As far as businesses go, being a landlord may seem like a fairly straightforward one. However, they’re also required to register their properties and secure certain licenses for their rentals, just like any other company. Obtaining these mandatory requirements will keep your property, tenants, and personal assets safe, whereas failing to file runs the risk of major fines. Here are 3 types of licenses that an apartment complex needs to have to be in compliance with the area’s regulations.
1. General Business License
Depending on your region, some municipalities may require you to obtain a general business license to operate as a landlord and rent out properties. Usually, this is only reserved for those who rent out apartment complexes rather than a residential home or for those who manage properties as a separate business, but this is not always the case.
The reason for a business license similarly varies by location, so be sure to check your city and county’s regulations to be sure you have everything you need. You can either search online to contact the local housing authority or do your own research. If you’re not confident about the answer, get in touch with other landlords and property managers or join investor groups on social media.
2. Use and Occupancy (Rental) License
Also called a rental license, a use and occupancy license governs whether or not a property meets the local housing requirements. It’s usually necessary to have this license in place before you can actually rent it out to tenants, but not every local jurisdiction requires it, so you’ll need to do some research to ensure you’re in compliance.
Another thing to know is how often you must renew your use and occupancy license. In most cases, it needs to be done every one or two years, depending on the local law. Likewise, most municipalities require apartment complexes to be inspected in the renewal process to ensure it’s still safe to live in.
It’s also considered good practice to have your rental license included in the leasing package for prospective tenants to review before they sign.
3. Certificate of Occupancy
A certificate of occupancy is an official document that declares a property meets all zoning and safety regulations and is appropriate for occupancy. The local building department issues this document after conducting a thorough inspection of the apartment complex, and it’s usually required for any tenancy.
Occupancy regulations vary by jurisdiction, but they all exist to uphold safety assurances, inspecting for structural issues, electrical problems, fire hazards, and other similar concerns. Having them is necessary for legal compliance and to avoid fines and other penalties, but it also increases the value of the apartment complex in the event you decide to sell the building.
The Bottom Line
Becoming a landlord or property manager can give you true financial freedom as long as you set all the necessary preparations from the get-go. Without the right forms and permits, your assets and the safety of your tenants are both put into jeopardy, so take the time to do the appropriate research or work with a business services company to get it done.