Illegal activities in your building
I have written here before about zealous prosecutors going after and prosecuting landlords for illegal activities of their tenants. As a property investor, if you are not aware of illegal activity going on in your leased building or apartment, you should have certain basic legal protections. That said, if a potential for illegal activity exists in your building and you (or your property manager, since you have vicarious liability through them) turn a blind eye, you certainly can be held responsible.
Stay focused and reasonable
It really is a matter of reasonableness and logic. The latest news out of Houston today is of a “stash” house, where illegal immigrants have been smuggled in and kept. In this scenario, it is basically impossible for a reasonable property owner not to know that something quite illegal was occurring.
According to the Houston Chronicle (“Five Will Face Federal Charges in Pearland Stash House,” by Anita Hassan, St. John Barned-Smith, Dane Schiller and Dale Lezon, 3/20/14), “federal authorities plan to charge at least five people in connection with the Wednesday discovery of dozens of imprisoned people living in a Pearland-area stash house, officials said.” The article went on to say “115 people were discovered in the packed, rancid stash house. Literally living on top of one another.”
This intense amount of squalid conditions were also described: “federal agents, along with police, sheriff’s deputies and constables, found a “sea of people” packed into the home, sitting on each others’ laps, hungry, thirsty, and exhausted.” It went on to describe the living conditions as “rooms littered with plastic trash bags and clothes, a single toilet, no hot water, and a terrible stench.” Clearly, no landlord in his right mind would allow such a scene to exist if they knew about it….or, more to the point, weren’t engaging in the illegal activity themselves.
Landlords and the law
Let this story be a shining example of the other extreme in landlord behavior and the law. You can, and should be, held responsible for obvious illegal activity in any investment property you own. Would it be reasonable for you (or your agent, a property manager) to complete regular inspections of your building? Absolutely. In this case of human smuggling, it would be terribly obvious. However, in the case of illegal activities that are not readily apparent (for example, a tenant setting up a meth lab in their apartment that you lease to them), good common sense needs to dictate. If something looks suspicious (or, smells so), you have the right to investigate. And you would be held responsible if you did not. But if there is nothing so obvious as to arouse suspicions, you should be in the clear.
Protect your asset at all times
Nevertheless, you still have your investment property as an asset to protect at all times. Even if you’re not liable for any illegal activity, you still get stuck with the clean up bill after law enforcement gets through with your tenants, and they leave. And that clean up could be a major source of headaches, not to mention a huge drain on your cash flow. Make sure you keep your eyes, ears and nose open to all possibilities when selecting and installing tenants, as well as when you do your regular check-ins with them.
photos courtesy of tv.graffitiwithpunctuation.net, barnettassociates.net, thegreatestrealestateblog.com, buildingmoxie.com, tenantscreeningblog.com, hdwallpaperart.com