Federal law establishes several standards for landlord-tenant agreements.
Basic tenets such as housing equality, rental agreements, and habitability are implied and enforced across all 50 U.S. states.
However, state landlord-tenant laws can vary widely across the country. While all states generally have laws covering security deposits, grace periods, late fees, and protected classes, these laws have significant variations from one state to another.
States deemed “tenant-friendly” offer tenants the most legal protections. This doesn’t necessarily mean that these states are hostile to landlords, only that there are more stipulations and limits you must be aware of.
Here are the top five tenant-friendly states and what landlords should know about owning property in them.
What Makes a State Tenant Friendly?
Several factors contribute to a state being perceived as more tenant-friendly than others.
Tenant-friendly states tend to have the following legislation:
- Local rent control
- Late fee limits
- Mandatory grace periods
- Security deposit rules (interest, short return times, etc.)
- Additional fair housing protections than the seven protected by the federal Fair Housing Act (FHA)
- Complex evictions
Complex evictions means that there might be a long waiting period, convoluted process, or other hinderances that make pursuing evictions undesirable for landlords. This means you’ll have to jump through hoops to evict a tenant in one of the following states—you can’t do it on a whim.
Tenant-Friendly States
In which states are you most likely to encounter the above laws? The following five states are commonly known as tenant friendly.
California
Landlords in California are subject to:
- Rent control ordinances in 15 localities
- Several required disclosures
- A 21-day maximum to return security deposits
- A 5-10% cap on late fees
- A minimum of 24 hours’ notice before entry
- 8 fair housing protections beyond those provided by the FHA (sexual orientation, gender identity/expression, age, ancestry, source of income, genetic information, and marital status)
California’s statewide rent control and extensive fair housing protections make it one of the most tenant-friendly states. Rental applications and evictions are also heavily regulated in California.
New York
Landlords in New York are subject to:
- Several required disclosures
- Local rent control
- Security deposit regulations, including a limit of 1 months’ rent and a 15-day return maximum. Some landlords must also pay interest on security deposits.
- A mandatory 5-day grace period
- Late fee limits (lesser of $50 or 5% of monthly rent)
- 8 fair housing protections beyond those provided by the FHA (sexual orientation, gender identity, age, ancestry, source of income, military status, marital status, and pregnancy).
Rent control laws vary by city and locality in New York, so be sure to research these individually.
Massachusetts
Landlords in Massachusetts are subject to:
- Required disclosures
- Security deposit rules, limits (1 months’ rent), and interest
- A 30-day security deposit return maximum
- 8 fair housing protections beyond those provided by the FHA (sexual orientation, gender identity, age, ancestry, source of income, military status, marital status, and genetic information)
Oregon
Landlords in Oregon are subject to:
- Required disclosures
- Local rent control
- 31-day security deposit return maximum
- Late fee limits (a reasonable flat fee less than 5% of monthly rent)
- Mandatory 4-day grace period
- 4 fair housing protections beyond those provided by the FHA (sexual orientation, ancestry, marital status, source of income, and pregnancy)
Washington
Landlords in Washington are subject to:
- Required disclosures
- 21-day security deposit return maximum
- reasonable late fee limits
- 15-day waiting period before eviction initiation
- 6 fair housing protections beyond those provided by the FHA (sexual orientation, gender identity, ancestry, military status, marital status, and pregnancy)
What Does This Mean for Landlords?
This information isn’t to say that you shouldn’t invest in these states. State laws are only one factor in what should be a multifaceted investing decision. Plus, local and city laws often play a role as well.
Rather than state laws, a better predictor of your success as a real estate investor is whether your properties are in an active market where rentals are in-demand.
What’s more, some of the restrictions mentioned above aren’t relevant if you’re doing your job well as a landlord. If you don’t expect to be evicting many tenants (for example, because you screen your applicants thoroughly using property management software), then you don’t need to worry about evictions being difficult in your state.
Likewise, if you plan on using a fair tenant scoring system, you shouldn’t need to consider extra fair housing protections as limitations on your rights as a landlord.
Conclusion
State laws certainly have a role to play in your real estate investing. However, it’s possible to run a highly profitable rental business in any state. By being aware of which laws apply in your state and county, you can successfully manage your rental business wherever you happen to be.
