RENTAL PROPERTY SELF MANAGEMENT RISKS
As a property owner, you’ll be faced with the decision of whether you’re going to hire a property management company or take the self-management route.
While hiring a property manager comes at a financial cost, doing so can help you avoid some pretty major headaches. From screening new tenants to dealing with evictions, you’ll have a lot on your plate if you decide to manage your properties on your own.
It’s best that you do your research and make an informed decision. That’s why we’re outlining the potential risks of self-managing, as well as breaking down the specifics of the Arizona Landlord Tenant Act you need to know in order to manage your property effectively.
Are You Self Managing Your Rental Property?
Considering taking the self-management route? If so, you’ll want to weigh the pros and cons to determine whether self-managing is a better option compared to hiring a management company.
While self-managing will save you some money, it will mean dealing with tenants, marketing your property, and adhering to landlord/tenant laws on your own. Also, hiring a property manager is often a smarter investment because they know the market and can help you get the maximum profit on your properties.
Pros and Cons of Self Managing
Here are some pros and cons to consider before deciding to manage your own rental properties.
- Save money compared to hiring a property manager
- Full freedom when it comes to screening tenants
- Face-to-face relationships with your tenants
- Total control and responsibility when it comes to handling repairs and maintenance
- Must be local in order to address maintenance of your properties
- Responsible for marketing and filling your properties on your own
- Must handle tenant issues like late payments and evictions
- Required to understand state rental laws to avoid legal issues
- May not understand the market, limiting your profit potential
- Harder to manage multiple properties at once
Potential Risks of Self Managing Your Properties
There are some specific risks that come with managing a rental property – especially if you are managing it on your own. If you’re not well-versed in state tenant laws, you’re susceptible to making some costly mistakes.
Below, we’ve outlined some potential risks to consider when self-managing your rental properties:
One of the most important tasks that a property owner has is to screen potential tenants. That means you are responsible for finding reliable, safe, and friendly tenants to rent your property. You’ll have to run background checks and credit reports, call references, and draft up a detailed lease that adheres to federal and state laws. Note that property owners still need to adhere to Fair Housing Laws if the owner owns more than 3 homes.
A lot of things can go wrong if proper care isn’t taken. You may overlook red flags, end up taking in an unruly tenant, or accidentally break laws with the terms in your lease.
For example, we once saw a lease that an owner wrote on his own, and it stated that the tenant didn’t have to pay rent because he had put the rent amount in the wrong spot. Don’t make that mistake!
Managing the Tenant-Landlord Relationship
Dealing with tenants is often easier said than done. Issues arise, people skip out on rent, and tenants may face eviction. Dealing with these issues can be stressful and expensive.
For example, taking a security deposit is an important part of the move-in process. Regarding security deposit refunds in Arizona, you’ll have to refund part or all of this fee upon move-out. Negotiating on how much of the deposit to take can lead to conflict and even legal troubles.
Adhering to Fair Housing Requirements
The Fair Housing Act Arizona outlines specific laws regarding screening tenants and avoiding housing discrimination during the rental process. Potential tenants cannot be discriminated against on the basis of race, ability, gender, sexual identity, or class.
To avoid legal problems, you need to thoroughly understand these laws and remain unbiased during the tenant screening process.
Dealing with Aggressive Breed Dogs
People love their pets, but sometimes you don’t want Fluffy tearing up your carpets or terrorizing the neighborhood. Fortunately, property owners have rights when it comes to restricting certain “aggressive” dog breeds and preventing dog bites.
Aggressive breed list for renters are available online and outline which breeds can and cannot be restricted. You may also choose to take a pet deposit to cover pet-related damages. Tread carefully, though, because some pets (like service animals) are protected by the law.
Tenants and swimming pools: a recipe for disaster?
If your property has a pool, you may be on the hook for pool liability if a tenant drowns or gets injured. Therefore, it’s important that you understand what that liability may be and acquire the appropriate liability insurance to cover you.
Handling Tenant Damages
Dealing with tenant damages is another important responsibility you’ll have as a property owner. Depending on your lease and state and federal laws, you may or may not be able to charge the tenant for damages caused by them.
For example, “normal” wear and tear is typically something that you CAN’T charge tenants for. So, if you’re wondering how to charge a tenant for damages, you’ll first need to assess whether they are caused by them and if they qualify as chargeable under your lease agreement.
Getting Rental Property Insurance
Getting rental property insurance is absolutely essential. You never know what might happen – injuries, floods, earthquakes, etc. – and you’ll want to be covered no matter what.
Without insurance, you’ll likely have to pay out of pocket for repairs or tenant medical expenses if they are injured on your property. These costs can be astronomical. Instead, we recommend getting Arizona rental property insurance where you pay a monthly premium to maintain consistent coverage.
Evicting tenants is never fun. Even if you’re eager to get a tenant off your property, the entire process can be complicated and stressful. There are laws regarding when you can or cannot evict a tenant. And, typically, you have to give them fair warning and even take them to court. For more details about the Arizona landlord-tenant eviction process, search online regarding the tenant eviction process in Arizona to know your rights.
Read: How to Evict a Tenant in Arizona – Guide for Landlords
Understanding the Arizona Residential Landlord and Tenant Act
The Arizona Landlord Tenant Act (or the “Residential Landlord-Tenant Act Arizona”) outlines landlord and tenant rights in the state of Arizona.
