5 Ways Real Estate Investors Can Avoid Lawsuits

Posted by Chris Clothier on Fri, Nov 7, 2014


When it comes to real estate investment, it’s vital to be well-informed. It can be incredibly daunting, because there’s a lot that real estate investors need to know in order to be successful in this business. In many cases, you can afford to make a few mistakes while adjusting to the learning curve — but not when it comes to matters of the law.

Real estate investors need to be experts on the laws that govern real estate investment — from everything that applies to you, down to your property management, landlords and tenants. Nothing can cripple a business, damage a reputation, or drain funds faster than a nasty lawsuit.

So how do you prevent yourself and your team from being blindsided?

5 Keys to Avoiding Lawsuits for Real Estate Investors

  1. Get Insured

While this won’t help you avoid lawsuit, it sure will help with everything else. Make sure your investment properties are insured. You never want to run into a bad situation without insurance. Before anything, get covered.

  1. Know the Law

“Knowing the law” is easier said than done. Perhaps most important is to know is the Fair Housing Act, which prevents landlords from discriminating against tenants on grounds of race, sex, marital status, religion and disability. While few people would openly try to discriminate, it’s very possible to accidentally discriminate. Be careful of “steering” or any attempt to get a “certain type” of tenant. You might be violating the law. On top of the Fair Housing Act are many local laws that govern real estate investors as well as landlords. Do your research!

  1. Avoid High-Liability Features, Behaviors and Items

Be very, very clear in your rental agreements about what is and is not allowed on your property. You want to be sure that you or your landlord doesn’t get blamed when Little Timmy falls off the trampoline (that you didn’t know they had) and the tenants decide to sue. First of all, avoid high-risk amenities, such as in-ground pools. More than that, detail a list of disallowed, high-liability objects, such as trampolines, volleyball nets, above-ground pools and water beds. That way, if someone gets hurt, you can’t be held responsible.

What Type Of Real Estate Investor Do You Want To Be

  1. Keep a Good Landlord

One of your bests lines of defense in lawsuit prevention is simply having a good landlord. In many cases, problems can be solved and prevented by attentive property management. A responsible landlord knows and respects the law and the rights of your tenants.

  1. Inspect the Property Regularly for Hazards

Upkeep is vital to protecting yourself from lawsuits. When an investment property is left without proper inspections and maintenance, it can create dangerous hazards that can lead to injuries...and you or your landlord may end up paying for negligence. Whatever you have to pay to make safe, professional repairs is nothing compared to what you’d lose in a lawsuit.

These are far from all of the ways real estate investors can protect themselves from lawsuits, but they’re a good starting point. Our most important advice? Run your business with integrity and attention to detail.

Your business will be better for it.

How do you recommend avoiding legal battles? Share your thoughts in the comments.

Minimize Risk with Memphis Invest

image credit: StockMonkeys.com


Topics: real estate investing, landlord liability