15 little-known-facts Rental Property Owners should know in Santa Monica

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1. Tenant Screening is a Legal Process 
Tenant screening is crucial, but it must be done carefully to avoid discrimination claims. The Fair Housing Act prohibits discrimination based on race, color, national origin, religion, gender, familial status, or disability. Screening practices must be consistent and fair. Using an online system that performs background and credit checks can help maintain a compliant and non-discriminatory process.​
2. You Can Deduct Property Management Fees 
Many rental property owners don’t realize they can deduct the fees they pay to property managers from their taxable income. These fees are considered a legitimate business expense. This can be a significant benefit at tax time, reducing the overall tax burden for rental property owners.
3. Security Deposit Rules Vary by State 
Security deposit regulations vary widely by state, including maximum deposit amounts and required return timelines. For example, in California, landlords must return the deposit within 21 days after a tenant vacates. Knowing the specific rules in your state is essential to avoid fines and legal issues.
4. Landlords Are Not Required to Have Renters Insurance, But Tenants Should
While you’re not required by law to carry renters insurance for your tenants, you can require tenants to have it as part of the lease. This protects both parties in case of damage or loss to personal belongings and may help protect you from certain liability issues.
5. Depreciation Can Benefit You
Rental property owners can depreciate the value of the property over time for tax purposes, which can lead to significant deductions. You can depreciate the value of your property (excluding land) over 27.5 years in residential real estate. This can help offset rental income, reducing taxable earnings and potentially increasing your cash flow.
6. The "Cash for Keys" Approach
If you’re facing an eviction, "cash for keys" is a strategy that can save you time and money. Rather than going through the costly and lengthy eviction process, you offer the tenant money in exchange for them vacating the property voluntarily. It’s a win-win: tenants get money to help them move, and you avoid the costs of court proceedings and damages from a contentious eviction.
7. You Can't Increase Rent at Will in Rent-Controlled Areas
If your rental property is in an area with rent control, like Santa Monica, you cannot just increase the rent whenever you want. There are strict guidelines about how much and how often you can increase rent. For example, the rent increase might be capped at a certain percentage, and tenants must be given proper notice before any hike.
8. You Can Be Held Liable for Tenant Injuries
Even if a tenant is responsible for their own injuries, property owners can still be held liable in certain situations. If a property has hazardous conditions that were not addressed in a reasonable time frame (like a broken step, leaking roof, or unsafe electrical system), you could be found liable for the tenant’s injury, even if they caused it.
9. You Can Charge for Late Fees—But Be Careful
Late fees are a legitimate way to encourage timely rent payments, but they must be reasonable and clearly outlined in the lease. Many states have laws that limit how much you can charge for late fees, and excessive fees could be deemed unenforceable in court.
10. Maintenance Is Your Responsibility—Even for Tenant Damage
In most cases, landlords are responsible for maintaining the property in a habitable condition, even if the tenant caused the damage. For example, if a tenant’s water damage needs repairing, the landlord is generally responsible for the fix, even though the tenant caused the issue. That said, if the damage is due to tenant negligence or misuse, you may be able to charge them for the repairs.
11. Rent Control Doesn’t Apply to Every Property
Rent control laws apply to buildings built before a certain year (usually 1979 in cities like Santa Monica), but not all properties are subject to them. Newer buildings or those that have undergone major renovations may be exempt from rent control. It’s important to know which properties are affected in your area, as rent control can drastically limit the rental income potential of your investment.
12. You Can Evict for "No-Fault" Reasons (In Some Cases)
In certain areas, you can evict tenants without a specific violation of the lease. These are called "no-fault" evictions, which typically occur in rent-controlled areas or when you need to occupy the property yourself. Be sure to check local laws to understand what qualifies for no-fault evictions in your area.
13. You Can Set Rules for Tenant Behavior
While you cannot discriminate against certain protected classes, you do have the right to establish rules regarding tenant behavior. For example, you can prohibit smoking, limit noise levels, or specify that pets are not allowed (except for service or emotional support animals under federal law). These rules must be reasonable, clearly written in the lease, and enforceable.
14. You’re Obligated to Provide "Fit and Habitable" Living Conditions
This means your rental property must meet certain health and safety standards. If a tenant feels the property is uninhabitable (e.g., no running water, unsafe electrical systems), they may be entitled to withhold rent or break the lease without penalty. It’s important to keep up with regular maintenance and repairs to avoid disputes.
15. Your Property Insurance May Not Cover Everything
Many landlords mistakenly think their homeowner’s insurance covers everything related to rental property. In reality, you may need a separate landlord insurance policy that covers property damage, liability, and loss of rental income. Make sure you have the proper coverage to protect your investment.