Most of my clients are investment-minded, and I love the notion of keeping your current home as a rental when you move out of the area or buy a bigger home. But, how do you know if you’re making the right decision and if you’re ready to be a landlord?
Over the past few weeks I’ve provided all the information you need to consider when becoming a landlord.
My final installment covers the specifics for becoming a landlord in the District. Each municipality has certain laws and regulations that property owners must abide by and this article is a good rundown for DC landlords.
The District has its own set laws and regulations for becoming a landlord that other jurisdictions don’t. In fact, it’s more stringent than most other localities in the metro region.
As a DC landlord, you’ll have additional legal requirements and paperwork that need to be completed before you can even rent out your home – whether it’s a house, townhome, condo unit, basement apartment or even a single room.
Also, when it comes time to sell, you can’t just sell your property without offering it first to your renters. Yep, you read that right.
Keep in mind that it’s important to fully understand landlord-tenant laws in DC. The District is one of the most tenant-friendly jurisdictions in the country, so there are a lot of hoops landlords have to jump through to make sure the laws and rights of the tenants are being followed.
You most likely appreciated these laws if you were ever a DC renter, but now as a landlord you don’t want to make any missteps.
These laws are there to protect tenants from unsafe housing and unscrupulous landlords (not you!). But you need to protect yourself so you don’t break the law or face any penalties.
Remember to consult with an attorney or a reputable property management company for details on current housing regulations and procedures, but below is my bonus guide to get you started on what needs to happen if you plan to rent out your DC home.
Get Started with License & Registrations
The first steps involve lots of paperwork and several small fees to the District government. If you’re either going it alone or plan to work with a property management company, you still need to understand these steps before you can rent out your home.
You also can use a company called Rent Jiffy (www.RentJiffy.com) that can help expedite the license process for you.
Obtain a Basic Business License (BBL) for one-family rental. You’ll need one of these and can apply at DC’s Department of Consumer and Regulatory Affairs (DCRA). Once you’ve paid the fee and your application is approved, the license lasts for two years. You’ll also have to register your business with the Office of Tax & Revenue.
Register as a rent-controlled property or ask for an exemption. You will need to register your rental unit at the Department of Housing and Community Development’s Rental Accommodations Division (RAD). You can file a claim of exemption from rent control, especially if you’re not a “big-time” landlord. You will need an exemption number so that you will be allowed to raise rent.
Submit a Certificate of Occupancy to DCRA. Not all properties need this certificate.
Submit a “Clean Hands Certification.” Did you pay all your parking tickets? Now’s the time! This form indicates that you don’t owe the DC government more than $100 for anything.
Non-residents need to appoint a Resident Agent or an Attorney-in-Fact and fill out the appropriate form. This person will be the official recipient of any financial or legal notices from the District.
Get your home inspected within 45 days of receiving your Basic Business License. Your home will need to meet DC Housing Codes for the health and safety of your tenants. You can view Housing Codes at the DC Municipal Regulations, Title 14. Your rental property must adhere to codes that deal with heating, lighting, ventilation, utilities, occupancy space, cleanliness, sanitation, pest control, fire prevention, etc.
Let the Office of Tax and Revenue know you no longer live in the property. Remember that lovely homestead deduction? Well, when you move out, that goes away and your property taxes increase.
Avoid Unintentional Discrimination
When selecting a tenant, you need to be acquainted with the District’s Human Rights Law, which includes housing discrimination statutes. These laws can be difficult to navigate as a landlord no matter how well-intended and, therefore, make sure you know them or hire someone who does. Here are a couple of examples:
It’s illegal to discriminate against families with children, so you can’t put your own cap on the number of occupants. The legal number allowed is two occupants per bedroom plus one more. So a two-bedroom condo could have up to five occupants. This law is meant to protect families but it also means that that the same place could have up to five 20-somethings splitting rent.
A landlord can’t discriminate against someone who does not have a source of income to pay the rent as long as someone else can cover the monthly payments (meant to protect those in Section 8 housing). If a renter’s parent or family member will co-sign the lease, you can’t turn them away even though they don’t have a job.
