Renting your property can be a good solution when your family has to move unexpectedly or has difficulty selling your home. It is often easier to rent your property than to find a buyer. However, being a landlord brings about its own set of challenges. Below are some potential pitfalls all landlords should try to avoid:
- Have a written lease. North Carolina law requires that all leases for longer than three years must be in writing to be valid. Although the term of most residential leases will be for one year or less, you may choose to renew the lease for several years. Additionally, having a written lease outlining all of your tenant’s responsibilities and rights is important, especially if your tenant fails to fulfill all of their obligations. If you do not have a lease agreement, your tenant can later argue that they were not required to maintain the yard, they were allowed to have pets, or that the rent was lower than the agreed upon amount. Having a written lease agreement protects you and clearly outlines what is required of you and your tenant.
- Keep your tenant’s security deposit in a separate trust account. Landlords are required to deposit their tenant’s security deposit in a trust account with a “licensed and federally insured” bank. Landlords are also required to tell their tenants where the security deposit is being held within thirty days after the lease has begun. The golden rule is to avoid co-mingling your tenant’s security deposit with any other funds. Your tenant’s security deposit is not earned money, but, rather, security in the event that your tenant should fail to fulfill all of their obligations under the lease.
- Send your tenant an accounting of their security deposit within 30 days after the lease ends. Within 30 days after your tenant has moved out, North Carolina law requires you to send your tenant a written accounting of what you did with their security deposit. You are allowed to use your tenant’s security deposit for a few specific items: 1) unpaid rent or costs for water or electric service paid by you; 2) damage to the property beyond normal wear and tear; 3) damages if your tenant unlawfully terminates the lease early (this does not apply to the early termination of a lease by military servicemembers or surviving family members); 4) unpaid utility bills that may become a lien on the property; 5) the cost to you to re-lease the property after your tenant’s breach of the lease; 6) your costs to remove and/or store your tenant’s property; 7) court costs if you have to evict your tenant; and 8) any permissible late fees and one of the following: the complaint-filing fee, a court appearance fee, or a second trial fee. You must identify each charge to your tenant within 30 days after the end of the lease. If the lease terminated early because your tenant breached the lease, then this 30 day period begins on the date your tenant is evicted or abandoned the property. This accounting will also tell your tenant if they owe you any money in excess of their security deposit.
- You cannot simply lock your tenant out for failing to pay rent. If your tenant falls behind or stops making their monthly rental payment, you cannot evict a residential tenant yourself. Instead, you must file a small claims action seeking summary ejectment and seeking a judgment for unpaid rent. Once you get an order for possession from the Magistrate, the Sheriff will schedule a time for you to lock out your tenant. You, your locksmith, and the Sheriff will be present at the eviction.
- If you supplied an appliance, you have to repair it. If you lease your property with a refrigerator, range, cooktop, dishwasher, microwave, washer, dryer, or any other appliance included, you are responsible for keeping those appliances in good working order and quickly making all necessary repairs, except in the case where the tenant intentionally or negligently damages the appliance.
- Regularly inspection the property. Do not wait until the end of the lease period to inspect the property. If you do, you may find there is more damage that can be paid by the security deposit, and the tenant may not have the funds to make the repairs. This will leave you paying for the repairs. Whether you lease the property yourself or use a reputable property management company, make sure the property is inspected at least quarterly, and be sure to take pictures of any damage you find.
These tips are just a few of the obligations imposed upon landlords by North Carolina law. If you are considering renting your property and you do not want to use a property management company, you should see a lawyer and learn about all of your duties and obligations to your tenant.
Published by Natasha M. Barone on November 12, 2015