Landlords: Keep tabs on your tenants or you could pay dearly.
Many people purchase income producing properties for long term investment. It sounds easy. Buy an extra home or a commercial property, rent it out, sit back and collect the cash. If only it were that easy and safe.
The fact of the matter is that whether you are a landlord for a residential or commercial property, you will owe certain legal duties to your neighbors, even if you never actually occupy your property or use it beyond renting it out.
In the residential context, as a landlord, you can be found liable to residents of nearby properties if the acts of your tenant interfere with a neighbor’s comfortable enjoyment of their property. Lawsuits have been filed against residential landlords for the illegal acts of their tenants, such as drug dealing and solicitation. The conduct of the tenant does not have to be criminal to merit a lawsuit against you. A stereo that is blasted by your tenant late at night will do the trick.
However, there are steps you can take to protect yourself from such a lawsuit. First, place provisions in the lease that require the tenant to respect the rights of residents of nearby properties or else forfeit the right to possess the property. Another thing you can and should do is check up on your tenants from time to time and ask the people leaving in the neighboring properties if there have been any problems.
In the commercial context, the potential financial harm from the activity of your tenant can be much greater. There are many commercial uses of properties that involve the use of solvents and other hazardous chemicals. Businesses such as auto repair shops, dry cleaners and industrial fabricators use chemicals that, if not properly handled, can seep into the soil and groundwater and cause an environmental mess for the neighbors and a financial mess for you.
Although it is probably not possible to avoid a pollution problem from the activities of a tenant, there are, like the residential context, steps you can take to prevent, or at least mitigate, the financial harm. First, have the soil and groundwater tested BEFORE you buy the property. Any other environmental damage from the use of the commercial property should be ascertained and if there is a problem, do not complete the purchase until the issue is resolved satisfactorily. If you enter into a lease for a commercial use that could potentially pollute the environment, you should consider placing provisions in the lease that will require your tenant to indemnify and defend you against a lawsuit or governmental action to clean up the pollution. You should also require your tenant to maintain liability insurance. It is not enough to place such a provision in the lease. You should require the tenant to provide proof of the insurance and a copy of the policy so you can verify that you will be covered in the event of a problem.
In both the residential and commercial context, an ounce of prevention is worth a lot of money in cure.
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