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  • Writer's pictureThe Onyx Group

Things Landlords Do That Cost Them Money

As a form of passive income, landlordship and property management is becoming increasingly popular. While investing money into a rental property can be a smart move, some choose to cut corners or overlook guidelines to save money or expedite filling vacancies. While lucrative up front, doing so can lead to future financial and legal troubles. As a landlord, your responsibilities and obligations need to be taken seriously to avoid serious repercussions for yourself and your tenants. Here are three of the most common mistakes landlords make that cost them money.

1. Mismanagement of Security Deposits

Security deposits are funds provided by tenants in good faith to show intent to rent and properly maintain a property. This money is to be set aside and only spent to cover costs associated with damages caused by the tenant, unpaid rent, and restoration costs to prepare the residence for the next tenant. If the tenant has properly maintained the property and has not accrued such costs, they may be entitled to reimbursement.

Some landlords make the mistake of failing to segregate security deposit funds. Doing so can leave you in a difficult situation where you must dip into your own money or face legal action. As a landlord, you are legally obligated to return security deposits within 15-30 days of a former tenant vacating your property. It is also vitally important to maintain proper paperwork clearly outlining what funds were deducted and for what cause in case of litigation.

Another common but detrimental mistake made by property managers and landlords is making improper deductions. As stated above, security deposits have very specific purposes and may only be used in connection to property-related debts on the part of the tenant. Any fines and fees deducted from the security deposit must be clearly outlined and within your legal limitations. Some such deductions may include:

  • Unpaid rent and associated late fees

  • Unpaid utilities

  • Removal of abandoned items

  • Property damage repair not attributed to normal wear and tear

  • Costs associated with a broken lease

These and other deductibles may vary from city to city and state to state, so check your local guidelines before making any deductions.

2. Representing Yourself in Court

While no one wants to waste time and money in the court system, sometimes it may become necessary as part of your duties as a landlord. Whether you have to take a tenant to court for unpaid fees or you find yourself as the defendant in a lawsuit, making the mistake of self-representation can backfire.

Inexperience with the legal system can lead to simple but costly mistakes that can put you in a financial bind.

Though it is possible to represent yourself in uncontested litigation, it is still not recommended. An attorney will be able to help you navigate the sometimes confusing landscape of property law and ensure you get the best possible outcome. Additionally, should your tenant contest the filings, and your property is owned by a company, like an LLC (which it absolutely should be) legal representation is mandatory.

3. Failing to Contract Away Duties to the Tenant

In the business of retail property ownership, the adage of ‘you have to spend money to make money certainly stands true. From normal maintenance and upkeep costs to emergency plumbing or repair bills, the realities of property management are more complex than most people realize. New landlords and experienced property managers alike may not realize that in some cases, these costs may be contracted to the tenant rather than remaining the landlord’s responsibility. Reviewing the terms of your lease and determining what maintenance costs you would like to pass on to tenants can help you save thousands of dollars per year. Some such costs may include:

  • Lawn or yard maintenance

  • Extermination costs

  • HOA fees or fines

  • Garbage disposal fees

  • Background and credit check costs

It should be noted that any fees or financial obligations being passed onto the tenant must be clearly defined in writing in the form of a signed contract. Amending your rental agreement to offset your costs may seem like a pain, but failing to do so can leave you struggling to pay bills on your own. Maintaining a record of all written correspondence and properly notifying your tenants of their duties can protect your interests and prevent you from being responsible for their debts.

Working with an experienced legal team like the Onyx Group helps you protect your assets and livelihood. We offer support for eviction cases, vicarious liability, and other areas of property law you may face. Contact us today for a free consultation and to learn how we can help you.


Landlords, we want to hear from you: what other costly mistakes have you made in the past? How did you recover? Let us know in the comments below!

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