It’s easy for both new and experienced landlords to make the mistake of operating in a casual manner, where word of mouth and handshake agreements are all you need. Indeed, you’ve probably even heard that building the sort of relationships where you can trust and be trusted is the best way to become a good businessperson.
But even the best relationships can go sour, and nothing causes discord like money does. While handshake agreements can be fine when circumstances are good, you need written agreements to protect yourself for the inevitable times when they go bad. Here are three reasons why.
1. Verbal Agreements are Meaningless
While many states have laws giving some degree of legal weight to verbal agreements, they often don’t hold up in court. And if you’re in a state that doesn’t recognize verbal agreements, you’re flat out of luck.
The problem with verbal agreements is that, if you do ever end up in court, it instantly becomes a “he said, they said” situation. If you have nothing to back up your claims beyond your story of how things happened, then you have nothing to rely on when it’s time to convince a judge that your assertions should stand.
2. There’s No Verification Without Documentation
When it comes to the courtroom or arbitrator’s office, the only currency that truly matters is written documentation. The only way to avoid “he said, they said” scenarios is when you have a clearly written record of how circumstances arose, what was agreed to, and how that agreement was violated.
Most importantly, that documentation needs to cover any and every event that may lead to financial consequences. It may be tempting to simply say “okay” when your tenants ask to repaint their apartment, or do some minor construction, but that would be a mistake. What if they paint with a type of paint that damages the walls, or requires professional assistance to strip when you want to re-paint? What if they put the structure at risk during their “minor” construction?
If any scenario arises where a seemingly tiny thing ends up costing you money, you don’t want to risk having to pay for it out-of-pocket. The only way to avoid that risk is to be able to show a judge or arbitrator that you clearly defined the terms for a given situation, and have written acknowledgment of those terms from your tenant or other relevant party.
3. Your Rights Rely on Documentation
In many states, your rights as a landlord extend only as far as you asserted them in the lease and other documentation. You may not think tenants need to be told that they’re responsible for damaging your property, but the boilerplate liability clauses exist in most leases for a reason.
To fully protect your rights, you need to assert them in clear text, and have the other party’s signature on the document acknowledging the terms of those rights. If the worst case happens and you need to take a tenant or other party to court, you’ll have a difficult time convincing a judge that your rights were violated if they hadn’t been properly established to begin with.
Ultimately, when it comes to your landlord business, you need to operate with one single, straightforward rule: put everything in writing, every time.
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