by Darryl Brooks

Created on: February 08, 2009

Being a landlord can be a confusing business. Between the state and the local laws, tax implications, and contracts, there is a lot to learn. Not understanding some of the basic terminology can make a difficult task impossible. This article will attempt to strip away some of the mystery behind these terms.

First, some basic stuff. What is the difference between a tenant, an occupant, and a subtenant? The tenant is the person you have a contract with and is responsible for paying the rent. Anyone your tenant allows to stay on the property within the terms of your lease is an occupant. (As opposed to a squatter, who your tenant may allow to stay on the property, but is not allowed in the terms of your lease.) A subtenant is someone your tenant rents your property to. This is typically not a good idea. Make sure this is covered in your lease agreement.

When creating your lease agreements, you need to understand that there are several types of agreements. Some of them are covered here. A Fixed Term Tenancy, sometimes called a Tenancy for Years, is when the rental has a start and end date. Another type of rental is called Periodic Tenancy. This is the common week to week, or month to month type of agreement that is renewed at the end of the period. An informal rental agreement that is a simple verbal agreement is called Tenancy at Will. Finally, there is a Section 8 tenant. This refers to low-income housing subsidized by the government. Unless you are familiar with the rules involved with this type of rental, I would suggest avoiding it.

Okay, you decide to end an agreement with a tenant, what do you do? The simplest case is if you and the tenant just come to an agreement to end the lease. This is called Surrender of Tenancy.

If the tenant stops paying rent and continues to live there, this is called Tenancy at Sufferance, and it's time to evict. Before filing for eviction, you need to give them written notice. This is called Notice to Quit. You will also have to give them a Final Notice before beginning the process of Eviction. Evictions can be messy legal battles, so learn the correct way to proceed before getting into it. Before getting into a situation that can lead to a legal battle, you should take out Landlord Liability Insurance to protect you against the legal costs.

After going through all that, you decide to get rid of the rental property. But be aware, if you make a profit on the sale, you will be liable for Capital Gains Tax. However, if you take the profit from the sale and use it to buy what is called a like-kind property, you can avoid the Capitol Gains Tax until you sell that property. This process is called a 1031 Exchange.

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