What Is a Landlord?

A landlord is an individual, business, or other entity who owns real estate and subsequently rents or leases the property to another party in return for rent payment. The renting party is called a tenant or leaseholder.

Landlords typically provide the necessary maintenance or repairs during the rental period, while the tenant is responsible for the cleanliness and general upkeep of the property. Specific duties and obligations of each party will be spelled out in a lease agreement.

Key Takeaways

  • A landlord is a person or entity which owns real property and then leases it out to tenants in return for rent payment.
  • A landlord can rent to either residential or commercial tenants depending on zoning restrictions and type of property.
  • Landlords and tenants are bound by a lease agreement, which is a legal contract specifying the rights and responsibilities of each party.
  • Being a landlord can generate passive rental income, but can also come with unforeseen costs and unique legal and financial risks.
  • Landlords are not allowed to discriminate (based on things like race or sexuation orientation), enter the property without proper notice, evict a tenant improperly, and raise rents without notice.

Understanding Landlords

Landlords invest in real estate as a source of financial profit. The monetary benefits of being a landlord include a steady stream of monthly tenant income, as well as ownership of real estate property which has the potential to appreciate in value. Landlords have specific rights and responsibilities that vary from state to state, however, there are general laws, common to all states. 

Landlords have the right to collect rent, as well as any prearranged late fees. They also have the right to raise the rent as defined in the tenant-landlord lease agreement.

When tenants do not pay rent, landlords have the right to evict them. The process of eviction also varies from state to state. Most states provide landlords with the ability to collect back rent as well as legal costs.

A lease is a legally binding contract outlining the terms under which one party agrees to rent property owned by another party. It guarantees the lessee, also known as the tenant, use of an asset and guarantees the lessor, the property owner or landlord, regular payments for a specified period in exchange. 

Landlord Responsibilities

Landlords are responsible for maintaining their rental properties in habitable condition, managing security deposits, and ensuring that a property is clean and empty when a new tenant moves in.

The landlord must also follow all local building codes, perform prompt repairs, and keep all vital services, including plumbing, electricity, and heat, in working order.

Advantages and Disadvantages of Being a Landlord

Landlords have financial advantages and disadvantages when investing in a rental property.

Among the benefits, a landlord may leverage borrowed funds to purchase a rental property, thereby needing a smaller portion of the total property cost, to gain the rental income from the structure. The rental property can secure this debt, freeing up other assets belonging to the landlord.

Also, most costs associated with rental properties are tax-deductible. If there is no net profit after expenses, rental income is essentially un-taxed income. As the rental property mortgage is paid down, landlords increase their ownership percentage of their property and gain access to the appreciation of value.

However, when a landlord sells a property, they will pay taxes on any capital gains unless they roll over the money into another rental property. This process, called a 1031 exchange, has specific requirements. The new property must be identified within 45-days of the sale, and the full transfer must take place within 180 days.

Advantages of Being a Landlord
  • Use of leverage to purchase the property

  • Tax-deductible costs

  • Income stream

  • Potential for appreciation

Disadvantages of Being a Landlord
  • Various responsibilities of maintaining and managing the property

  • Taxes on capital gains

  • Tenant-related hassles

  • Unforeseen costs

  • Unique legal liabilities

Special Considerations

An absentee landlord is an individual, corporate, or state entity that owns and rents out real estate but is not located on or near the property.

Being an absentee landlord can be risky for the property owner. Damage or a complete loss due to negligence or tenant misbehavior is an ongoing worry. Squatting situations can also arise without adequately monitoring, and the eviction of tenants can be problematic.

Security deposit management is also a critical obligation for any landlord. While landlords have the right to charge tenants a security deposit to cover both property damage, as well as unpaid rent, the deposit does not ever actually belong to the landlord.

Rules and laws governing security deposit amounts and how they must be maintained. These rules vary from state to state. Landlords who breach these laws could face legal consequences.

In 2019, Oregon became the first state to implement statewide rent control, placing a limit on rent increases and limiting a landlords' ability to remove tenants without cause.

Landlord FAQs

What Are Things a Landlord Cannot Do?

Here is a list of four main things a landlord isn't allowed to do:

  1. Discriminate: Thanks to the Fair Housing Act, the law strictly forbids landlords from denying a lease to someone based on: race, color, national origin, sexual orientation, familial status, disability, or gender.
  2. Enter without proper notice: Unless it's for an emergency situation such as a fire or leak, landlords must give proper notice before entering a property. Laws vary by state, but many statutes require at least 24-hour notice.
  3. Evict tenant improperly: A landlord may evict a tenant for several reasons, but they must always go through the proper legal channels. Failure to follow proper protocol puts the landlord in a precarious legal position.
  4. Raise rents without notice: Landlords must give ample notice before increasing a tenant's rent (typically that means a minimum of 30 days). And depending on the state, rent control laws might prevent landlords from raising rents above a certain limit; even when the lease is up for renewal.

How Can You Become a Landlord?

You don't need a specific license, degree, or certification to be a landlord. When you purchase a rental property, you essentially become the landlord.

That said, it makes sense to learn about landlord-tenant laws, state regulations, and property management best practices in order to run the property as headache-free as possible.

How Much Notice Does a Landlord Have to Give a Tenant to Move Out?

In most states, landlords must give a tenant 30 days' notice to end a month-to-month lease.

What Does Landlord Insurance Cover?

Landlord insurance generally covers three types of losses:

  1. Property damage: Damage to the home due to perils like fire, wind, hail, or snow.
  2. Liability: Protects the landlord legally if a tenant is injured on the property.
  3. Loss of rental income: If the property can't be rented out due to covered damage, landlord insurance may also cover the loss of rental income.

How Long Does a Landlord Have to Make Repairs?

Landlord-tenant laws vary from state to state. But generally speaking, a landlord has 3-7 days to fix critical issues (such as no heat or running water) and 30 days for less serious problems.

How Do I Report a Landlord For Negligence?

In the majority of cases, you must first notify the landlord of the issue(s) before filing a complaint. After that, there are several places to file the complaint including:

How Much Can a Landlord Raise the Rent?

The amount a landlord can increase the rent depends on local laws. In areas without rent control, there's no limit to how high a landlord can raise your rent.