The following is a hypothetical, but plausible, liability scenario tied to owning and operating a rental property:
A person owns a beautiful beach front rental property and rents it out to a couple for a weekend. During their stay, the couple decides to go on a walk around the property and slip down a stairway lacking handrails. As a result, the guests sue the landlord for over a million dollars to cover the pain, suffering, and injuries associated with the slip and fall. Since the rental property is titled under the landlord’s person name, the landlord loses the property investment and loses personal assets as well.
If you own rental real estate, there are countless possibilities of someone getting injured – or worse. While many landlords spend time and resources making sure their rental unit is occupied by responsible guests and that the property is well maintained, very few spend time and resources making sure their assets are protected from lawsuits if one should arise.
The following checklist provides a few protective measures landlords can take to protect the financial future of their rental property and personal assets:
- Understand the liabilities of your rental property
- There are many potential liabilities that arise from owning rental property ranging from breach of lease, to “slip and fall,” to environmental and toxic waste claims. A landlord can get sued by tenants, tenants’ guests, sub-lessees, neighbors, neighborhood associations, contractors, and even trespassers. Moreover, landlords can be held strictly liable for various property defects and maintenance.
- There are many potential liabilities that arise from owning rental property ranging from breach of lease, to “slip and fall,” to environmental and toxic waste claims. A landlord can get sued by tenants, tenants’ guests, sub-lessees, neighbors, neighborhood associations, contractors, and even trespassers. Moreover, landlords can be held strictly liable for various property defects and maintenance.
- Protect your rental property
- As a property owner, you want to shield yourself from both “outside-in” and “inside-out” liabilities. “Outside-in” protection means that your ownership of the property cannot be claimed by your personal creditors. “Inside-out” protection insulates you and your personal assets from liabilities arising from owning and managing a rental property. There are different protective options for rental property. Titling rental property to limited partnerships, land trusts, or series LLCs is not advisable for Asset Protection purposes. Instead, we advise our clients to retitle any real estate they own or co-own to one or more limited liability companies (“LLCs”). LLCs are great protection tools to protect landlords personally from liabilities linked to their rental property and shield the rental property against lawsuits. Moreover, landlords avoid double taxation by titling their rental properties to LLCs since they are not taxed as corporations. It’s important to discuss with an experienced Asset Protection which jurisdiction is best for your LLC, how the LLC should be owned, and any many other considerations.
- As a property owner, you want to shield yourself from both “outside-in” and “inside-out” liabilities. “Outside-in” protection means that your ownership of the property cannot be claimed by your personal creditors. “Inside-out” protection insulates you and your personal assets from liabilities arising from owning and managing a rental property. There are different protective options for rental property. Titling rental property to limited partnerships, land trusts, or series LLCs is not advisable for Asset Protection purposes. Instead, we advise our clients to retitle any real estate they own or co-own to one or more limited liability companies (“LLCs”). LLCs are great protection tools to protect landlords personally from liabilities linked to their rental property and shield the rental property against lawsuits. Moreover, landlords avoid double taxation by titling their rental properties to LLCs since they are not taxed as corporations. It’s important to discuss with an experienced Asset Protection which jurisdiction is best for your LLC, how the LLC should be owned, and any many other considerations.
- Obtain adequate liability insurance
- If you title your rental property under an LLC, make sure your LLC obtains a good liability insurance policy. As additional coverage, some of our clients form another LLC to manage the LLC that owns their property. This further distances them from potential personal liability as property managers.
- If you title your rental property under an LLC, make sure your LLC obtains a good liability insurance policy. As additional coverage, some of our clients form another LLC to manage the LLC that owns their property. This further distances them from potential personal liability as property managers.
There is a long list of items to consider when thinking of ways to protect yourself and your rental property from legal issues. However, use this short list as a guide to help you decide what steps you need to take to make sure that your property is protected before potential claims arise. Contact our office to schedule a Complimentary Preliminary Consultation with an Asset Protection Attorney regarding protection for rental properties and more.