Planning to Go Into Commercial Real Estate? 8 Rules You Should Know Before Renting

Renting commercial real estate can make for great business. However, if you don’t know the law, you could lose money or find yourself facing legal issues. If you’re considering becoming a landlord, you may want to speak to a commercial real estate lawyer. Solomon Richman, P.C. is a commercial real estate firm that can review commercial lease agreements or assist you if you are facing a landlord tenant dispute.

If you’re planning to go into commercial real estate or are in the process of drafting a lease agreement, here are 8 things to consider:

1.      Know what questions you can and cannot ask. Under the Fair Housing Act, landlords are not permitted to ask questions pertaining to national origin, religious beliefs, sexual orientation, or disability. According to Forbes, landlords are only permitted to screen applicants for income and credit history. In some areas landlords can also perform criminal background checks and look into a person’s rental history. However, if you are planning to be a landlord, it is important to know what background checks are permitted and which ones are illegal. In some cases, landlords faced lawsuits in the tens of thousands of dollars for asking what they thought was an innocent question.

2.      Clearly identify and differentiate fees and deposits. Fees are non-refundable. In New York, brokers sometimes charge fees. Deposits are refundable as long as tenants don’t damage the property.

3.      Make sure your security deposit amounts are legal. Every state has different limits on how much landlords can ask for in security deposits. Make sure that your requests are within the limits of the law.

4.      Children are off limits. Under the Fair Housing Act, landlords are not permitted to ask potential tenants whether they have children. Some landlords have tried to bypass the law by asking tenants to put children’s names on applications, but doing this could potentially get you into trouble if you’re a landlord.

5.      Make sure you let tenants know when you’ll be dropping by. There are only a few occasions where it is legal for a landlord drop by. In general, a landlord must have reason to do so. A landlord is permitted to come to the property to make repairs, to show the space to potential buyers or renters, and to inspect the property. Even so, landlords must give proper notice to their tenants.

6.      You cannot terminate a lease unless there is an early-termination clause. If you have a lease with your tenant, you cannot decide to sell the property until the terms of the lease are up.

7.      Know your rights when making rental decisions. You are only permitted to use certain types of information to make rental decisions. Under the Fair Housing Act, you are not permitted to factor in age, marital status, or a person’s history of arrest when renting.

8.      Know when you can raise the rent. As a landlord you are generally allowed to raise the rent in a lawful manner—usually around lease-renewal time. You’ll want to review rent-control laws before you raise the rent.

Becoming a landlord and renting commercial real estate can be rewarding. Yet, it is important to understand the law. Before you begin to meet with potential tenants and before you draft a rental agreement, you’ll want to speak to a commercial real estate lawyer. Contact Solomon Richman, P.C. today. Our firm can answer your commercial real estate questions. Please visit our website at www.solomonrichman.com.