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How to Reduce Rental Property Liabilities
Small business owners face a real challenge in managing risks. And new landlords that have dedicated a large percentage of their personal savings towards real estate investments are no different. This new territory of owning a business and being its sole proprietor can come with a few financial realities in the form of hidden liabilities. That’s why we’ve put together this review that can help you understand how to reduce rental property liabilities.
How LLCs Protect Your Rental Property from Liabilities
When a successful legal action is taken against a limited liability company (LLC) and your group is held liable, collection of damages is limited to the assets of the company. Here are a few other important reasons to make your rental business an LLC:
LLCs protect your personal property. Safeguard your savings, and protect the property you own elsewhere with an LLC. Other personal assets, like your personal home or inherited money, are usually sheltered with the formation of an LLC.
Sheltering each property with its own LLC may be smart. Some landlords find that they’re able to further protect their real estate portfolio by creating an LLC for each property. That way, if one of your properties is found liable and held responsible due to unforeseen reasons, the rest of your properties are safe.
Limit Liabilities by Requiring Renters Insurance
Because the cost is nominal to the tenant you’ll find they may be willing to take on a renter’s policy. If something should happen, their belongings will be protected and your property stands to benefit as well. There are a number of other important reasons why requiring renters insurance of your tenants makes good business sense.
Your finances are better protected from tenant-caused damage. Tenants that are required to have renters insurance on board are more able to meet the financial obligations. If they damage your property they only need to pay the deductible.
Your tenant’s personal belongings are protected. If a theft should occur, your tenant can recover some of the cost to replace expensive stolen items.
Limit Liabilities by Keeping Common Areas Safe
With an obligation to protect your tenants, it’s your job to ensure that entries and hallways are safe and hazard-free. Here are some suggestions to limit liabilities by keeping common areas safe:
Maintain your property. Tripping hazards like uncollected parcels building up around mail collection areas can be a problem. Designate an out-of-the-way area for large package delivery and keep clutter down in high-traffic walkways. Good property management upkeep can really make a difference.
Revisit your pool, playground or other recreational areas. Take a look at your rental through the lens of a liability expert. If you find problems, take on the work if you’re up for it. Or if you need to, hire a go-to professional to get the job done.
Inspect stairwells. Be sure that your banisters are securely fastened in every stairwell. Verify all exit signage is operating properly and replace any burnt out light bulbs. Have maintenance personnel frequently inspect stairs exposed to the elements during winter months to salt and remove snow.
Check in on community and laundry rooms. Verify all lights are operating and that each space is well-lit. Clear out tripping hazards in highly-trafficked pathways in storage areas.
Install security Wi-Fi-enabled security cameras in common areas. If the unexpected should happen, and someone is injured on your property, having footage of the incident could be important. You’d be able to review how a problem occurred.
Limit In-unit Liabilities by Maintaining Your Property
Keeping your entire rental property well-maintained should be a high priority. Here are some suggestions to minimize in-unit liabilities on your property.
Require semi-annual inspections. Write up a clause in your lease agreement requiring the tenant to allow you access to the rental. When the time comes, inspect for issues. You’ll be able to look carefully at problems and liabilities that need your attention. You’ll also see how the tenant’s treating your place.
Check in with your tenant about their concerns. By asking them if they have any concerns, you may learn that the stove has been malfunctioning. If an occasional leak under the sink makes the floor slippery, you’ll learn about it then.
Limit Employee Liabilities With Training and Personal Protective Equipment (PPE)
As a business owner, you’re obligated to maintain as safe work environment for your employees. Here are a few ways you can limit employee liabilities with training and requiring PPE:
Offer training for new hires. When you bring on new employees, be sure to thoroughly train them on the tasks they’ll be required to perform. By investing time into training, you’ll help to rule out accidents and reduce turnover as well.
Review PPE best practices. When employees will be required to wear protective gear, be sure you make time to teach them how to use the equipment correctly.
Put together an operations manual for your rental property. Build a document that discusses all the various tasks employees may be expected to perform. Write out safety measures that need to be taken and required PPE for common tasks and maintenance requests.
The Benefits of Commercial Umbrella Liability Insurance
Rental property owners are attractive targets for lawsuits because the risks related to investment properties are so numerous. You can help mitigate your financial risk and help to further protect your finances. Take a look at the benefits of commercial liability insurance:
Slips and falls can be covered. Tenant injuries resulting from landlord negligence can result in serious cash awards. And these rewards can skyrocket if the injuries impact the tenant’s ability to earn a living.
Defamation lawsuits against your business can be covered. Connectivity into online communities can present risks and liability blind spots for real estate investment property owners. Even a small misstep on social media can be considered liable.
Employee-caused car accidents and damages can be covered. If you or your employees are out on official business and are involved in an accident, your commercial umbrella liability policy can be used to cover the costs for injuries and damages.
American Family Insurance’s Loss & Risk Control Resources
We believe that your business should be a safe and prosperous place for yourself, your tenants and your employees. We’re helping our policyholders reduce the risks and losses by providing informative, instructive safety and risk management information. And this is information you can use to help identify risks and reduce liabilities.
By understanding your vulnerabilities and protecting your business with carefully-insured policies, you’ll find real peace of mind. And you’ll know that your investments are more secure. While reviewing your property’s risks, make a phone call to your American Family Insurance agent and request a thorough business insurance review. You’ll get an affordable insurance coverage that can give you the security you need to pursue your financial goals.