What Tenants Expect from You
You need to follow several guidelines when dealing with prospective renters to adhere to the law. This will begin immediately when you list your home including the day the lease is signed and doesn’t end till the last day they live there.
Remember you can contact the Housing Service Center at the Department of Housing and Community Development for more complete information.
Tenant Bill of Rights (TBR). As of July 2015, DC landlords must provide rental applicants with a copy of the “DC Bill of Rights” (along with other disclosure documents required under the Rental Housing Act) and to have these prospective tenants sign the TBR to confirm receipt. If the landlord fails to have this done then they waive their right to increase the rent during the renter’s tenancy. Get a hard copy of the TBR at the DC Office of Tenant Advocate.
Rental Regulations. Give the tenant a copy of DC Municipal Regulations, CDCR Title 14, Housing, at the start of the tenancy. This is a must!
Security Deposit. Charge only one month’s rent for a security deposit and hold these funds in an interest bearing account in a DC financial institution. Once a lease has ended, you have 45 days to either return the deposit or notify the tenant in writing that you’re withholding it to pay for damage or money owed.
Fire Safety. Provide a written notice or checklist disclosing fire safety and protection information, such as smoke detector, sprinkler system, fire alarm, smoking policy, emergency evacuation routes.
Indoor Mold. Provide information on the health hazards associated with the exposure of indoor mold. Get this information from the Department of Health’s website.
Housing Code Violations. Continue to maintain housing code requirements. Tenants can file for violations, such as no heat in winter or faulty plumbing. Make timely repairs and maintain the property.
Raising Rent. Give at least 30 days written notice if you will be raising the rent. How often and how much depends on whether it’s a rent-controlled property.
Lease Renewal. A lease automatically goes month-to-month once the initial lease period ends even if you don’t agree to renew the lease. You need a legal reason – nonpayment of rent — to evict a tenant when the lease ends.
Disclosures. You are required to make any necessary disclosures. For example, if your home was built before 1978 (even if it was renovated after that), then you need to disclose the possibility of lead-based paint to your tenant.
Know DC Eviction Procedures
You hope it doesn’t come to eviction, but it can happen so know the steps you need to take to legally evict a tenant. It’s important to have legal help from an attorney when you reach this point.
- Prove to the Court at least one legal reason — nonpayment of rent; violation of lease agreement (pets aren’t allowed); damage to property, or you want to demolish the property or renovate, or want to use the home for immediate personal use. You can’t evict if you just don’t like them!
- Use the Landlord Tenant Resource Center at the DC Superior Court for more information.
- It’s illegal to remove any of the tenant’s belongings, to change the locks, turn off heat or water or force a tenant out on your own.
- Send legal notice to the tenant to vacate the property, which is sometimes called “Notice to Quit.” You usually need to give them a 30-day notice, unless they are using your property as a drug haven or haven’t paid rent. Check the language in your lease to see if the tenant has given up this right to receive notice for nonpayment.
- File a lawsuit against your tenant to receive a “judgment for possession” to evict them. You can’t force a tenant out and must file a lawsuit.
- Coordinate the eviction through the U.S. Marshals Service once you receive your judgment for possession and are authorized to evict. They must be present during the eviction.
Selling Your DC Rental Property
Before you can sell your DC rental property, you must first provide the current tenant with the opportunity to purchase it. This is where things can get complicated.
Under the Tenant Opportunity to Purchase Act (TOPA), you must send by first class mail a written offer of sale to each tenant with the asking price and other terms. You also must send a copy of this letter to the District government.
The tenant then has a certain time period to express interest in buying the property and also provide an approval letter.
They can also match any offer you receive on the property from another buyer.
If you are selling a home that has a tenant in the property, please make sure to work with an attorney or a real estate agent that is well versed in how to do so.
It’s a very complicated process with very strict rules and deadlines. Not only that, but you then need to show the title company that you did everything correctly before they can allow the change in ownership to occur!
As you can see, there is a lot to know when becoming a landlord in the District. But if you’re prepared and organized, it can be a good investment down the road. Virginia and Maryland have their own set of laws and regulations, so check with their housing authorities for details. But nothing is like in DC, so I wanted to address this jurisdiction specifically.