined rules help the tenant understand what is required and what will happen if the tenant defaults. By enforcing the rent rules, the landlord can reinforce the consequences of the tenant failing to meet his obligations.

Deposits & Fees

Many landlord-tenant disputes concern rental fees and deposits, particularly tenant security deposits. Most state landlord-tenant statutes specifically address security deposit disclosure requirements, collection of security deposit funds, holding of funds in a specified account, including applicable interest, and the accounting and return of security deposit funds at lease termination.

Some states regulate by statute the landlord’s policy for rental late fees and grace periods. Landlords should make sure their deposits and fees policies are in accordance with applicable statutes for all rents issues.

Property Maintenance

Adequate and timely property maintenance protects the landlord’s investment, avoids more costly emergency repairs and additional damage, and reduces tenant and governmental actions related to habitability issues. Investing in property upgrades can allow higher rents, attract better tenants, and increase property value.

Move-In/Out Procedures

Many landlords fail to follow adequate procedures for moving tenants in and out. Some landlords fail to comply with laws related to possession of the rental unit and disposal of abandoned property.

Enforcement of Lease Terms and Conditions

A landlord can create problems or worsen problems if he delays taking action against tenants who materially default on their leases, and/or cause problems for other tenants. If it is in the best interest of the landlord’s business, a landlord should not hesitate to evict. Failure to evict when necessary can result in losses that far exceed the total cost of an eviction.

A common problem is waiting too long before taking proper action against tenant defaults. By waiting the landlord hopes the tenant will cure his default and the landlord won’t be forced to take a negative action. Ignoring problems or failing to act in a timely and appropriate manner to enforce rental policies does not cure tenant defaults.

Some types of tenant defaults demand swift action, e.g., threat of harm to others or damage to the property. The landlord’s failure to confront a threatening situation or potentially dangerous situation that affects the safety and security of tenants and property is a serious matter. The landlord has the obligation to take reasonable measures to secure tenant safety, security, and privacy.

Lease agreements should always contain a clause prohibiting tenants from making alterations and improvements to rental property. A landlord’s concerns regarding tenant unauthorized alterations and improvements include issues of liability; health, safety, and security of the tenant and the neighboring tenants; building codes requirements; licensures and work permits; possible environmental impacts; and landlord habitability responsibilities by statute.

The lease clause must be detailed sufficiently to clearly and unambiguously cover liability and safety issues. The landlord has a duty of care for his tenants and must take all measures to protect the tenants and the rental premises. A sample clause might read:

“Except as authorized by statute or as authorized by the prior express written consent of Landlord, Tenant will not make any repairs, alterations, or improvements to the premises including but not limited to painting, carpeting, wallpapering, electrical or lighting changes, nailing holes in the wall, rekeying of locks, installation of new locks or installation or alterations of alarm systems.”

The lease agreement might also a notification clause such as:

Unauthorized Tenant repairs, alterations, and improvements are a material violation of the Tenant’s Lease Agreement and subject to lease default remedies as stated in the lease agreement.

Some standard lease agreements may also utilize a clause that states:

Tenant accepts the rental unit, fixtures, and furniture as is except for conditions materially affecting the health or safety of ordinary persons.

Despite lease language to the contrary, tenants do make material changes to their rental unit.  Some tenants request permission for alterations, many tenants do not. Most commonly a tenant wants to:

• Upgrade or install additional exterior door locks
• Install a security system
• Upgrade lighting fixtures
• Paint interior walls or cabinets
• Replace flooring or carpeting in the unit
• Replace landlord supplied appliances with the tenant’s own appliances
• Install privacy fencing for a single family property or alter existing landscaping or green space for gardens or plantings

From the tenant’s viewpoint, these types of alterations are improvements, an upgrade to the rental unit/property for reasons of safety, security, or aesthetics. From the landlord’s perspective, the alterations and improvements are clear violations of the lease agreement, subject to the default remedies as detailed in the lease agreement, and are a disregard for the terms and conditions of the legal contract.

