My colleague Susan began investing in real estate as a way to create passive income as she neared retirement. She found a cheap house in Chicago, rehabbed it, then maintained the property as a rental holding. Unfortunately, she didn’t screen the tenants properly and they ultimately sold drugs out of her rental home. The result: A sky-high legal bill, a poor neighborhood reputation, and a significant loss in market value on the property. Susan’s negative experience demonstrates why it’s so important that property owners take the time to screen and monitor tenants. Understanding the warning signs of drug activity can allow you to spot a problem before it results in expensive attorney’s fees and even legal troubles.
Did You Know: Landlords Can Be Held Liable for Drug Activity on Rental Property
Many states and jurisdictions have laws that require landlords to protect the surrounding community from criminal activity. Renting to someone who does drugs on the property can create a liability that may end in fines, lawsuits, or worse. Law enforcement could hold you criminally responsible if you knowingly allowed the drug activity to occur inside your property.
In addition, other tenants, neighbors, or nearby neighborhood residents could sue you on the grounds that your property is a nuisance that poses a threat to public safety. What’s more, if someone gets injured as a result of a fight (which can occur over money or due to an individual’s intoxicated state), then they could potentially sue you—the property owner—for damages. In extreme circumstances, the property could even be seized by governmental authorities.
Look for these warning signs and notify law enforcement promptly if you suspect your property is being used for drug activity.
1. Frequent visitors at all hours of the day and night.
Is your property receiving a steady stream of guests who only stay for a few minutes at a time, night and day? You may even see an obvious exchange where money is visible.
2. Unusual odors.
Growing or manufacturing drugs can produce noxious smells. If neighbors or other tenants are complaining about unpleasant odors, check on your property right away, as this can be a sign of a serious problem.
3. Spikes in utility usage.
Manufacturing drugs can cause an unusual surge in utility bills. If the bills are in your tenant’s name, check the meter for high usage.
4. Unfamiliar residents.
If the property is occupied by someone other than the tenant, this can be a sign of a problem. Keep a record of your tenants’ vehicles and license plate numbers. Check to see who’s really staying at your property.
5. Paying rent in cash.
While not illegal, making rental payments in cash is rather unusual. Even if there are no other warning signs, it’s wise that you require your tenants to make rent payments via check to establish a paper trail.
Of course, any of these potential red flags may turn out to have a perfectly reasonable explanation, but if you ever have reason to be suspicious, it’s best to err on the side of caution and call the police. If it turns out that your wariness was warranted and the police find evidence of drug activity on your rental property, you may have grounds to evict the tenant faster than if they simply didn’t pay rent. This also provides vital documentation that shows you made an effort to remedy the situation.
Depending upon your local laws, the eviction process for drug activity may be different than a typical eviction. If you’re unsure about your rights or the next steps, consult an attorney who has experience in landlord-tenant disputes and evictions. The last thing you want to do is lose an eviction case due to improper procedure.
The best way to prevent illegal drug activity on your property is to thoroughly screen every tenant before signing a lease. Be sure to check the language of your lease. Ensure that it specifically prohibits any conduct that is unlawful under state or federal law, including the use, manufacture, distribution or sale of any controlled substances. Then, if the worst happens and you must evict a tenant for drug activity, you’ll be in a stronger position to win your case.
Learning From the Mistakes of Others
After the lawsuit stemming from drug activity on her rental property was resolved, Susan was a little cautious about investing in real estate again. She realized that she needed better real estate investing guidance and mentorship. That’s when she turned to HomeVestors® and became a franchisee. As her HomeVestors Development Agent, I’ve watched her investing business bloom. She is well on her way to reaching her retirement income goals. If you’ve stumbled a time or two with your real estate investments, reach out to HomeVestors today and find out more about how we can support you.
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