In my ten years as a landlord, I never expected the dreaded pink letter indicating I was being sued by a tenant.
Yet, there it was – right in my mailbox – a letter from my former tenants indicating they were suing us for withholding their security deposit. There are strict tenant rights laws around security deposits. Each state, and sometimes city, has different laws around security deposits. Was I in breach of my state’s laws regarding security deposits? You’ll have to wait until the end to find out.
Are You Covered?
Tenants sue landlords for many reasons, but some prove more popular than others. Does your insurance policy cover any of the top five reasons tenants sue?
There are several steps to a proper eviction. If a landlord skips any of the steps, this is considered a wrongful eviction and is in violation of the law. To properly evict a tenant, landlords need to follow their state law. Oftentimes, this includes five steps:
Step One: Serve the tenant with appropriate notice based on your state’s laws.
Step Two: File an eviction action with the court, and serve the tenant with the complaint and summons.
Step Three: Provide appropriate time to allow the tenant to respond to the complaint.
Step Four: Receive a judgment on the eviction.
Step Five: Remove the tenant (legally). Local law enforcement can assist with this process.
Landlords are at risk of being sued for wrongful eviction if any of these steps are skipped during the eviction process. Additionally, retaliation eviction is illegal. This occurs when a landlord tries to evict a tenant in retaliation for filing a complaint against them with a government agency. Changing the locks, shutting off utilities, and removing the tenant’s property are all forms of wrongful eviction.
2) Breach of Quiet Enjoyment
There are two rights that all tenants get that do not need to be specified in a lease: habitability and quiet enjoyment. First, we will discuss quiet enjoyment. Quiet enjoyment means that a landlord cannot interfere with a tenant’s ability to live reasonably in their rented home.
Landlords who come to the rental without notice, interrupt utilities, or have safety or security violations are in breach of this right. A rental owner is allowed to enter their own property, of course, but with proper notice. In my town, it was 48 hours’ notice, but it is different in each location, so be sure to understand the rights owed to your tenants.
If a tenant feels their right to quiet enjoyment is in breach, they can sue. Examples of reasons tenants sue for breach of quiet enjoyment are landlord harassment, ongoing renovations or construction, or unattended repairs that adversely affect the tenant’s life.
A tenant deserves a habitable home to live in. When a property owner is in violation of a habitable residence, a lawsuit can be filed by the renter. Legally, this is called “the implied warranty of habitability.” Each state, city, or county has local building codes that must be complied with. Items that are always required are smoke detectors, hot water, heat, and sewage disposal.
Check local laws to fully understand what is expected of you as a rental owner. Many cities require inspections to ensure that the space is habitable and suitable for tenants.
4) Fair Housing Discrimination
It is illegal to discriminate against a prospective tenant based on sex, race, and other protected categories. A landlord cannot advertise in a way that discriminates, such as saying they are seeking a female tenant. Additional ways that landlords discriminate are inconsistent application requirements, asking larger deposits for certain groups of people, or terminating an agreement based on discriminatory reasons.
Tenants and applicants who feel they have been discriminated against can file a complaint with the Department of Housing and Urban Development.
5) Withholding or Mishandling s Security Deposit
Last, withholding a security deposit is often a cause for a lawsuit (like mine). Landlords can withhold security deposit funds for unpaid rent, damage, making repairs, or cleaning. However, “normal wear and tear” cannot be withheld from the security deposit. This is where it gets dicey. What constitutes normal wear and tear is not well-defined. So, while a landlord might feel that damage was excessive, a tenant can claim it was normal wear and tear. This is the reason I was sued.
Was dog nail marks gouged into wood normal wear and tear? Was grease splatter on the walls normal wear and tear?
Ultimately, the judge decided no in my lawsuit. It was not normal wear and tear and I won the judgment.
Can Insurance Cover Landlords In the Event They Get Sued?
Not every insurance policy covers the same things so it’s extremely important that landlords, property owners and property managers have an insurance broker that specializes in the real estate industry to ensure you are properly covered. Landlord insurance policies typically do not cover tenant discrimination without a separate endorsement and/or a separate policy all together. Habitability and fair housing is also something that may be excluded on your insurance policies and may not provide the coverage you think you have to protect you in the event you get sued by a tenant or third party.
Specifically, a standard landlord business owner’s policy covers three types of lawsuits:
- Tenant injury caused by negligence: Landlord insurance can cover costs associated with lawsuits over an injury. Icy parking lot slips, broken stair falls, and other accidental injuries are covered by insurance. The policy will cover legal costs and judgments up to your policy limit.
- Damage to the tenant’s property: Let’s say a wiring defect causes a fire or a pipe breaks and the unit floods – landlord insurance will cover it. Any injuries or property damage will be covered by the insurance policy.
- Personal injury liability: Certain policies cover personal injury liability. This can cover libel, slander, invasion of privacy, wrongful eviction, and discrimination. However, many policies do not cover these lawsuits. Understand your policy fully before falsely believing you’re covered for something you might not be.
Certain risks come with owning a rental property. Lawsuits are a very real possibility in this litigation-rich climate. Ensure that you are prepared for a lawsuit with the right insurance policy. Review your insurance policies and pay attention to what is and what is not covered. The right policy will keep you protected from certain litigations.
GS Insurance Solutions, Inc. is a full-service insurance and risk management brokerage specializing in the apartment and property management industry. GS Insurance Solutions is the exclusive endorsed broker for the Apartment Owners Association of California. For more information on the full area of products and services we offer tailored to your specific needs, please call our team at (650) 282-3014 or email us at [email protected].