In some states landlord-tenant statutes provide tenant rights for repairs or alterations to the premises in certain situations. In these states tenants have a defined right to authorize emergency repairs if they are unable to reach the landlord in a timely manner in an event that threatens the immediate health and safety of the tenants or the rental unit is at risk without immediate repair. The lease agreement should clearly define what constitutes an emergency situation and provide guidance for acceptable tenant responses. Habitability issues regarding the provision of essential services for safe and sanitary housing are the landlord’s obligation by statute. States statutes specify the landlord’s responsibilities and duties for habitability issues and response times.

Fair Housing Act Right to Reasonable Modifications of Rental Unit

A landlord has a duty under the federal Fair Housing Act as amended to allow tenants with disabilities to make reasonable modifications of their living space or common areas at the tenant’s expense to the extent that is necessary for the tenant to comfortably and safely live in the unit.

A disabled tenant cannot modify the rental premise without the prior approval by the landlord and the proposed modifications cannot make the rental unit unacceptable to a future tenant. The tenant must agree to restore the rental unit to its original condition (undo the modifications) when the tenant moves out. Examples of disability modifications may include adaptive faucets or door/cabinet hardware or lowering kitchen countertops for wheelchair accessibility.

A landlord may ask the tenant to provide a reasonable description of the proposed modifications, proof that the modification will be done in a workmanlike manner, and require that the tenant obtain the necessary building/work permits before the work begins.

Tenant Requests for Alterations and Improvements

A straightforward request from a tenant for an alteration or improvement to the unit allows landlord and tenant to consider options to determine if the alteration or improvement could be allowed. A landlord should require tenants to submit written requests for alterations and improvements.  A landlord may want to determine whether the improvement or alteration is work that could be easily undone (repaired or restored) when the tenant moves out. Another consideration might be whether the proposed improvement might add value to the rental unit. If the improvement is an object that the tenant wants to take with him/her upon moving out, the landlord and tenant must document their agreement in writing. The landlord might be receptive to approving an alteration if the tenant understands that he/she will be responsible for restoring the unit to its original condition at the end of the lease term. If the landlord deems the tenant’s restoration work is unacceptable under workmanlike standards, the landlord will deduct the costs of repairing or restoring the unit from the tenant’s security deposit.

The authorization agreement between landlord and tenant should be documented in writing with specifics regarding the scope of the work, material to be used, whether the alteration or improvement would be fixed (permanent) or portable and the terms of tenant reimbursement if any.

Fixtures

The lease agreement should define that any attachment to a building, fence, deck, or to the property grounds becomes a permanent fixture to the property. Absent lease language to the contrary or a documented landlord-tenant agreement returning specified objects to the tenant, the attached fixtures become the landlord’s property.

To help determine whether an object is portable or permanent, a court may look to the specifics of the issue, such as (1)whether the tenant received the landlord’s permission for installation or attachment of the object; (2) did the object require structural changes that affected the use and/or appearance of the unit/property; (3) did the installation of the object require firm attachment to the property using nails, screws, bolts, permanent bonding, or cement;  and (4) what did the landlord and tenant intend to happen regarding the object.

Non-authorized Tenant Alterations and Improvements

Upon discovery or knowledge of unauthorized tenant alterations and improvements to the rental unit/property, a landlord must determine his course of action based upon his lease agreement terms and conditions and the specifics of the situation. Whether the landlord likes or dislikes the tenant’s alterations or improvements, the fact is that the tenant did not have permission to alter the unit/property and the tenant’s actions constitute a lease default. If the landlord does not address the issue of unauthorized alterations and improvements by enforcing the terms of his lease agreement for lease violations, tenants may take advantage of weak property management to violate other terms of the lease agreement.

Landlord Notifications

What a landlord should do is to notify the tenant in writing that the alterations and improvements made to the unit/property have been discovered, the alterations and improvements were unauthorized and no more alterations or improvement can be done. The landlord should reference the specific lease language that prohibits such actions and the consequences of the lease default. Landlord actions could be, depending upon the circumstances, a warning, a notice to cure or quit, an unconditional quit notice or if left uncured (the tenant fails to respond), legal action for eviction. The tenant may be held responsible for costs to restore the unit/property to the original condition and costs for such work may be deducted from the tenant’s security deposit.

Tenant onboarding follows tenant selection as the next step in filling vacancies. The tenant onboarding program transitions the selected qualified applicant to the status of new tenant. The purpose of tenant onboarding is to acclimate the new tenant to the rental property by providing detailed information on rental policies, practices, rules and restrictions.

