Tuesday, April 5, 2011

The First Step to Becoming a Successful Residential Landlord

For many people, in this time when selling a home for an amount greater than the mortgage debt may be impossible, leasing their house is a way to move to a new home without facing the risk of taking a loss on their investment.  The fundamental element of success in becoming a landlord is a good lease.

What makes a good lease?  The simple answer is, the agreement between landlord and tenant must ensure that the expectations of both parties are met and must comply with both state and federal law.  One of the most important expectations of a landlord is that if the tenant fails to pay rent or damages the premises, the landlord may retain the security deposit.  However, many landlords do not realize that security deposits, and most aspects or residential leasing, are strictly regulated by Chapter 59.18 RCW, commonly known as the Residential Landlord-Tenant Act.

For instance, if a landlord wishes to require a security deposit, the lease must be in writing and must include "the terms and conditions under which the deposit or portion thereof may be withheld by the landlord."  In addition, in order to have the right to withhold funds for damage to the premises at the termination of the lease, the landlord must provide a "written checklist or statement specifically describing the condition and cleanliness of or existing damages to the premises and furnishings," at the beginning of the lease term.  Further, the landlord must "provide the tenant with a written receipt for the deposit and shall provide written notice of the name and address" of the bank holding the deposit.

If a landlord is holding a deposit and there is actual damage to the premises, the landlord may only withhold the deposit if the landlord delivers to tenant a statement of the specific reasons for withholding the deposit, within 14 days of the date the tenant vacates the premises.  Failure to follow this requirement may result in the landlord being obligated to the tenant for twice the amount of the deposit.

There other important requirements applicable to residential leases, such as a landlord's obligation to provide notices related to toxic mold or lead paint, regardless of whether either is known to be present on the premises.  The landlord-tenant relationship is regulated by both state and federal law.  In our state, the legislature has been active in this field lately, revising several sections of the Act as recently as 2010.  This means lease forms from previous years may be outdated.

Owners should not be afraid of leasing their home.  If done correctly, it can offer financial and other practical rewards.  However, it is important that prospective landlords plan ahead to ensure that the leasing relationship is built on the solid foundation of a properly drafted lease agreement.

- Ryan D. White