Legal Pitfalls Every Property Manager Should Avoid

29 May 2025

Managing properties might seem like a dream gig—collecting rent, sipping coffee, and watching your bank account grow. But hold on! Before you start picturing yourself as the real estate mogul of the century, let's talk about the legal landmines lurking beneath the surface. Because one wrong step, and BOOM—you’re in lawsuit city, population: you.

So, grab a seat, maybe a notepad, and let’s dive into the common legal pitfalls every property manager should sidestep like a pro.

1. Ignoring Fair Housing Laws 🚨

If you think you can rent out properties based on “gut feeling” or personal preference, think again! Fair housing laws exist to make sure discrimination stays out of the real estate game.

What Can Go Wrong?

Let’s say you reject a tenant because their pet hamster sounds like a bad roommate. Fine. But if you reject them because of race, religion, gender, or disability? Lawsuit incoming!

How To Avoid This Mess

- Treat every applicant equally—document everything to prove this.
- Avoid using language that could be discriminatory (e.g., "Perfect for young professionals" = 🚩).
- Stay updated on federal, state, and local fair housing laws.

2. Sketchy Lease Agreements ✍️

A handshake and a smile won’t cut it in the property management world. If your lease agreement is vague, full of loopholes, or—worse—not in writing, you’re practically inviting legal trouble to move in rent-free.

What Can Go Wrong?

Your tenant sublets the apartment to a family of 12. The lease says nothing about subleasing. Now what? Or maybe they stop paying rent, and your lease agreement doesn’t mention late fees or eviction policies. Nightmare? Yep.

How To Avoid This Mess

- Use a solid, legally sound lease agreement.
- Include clear terms regarding rent, deposits, maintenance responsibilities, and eviction procedures.
- Get everything in writing. If it’s not written down, it didn’t happen.

3. Mishandling Security Deposits 💰

Nothing raises a tenant’s blood pressure faster than a missing security deposit. If you’re treating deposits like a personal savings fund, you’re in for a world of trouble.

What Can Go Wrong?

Tenants move out, request their deposit back, and… crickets. They take you to court, and suddenly you're paying way more than just the original deposit. Ouch.

How To Avoid This Mess

- Know your state’s specific laws on holding, returning, and deducting from security deposits.
- Provide itemized deductions if you’re withholding any amount.
- Return deposits within the legal timeframe—or risk seeing your name in a lawsuit.

4. Playing It Fast and Loose With Maintenance Requests 🔧

If you love hearing the phrase "I’m calling a lawyer," then go ahead—ignore tenant maintenance requests. Otherwise, fix problems. Quickly.

What Can Go Wrong?

A leaky pipe today turns into mold tomorrow. Mold turns into a tenant refusing to pay rent. They take you to court for an uninhabitable living space, and suddenly, you’re famous for all the wrong reasons.

How To Avoid This Mess

- Respond to maintenance requests ASAP.
- Keep written records of all repairs and communications.
- Conduct regular property inspections to prevent small issues from becoming legal disasters.

5. Botching The Eviction Process 🚪

Evictions are nobody’s favorite task (unless you're secretly a robot with no emotions). But if you handle them carelessly, you’ll be facing more than just an angry tenant—you’ll be facing the courtroom.

What Can Go Wrong?

You change the locks without notice. Maybe even toss their stuff on the curb for dramatic effect. Surprise! You just committed illegal eviction. Now, they’re suing you faster than you can say "Oops."

How To Avoid This Mess

- Follow the legal eviction process—no shortcuts.
- Give proper notice as required by law.
- Avoid self-help evictions (no shutting off utilities or sneaky lock changes).

6. Overlooking Tenant Privacy Rights 🔑

Sure, you own the place, but that doesn’t mean you can waltz in whenever you feel like it. Tenants have rights, and privacy is a big one.

What Can Go Wrong?

Imagine this: You barge in unannounced to “check on things,” and your tenant is in their pajamas, mid-binge-watching their favorite show. They’re not just annoyed—they’re calling their lawyer.

How To Avoid This Mess

- Give proper notice before entering the unit (usually 24-48 hours, but check your local laws).
- Only enter for reasonable purposes, like repairs or emergencies.
- Respect their space as if it were your own.

7. Bad Record-Keeping 📂

If your property management record-keeping system is just a shoebox full of crumpled receipts, you’re in dangerous waters.

What Can Go Wrong?

A tenant claims they paid rent in cash. You have no record of it. Now it’s your word against theirs in front of a judge. Not fun, right?

How To Avoid This Mess

- Keep meticulous records of rent payments, lease agreements, maintenance requests, and communications with tenants.
- Use property management software if spreadsheets aren’t your thing.
- Store documents safely in case you need to prove anything in the future.

8. Misclassifying Workers 🚧

If you hire maintenance personnel or office staff, you better be crystal clear on whether they’re employees or independent contractors. Because Uncle Sam is always watching…

What Can Go Wrong?

You call your handyman an “independent contractor,” but in reality, he works under your direct supervision with set hours. The IRS comes knocking, and now you owe back taxes and penalties.

How To Avoid This Mess

- Properly classify workers according to labor laws.
- Follow payroll tax requirements if you have employees.
- Consult a CPA or attorney if you’re unsure (better safe than sorry).

9. Violating Rent Control Laws ⚖️

Rent control laws aren’t just there to give you a headache—they exist to protect tenants. And violating them can land you in deep financial (and legal) trouble.

What Can Go Wrong?

You decide to hike up the rent on a whim, only to realize your city has strict rent control measures. Now, you owe tenants a refund… and possibly legal fees.

How To Avoid This Mess

- Check local regulations before increasing rent.
- Notify tenants properly about rent changes.
- Keep detailed records of any rent adjustments.

10. Not Having Insurance Coverage 🏚️

If you think skipping insurance will save you money, think again! One slip-and-fall incident or accidental fire, and suddenly you’re drowning in legal fees.

What Can Go Wrong?

A tenant slips on an icy walkway and sues you for medical expenses. Without liability insurance, you’re footing the bill—literally.

How To Avoid This Mess

- Get landlord insurance (liability, property damage, loss of income, etc.).
- Require tenants to have renters' insurance.
- Review your coverage periodically to ensure you're fully protected.

The Bottom Line

Being a property manager isn’t just about collecting rent and fixing leaky faucets—it’s about staying on top of the legal game. From fair housing blunders to security deposit slip-ups, there are plenty of ways to end up in hot water. But with a little diligence, some good record-keeping, and a solid understanding of the laws, you can keep your properties running smoothly—and lawsuit-free.

So, avoid these pitfalls like a landlord dodging a tenant on rent day, and you’ll be just fine!