A well-developed tenant onboarding program is a comprehensive tenant guide to rental living at the selected property. The onboarding program is a key to a positive tenant rental experience, serving as a communication tool between landlord and tenant; a practical guide to the property features, amenities, and services; detailing the specific obligations and duties of landlord and tenant; and conducting the move-in unit inspection and checklist.

Studies have shown that beginning a new tenancy on a positive note can contribute to a more satisfactory landlord-tenant interaction during the tenancy and a better move-out experience at the end of the lease term.

Onboarding begins with welcoming the tenant to the rental community and setting the tone of the anticipated landlord-tenant relationship. Ideally the onboarding process is an interactive discussion between the landlord and future tenant to review and understand important rental policies and practices.

During the onboarding session, the landlord will discuss his rental expectations and standards allowing sufficient time for questions and/or clarification of policies and practices. It is important a tenant fully understands his/her legal obligations and duties by landlord-tenant statutes and the lease terms and conditions; rental policies; property rules and restrictions; rents, fees, and deposits; utilities responsibilities; good neighbor standards; noise and disturbance policies; renter insurance requirements; and property management services before signing the lease agreement. The landlord should make it clear that the tenant’s signature on the lease agreement is a binding legal contract between landlord and tenant. Each party to the lease contract has specific obligations for compliance and defined remedies for lease defaults.

If the future tenant is unable to meet rental terms and conditions at the time of the onboarding session, the landlord and proposed tenant should discuss the next course of action which could be applicant withdrawal from consideration for tenancy or in certain circumstances a negotiated alternative lease terms and conditions. The landlord should be thoroughly familiar with the state landlord-tenant statutes, fair housing laws, adverse action requirements, and laws applicable to consumer protections, anti-discrimination protections and other consumer/tenant legal rights and protections before making a decision that differs from his stated rental criteria. Written documentation of all discussions and subsequent course of action should be prepared and kept for retention.

The soon-to-be tenant wants to move forward through the orientation session, lease signing, and receipt of keys. Although a tenant may want to hurry through the session, a landlord should not shortcut his standard policies and practices orientation. The new tenant may not be a new renter – i.e., having rented other properties – but will likely be a new renter for this landlord at this property. Landlords set their own rental policies and practices for legal compliances and business necessity. A tenant must comply with the rules of a specific property as set by the managing entity for that property.

What are some of the important points to cover during the tenant onboarding session? Typically a lad will review the following key points with the new tenant:

• Landlord and Tenant Obligations, Responsibilities and Duties per Landlord-Tenant Statutes,
• Landlord and Tenant Obligations, Responsibilities and Duties per Lease Agreement,
• Lease Terms and Conditions,
• Lease Addendum as required,
• Lease Violation Warnings and Notices,
• Fees, Security Deposit, First/Last Month Rent,
• Rental Rules and Restrictions,
• Rents/Late Fees/Grace Period/Payment Method,
• Pet Policy,
• Noise and Disturbance Policies,
• Good Neighbor Duties,
• Utilities Responsibilities,
• Parking Policy/Parking Pass,
• Landlord Contact Information – Landlord Name and Contact Numbers,
• Landlord Emergency Contact Information – Designee Name, Address, Contact Numbers,
• Repairs/Maintenance Policies and Procedures,
• Inspection Schedule,
• Key Control Policy,
• Housekeeping Standards and Landscape Duties,
• Online Tenant Portal Services,
• Tenant Support Services – Direct Staff,
• Move-in/Move-out Inspections and Checklists, and/or
• Move-out Notification and Procedures.

Additionally, the landlord will need to confirm that the information provided by the incoming tenant on the application form is correct and current for the tenant’s:

• Place of Employment – Company Name, Address, Telephone Number
• Personal Contact Information – Name and Contact Number
• Emergency Contact Information – Name and Contact Number

After reviewing key information, all adults who will reside in the rental unit should acknowledge their understanding and consent to the landlord’s rental terms and conditions by signing the lease agreement. The landlord will then collect required fees, the security deposit, and pro-rated rent and provide a receipt to the tenant for funds tendered.

