Podcast

We have our weekly  podcast at 11AM each Sunday.

Schedule

Landlords Journal on Itunes

(more…)

Suing Landlords

As a landlord for 10 years I have been threatened with being sued several times.  This is due largely in part to disgruntled tenants who will find any excuse to not pay their rent or leave you holding the bag on cleaning up the property they trashed.   I always give people the opportunity to make things right,  however;  I should not be left with thousands of dollars in damages to my property and rent that was never paid.  Afterall,  I have mortgages and taxes to pay.   When tenants are confronted,   they often threaten to sue me for everything from the house making their kids sick to I never made repairs, etc.    I maintain my houses quite well and have standards of the tenants who live there.  If any of the above were true then it was not known to myself or those who work for me.  Again,  it is just a tired excuse for tenants who refuse to do the right thing.  They also use these excuses to not pay their rent.  I’ve even had (on more than one occasion) people withhold rent because I was not furnishing  light bulbs.  They felt it was my responsibility to do so.   My reply to these people is twofold:

If they are unhappy they are free to leave and if I am unhappy with them then I am free  not to  renew their lease.  Many people think they are doing you a favor by living in your property,  not true at all.  It is the other way around,  I am doing them a favor by allowing them to live in my property.  If they don’t like it then they are welcome to leave after paying their lease out.

If they feel that repairs are not being done and they do not live in acceptable housing then this does not give them the right to not pay rent.  I instruct them to go to the courthouse, file a complaint and pay the courthouse the rent until the situation is rectified.   Their rent obligation does not go away simply because I am not performing repairs.  We can play that game all day long.   This is where a carefully crafted rental agreement really pays benefits.

So this brings me to “suing your landlord”.  The smart landlord will have his/her properties in an LLC.  So the person will have to sue the entity that owns the property.   Since an LLC is considered a person,  they can not sue you directly UNLESS they can prove that your LLC is a shell company only to protect the individuals.  From my speaking with attorneys,  this is very difficult to prove.  If the landlord was foolish enough to put his/her property in a sole proprietorship,  they can potentially lose everything they have and is the only way they can sue the individual landlord directly, unless of course it was proven that it was a shell company.

I choose to keep my properties highly leveraged so in the event that something like this would happen,  I just write a check so the bank has a big lien on the property…  If the LLC were to be sued,  the winning party would end up getting zero after the creditors were paid.  Not many lawyers will sue a broke or bankrupt LLC since they will be the last to get paid.

Moral of the story,  put your properties in an LLC and never in a sole proprietorship,  you are asking for trouble later on.  Also be in the position to write a check against the property to tie it up financially,  see above.    You can be on vacation relaxing while your disgruntled tenant is threatening to sue because they are pi**ed that you had the odacity to ask for money that was owed to you.

“