Lawsuits in Real Estate have become a normal thing in today’s litigious society. Real estate has a lot of potential for financial good and financial bad for the investor. In no way will disaster come upon you faster than with an ill-timed lawsuit. You need to cover your bases. Here are some things you can do to limit the impact.
How to Limit the Impact of Lawsuits in Real Estate: Insure Your Properties
Insurance is going to cover your back in a lot of worst-case scenarios. It’s also nothing short of essential if you’re renting out property space for others. Building insurance, contents insurance, and public liability insurance are three of the most common types of insurance you should look into. Building insurance covers damage from natural disasters or crimes (like theft or vandalism). They often include insurance against fire, rainstorm damage, etc., but may not include things like earthquakes or hurricane flooding. Look into this if your property is in an area with extreme weather. Contents insurance covers you for losing personal items to theft or damage. Public liability protects you from visitors or renters hurting themselves on the property and suing you for their medical bills. If you can afford it, landlord insurance often covers all of the previously discussed.
Create a Separate Company
The LLC structure is ideal for protecting personal property from your business liability. Why? It’s all about asset protection. Basically, having an LLC separates your business assets and your personal assets. If the LLC gets sued, it will have nothing to do with your personal assets. It also can help protect you from liability in relation to business partners – whereas, in a general partnership (for example), you are liable for legal issues involving your business partner. LLCs are not legally impregnable by any means. So make sure you’re familiar with your state’s regulations and rules pertaining to LLCs.
How to Limit the Impact of Lawsuits in Real Estate: Keep Your Contracts Sharp
Make sure you know how to draw up a proper rental contract for a tenant. If you don’t include everything you need to, you could find yourself in a difficult position. For example, most contracts bar the tenants from messing around with utility systems (such as the electrical) themselves, and instead specifically state that the landlord must take care of it. If the tenant goes digging around in the walls and electrocutes themselves, and tries to sue, you should be contractually held not to be at fault.
Nobody enjoys legislation. Sometimes, it’s necessary in order to keep things fair. Other times, it’s really only because somebody is trying to take advantage and get an easy payout. Protect your hard-earned investments, and make sure you’re prepared for the worst.
Check out this article on what to know before renting out your ADU!
Steelbridge Realty LLC is a Licensed Real Estate Brokerage that utilizes cutting-edge marketing techniques and data-driven Real Estate solutions in today’s ever-changing environment. Our group of professionals have decades of experience and have navigated through many business cycles. Our diverse background gives us the tools to guide people towards successful decisions.