If tenant services are provided through an online Tenant Portal, the landlord should ensure the tenant receives training on how to use the online system and what services are available online, such as rent payments and maintenance requests. If possible, the tenant should register with the Tenant Portal during this onboarding session.

Following the lease signing but before keys or other devices (such as garage door openers or alarm codes are transferred) the landlord and tenant should conduct a move-in inspection of the rental unit per requirements in the landlord-tenant statutes applicable to the property location.

A detailed walk-through room by room of the unit should be conducted and any items requiring repair or maintenance should be noted as to the item’s condition and the agreed upon corrective action. During the walk-through the landlord can provide the tenant with the location and instructions for the care and use of system components such as the location of the breaker panel, the main water shut-off valve, water shut-off valves inside the unit, heating and air conditioning unit(s), water heater temperature controls and shut-off, smoke detectors, carbon monoxide alarms, or other supplied equipment. Additionally the tenant should be provided with instructions for the care and cleaning of unit appliances such as the refrigerator, stove, dishwasher, microwave, etc. If an item in the unit requires special care for cleaning or maintenance, the tenant should be instructed with the necessary information for care, for example, hardwood flooring cleaning instructions. If the tenant will be responsible for landscaping or property maintenance, the landlord and tenant should walk the property to identify the areas of responsibility and the standard of care that is required.

The completed move-in checklist with any notations should be signed and dated by the tenant. A copy of the checklist should be given to the tenant for his records and the original checklist retained in the tenant’s file. The tenant should be advised that the move-in checklist as updated by agreed upon corrective actions will be used to determine the condition of the rental unit at the time of tenant move-out. Documentation of the unit move-in condition and condition of the unit at move-out may also include photos or videos made during the inspections.

Since the amount of information provided during onboarding can be overwhelming to the new tenant who is anxious to move in and get settled, it is a good business practice to provide the tenant with a move-in documents/information packet containing copies of all signed documents – lease agreement and addendum, move-in inspection checklist with notations of unit condition and schedule of corrective actions, and key control policy with attached receipt of key transfer – along with helpful tips and reminders of information that was covered during the onboarding session, particularly contact numbers, rent payment procedures, and maintenance requests.

An effective onboarding program can help a landlord manage his properties more efficiently by providing the new tenant with key information and resource services to help reduce the stress of move-in and adjustment to a new rental environment.  Long term benefits to the landlord utilizing an onboarding program are a better working relationship with the tenant during the lease term, and the likelihood that a good tenant having a positive experience will renew his lease.

Usually such a lease clause needs to be customized to the specific property and the specific tenant. Writing such a lease clause requires certain knowledge of law and real estate matters to ensure the clause is unambiguous, adequately states the intent of the parties, and is legally binding. An inadequately written clause could create unwanted potential problems. You may want to consult with a knowledgeable attorney regarding a number of issues before drafting a right of first refusal document.

Giving anyone a right of first refusal potentially creates problems for the seller. The fact that there is such a right usually requires disclosure of that fact to potential buyers, or their agents. In normal market conditions, depending on terms of the clause, this may well result in a limited pool of potential buyers. This is because either the buyers or their agents will prefer to go on to other available properties rather than waste time since the tenant can easily win the purchase by simply matching the buyer’s offer.  There could be problems if the tenant disclosed certain property issues to potential buyers in order to discourage the buyer.

If the terms of the clause allow the tenant to buy the property by simply matching the first offer, even if not acceptable to the landlord-seller, then the seller has lost the ability to make a counter offer to the potential outside buyer. If the terms protect against this by allowing bidding, the potential buyer may walk away after his initial offer.

The clause usually requires customization for specific tenants because the tenant must approve of the clause if he/she is to sign the lease agreement. Accordingly, the terms are potentially negotiable unless the landlord is willing to turn away any potential tenants who are aware of potential problems and try to negotiate the clause, therefore reducing the pool of applicants.

The terms of a right of first refusal clause/document can vary according to law, location, and customary practices. There may be contingencies and/or exceptions based upon the type of purchase offer such as a cash sale. Any obligations, limitations, or deadlines must be thoroughly understood before the document/clause is executed.

The owner/landlord has the right to offer his property for sale to any tenant and any tenant has the right to make an unsolicited offer to purchase the property without having a right of refusal – either before or after another offer has been made.