Updated in 2018, this act specifies what landlords and tenants can do before, during, and after a leasing agreement.
Below are the five main chapters that outline general provisions, landlord obligations, tenant obligations, and rules regarding remedies and retaliatory actions.
The aim of this chapter is “to simplify, clarify, modernize and revise the law governing the rental of dwelling units and the rights and obligations of landlord and tenant” and “to encourage landlord and tenant to maintain and improve the quality of housing”. This section can be found on Page 4 of the Arizona Residential Landlord-Tenant Act.
The “Landlord Obligations” section outlines the responsibilities of you, as a landlord, when it comes to managing your property, handling repairs, and dealing with tenants.
These obligations include (but are not limited to):
- Avoiding discrimination and abuse
- Allowing lease termination in the case of sexual assault, domestic violence, and other safety issues
- Not withholding the security deposit for reasons not outlined by the law and your leasing agreement
- Maintaining safe, clean, and accessible premises
- Keeping up with repairs to air conditioning, heater, and plumbing. if repairs can’t be completed, then the owner must supply reasonable alternative accommodations to tenants
Similarly, the document outlines tenant responsibilities and obligations. We recommend reading the act in full in order to understand these terms.
Tenant obligations include (but are not limited to):
- Complying with building codes regarding health and safety
- Disposing of trash and debris
- Not defacing the property or causing irreparable damages
- Paying rent on time
- Preventing an infestation of bedbugs and mold
- Vacating the premises on the agreed-upon move-out date
- Not withholding access to the premises when repairs or maintenance is required
Read: Are Landlords or Tenants Responsible for Pest Control?
Tenants and landlords must be in compliance with these laws. If issues arise, this act outlines some appropriate measures to take to resolve any issues.
This chapter describes how a landlord can withhold a deposit for damages, how a tenant can request a security deposit refund, how a tenant can collect their possessions upon move-out, and whether a tenant can manage their own repairs.
Read the “Remedies” section for more information.
When conflict does arise, there are measures tenants and landlords can take to resolve their issues. This sometimes involves taking the case to civil/state or federal court.
Once a tenant or landlord has filed a formal complaint, the other party may have a set period of time in which they must resolve the issue. If the issue persists, the defending party may choose to take the offending party to court.
Navigating these laws can get confusing. As a property owner, it’s your responsibility to know your rights as well as your tenants’ rights. When you hire a property management company, however, it may be easier to navigate these issues because you have a professional on your side.
Need help managing your property? Consider hiring a property management company. At Century 21 Northwest Realty, we aim to prevent costly mistakes and save you stress when it comes to managing your real estate investments.
Arizona Landlord Tenant Act – FAQ
Have more questions about the Arizona Residential Landlord and Tenant Act? Get all of your important questions answered in our FAQ section below.
Can I sue a tenant for breaking a lease in Arizona?
While typically tenants who break a lease are on the hook for the rent for the rest of the lease term, there are a few exceptions. Tenants may legally break a lease under the following conditions: 1) they are a victim of domestic violence, 2) they are starting military duty, 3) the rental unit is unsafe to live in, 4) the landlord harasses them or violated their tenant rights. Under these conditions, you may not sue them if they break the lease. But did you know that the tenant must give you a formal notice and you may have time to remedy this?
How late does rent have to be before they start to evict?
In Arizona, a landlord can give a tenant an eviction notice the day after a tenant doesn’t pay rent. A grace period if not required. See the “Noncompliance” section here for more information.
Do landlords have to comply with ADA?
The Americans With Disabilities Act (ADA) prohibits discrimination on the basis of mental or physical disability. Therefore, a landlord has an obligation to comply with ADA laws, regardless of what’s outlined in their landlord-tenant leasing agreement.
Are landlords responsible for pool maintenance?
In short, yes. Landlords must maintain pools located on their rental properties, as they may be held liable for tenant injuries caused by the pool being in disrepair or an otherwise “dangerous” condition.
Does a landlord have to prove damages?
Typically, yes. If the tenant contests your claims, you may need to prove that the damages were caused by the tenant and were not due to negligence on your end. General “wear and tear” does not fall under this category. Learn more about “Upkeep and Repairs” here.
How long does it take to evict a tenant in Arizona?
The Arizona Residential Landlord and Tenant Act states that the eviction process can take as little as two weeks, but it often takes 30 days or more. Title 33-1367 dictates that you (the landlord) cannot change the locks on the unit and remove the tenant’s belongings immediately.
What insurance do landlords need?
If a tenant is injured while on your property, you may be held liable for their injuries. For this reason, getting protective landlord insurance is recommended. Landlord insurance typically offers liability coverage on your rented property. Having a policy may help you cover medical expenses and legal fees if a tenant is injured on your premises. Compare landlord insurance options online to find a policy that fits your needs and budget.
How much does landlord insurance usually cost?
The cost of landlord insurance varies based on how much coverage you need, how old your property is, what area your property is in, and other factors. It’s best to shop around for landlord insurance options and get a quote based on your unique situation. Landlord insurance is typically 15-25% higher than homeowner’s insurance, or, on average, about $950 per year.