The existing lease agreement is valid and enforceable until its expiration date and the lease binds the buyer if sold before its expiration.

Unless the lease agreement has a specific clause requiring a buyout or otherwise terminating an existing lease (not often seen), leases go with the property. That is, both the tenant and the new owner must abide by all terms of the lease agreement. When there is significant time left on the existing lease, this can mean that the property will not be of interest to any potential buyer who wants to personally occupy the property.

Generally speaking, trying to market an occupied rental unit is usually not a good idea. There can be potential problems in scheduling showings, despite required advance notification to the tenants. Due to possible problems with access and the fact that the property may not show well when occupied by tenants, it is usually best to not try to sell a single-family property while leased.

The best way to market a rental property that will result in the  best price with the least hassle is to wait until it is vacant – either because of lease expiration or having done a lease buyout – and not list it until all necessary and/or desired cleaning, repairing, and/or improving has be fully completed.

Obviously, if a “For Sale” sign is installed on the property, the tenants will know of a possible sale. Even if the marketing of the property does not include on-site signage, the tenants will know that the property is being sold because it is almost always necessary that potential buyers (perhaps more than one) and/or their agents (e.g., lenders, appraisers, inspectors, contractors) visit the property once marketing begins, particularly after the first purchase offer is made, with this often being well in advance of escrow closing. While many of these tasks do not require access to interiors of units, it is almost certain that one or more tenants will notice strangers who are involved in surveying common areas.

For example, often prior to marketing of the property the owner hires contractors to do deferred maintenance and/or improvement and those vendors often know that they are doing the work because of a future sale. Curious tenants will likely obtain this info from those vendors. Thus, at least some tenants will know well in advance of other indications that a sale will likely occur in the future – perhaps before it is even listed for sale. And, one tenant knowing something usually means all tenants know that something.

Of course all access of leased premises would require advance notice of entry in accordance with state law and it would be nearly impossible and inadvisable to not disclose why access is being requested. Having multiple units often complicates matters.

Since you will want cooperation of tenants regarding buyer inspections and estoppel certificates, it is recommended that you notify tenants of the pending sale as soon as there is a fully executed purchase contract. You should explain that the buyer or his agent will be making inspections and you appreciate the tenants’ cooperation during the inspections. Keeping tenants in the loop and remaining on good terms with them may reduce the chance of them voicing complaints about the property to the buyer or his agent.

Providing tenants with written notice of the potential sale also gives the owner a chance to reassure the tenants that their lease agreement is fully binding on a future buyer and their security deposit will be transferred to a new owner through escrow. The tenants should be notified immediately upon close of escrow and provided contact information regarding the new owner.

An umbrella insurance policy is a type of liability insurance that provides additional liability coverage over and above the landlord’s standard liability policy coverage.

Umbrella insurance coverage takes effect when the costs of a claim surpass the landlord’s standard liability policy limits. Umbrella policies are not replacement insurance policies. An umbrella policy does not cover anything that is not already covered by a base policy. Umbrella insurance is additional insurance and can cover a broader range of insurable events that are usually excluded in a standard landlord insurance policy. Covered events could include false arrest, mental anguish, discrimination, slander, and libel. However if a landlord is negligent in s legal responsibilities, or commits a criminal act, liability insurance will not cover lawsuit expenses or awards for damages.

For example, a landlord has a basic liability policy for $250,000 coverage. A tenant files a lawsuit for an injury that occurred on the rental property and is awarded $1 million in damages. Since the landlord’s coverage is only $250,000, the landlord will have to pay the outstanding balance. If the landlord had purchased a million dollar umbrella policy to protect his business for liability, the umbrella policy would have taken effect and covered the outstanding balance.

The landlord’s basic policies and his umbrella policy should have the same beginning and ending date. Policy effective dates are important because some insurers limit their umbrella coverage to injuries or damages that occur during the policy period of the umbrella. There can be potential problems if the both policy dates are not the same. A landlord may want to determine if his base policy has a “prior acts” rider that will cover claims made against an event that occurred before current policy actually went into effect, e.g., an existing rental property was bought with tenants already in place.

Premiums for umbrella policies may vary by insurance carrier, the type of business, policy limits, and the scope of coverage needed to help protect the business.