Hi, there! Joe White here from Grow Property Management, your trusted property management company in Philadelphia.
We want to talk about the potential repercussions you might face if you don’t legalize your rental property in Philadelphia by not obtaining a rental license and ensuring compliance with city regulations. This isn’t legal advice - we’re not lawyers, just a real estate broker and the operator of a property management company called Grow Property Management. Based on our experience, we’re offering our perspective on what can happen if you’re not following the rules.
We’d estimate that around 80% or more of landlords in Philadelphia aren’t fully compliant with city regulations. A good number of them actually get away with it, as the city isn’t yet sophisticated enough to track down every landlord who’s operating without the proper licenses. From our property management experience, it just doesn’t typically come up unless you end up in landlord-tenant court. We handle rental licenses for our clients as part of our services, but we rarely get asked for them because we don’t often have to go to court. In fact, the last eviction we had to handle was about three years ago, and before that, it had been another three years since our previous eviction.
Evictions are extremely rare for us because we screen tenants very thoroughly. By avoiding problems before they start and managing tenants throughout their leases, we don’t end up dealing with court cases. However, when landlords come to us with tenants already in place, we’ve had to handle evictions, so I do have experience with the legal side of things.
Now, let’s talk about the consequences of not being compliant with Philadelphia’s rental property regulations. To legally operate a rental property in the city, you need a rental license, a rental suitability certificate, and if the property was built before 1978, you also need to get a lead safety test done every four years (this used to be every two years). If you don’t follow these rules, there are two major ways it can play out.
First, the city can fine you $300 per day for every day your property has been rented without a license. For example, if the tenant has been living there for a year, you’re looking at 365 days of fines — that’s 365 times $300, which can add up very quickly.
The second and much more severe consequence can occur if you end up in landlord-tenant court. If a judge finds that your property isn’t legally licensed, they have the power to refund the tenant every cent they’ve ever paid you in rent, potentially tripling that amount to make it punitive. This is based on the idea that if you’re renting out an unlicensed property, you’ve been taking money illegally. For example, if the rent is $1,000 per month and the tenant has lived there for 12 months, the judge could award the tenant $36,000 (12 months of rent times three). So, the financial repercussions can be staggering.
I’ve personally only seen landlords face these kinds of issues when they try to evict a tenant without having their rental license in place. The court typically won’t let you proceed with an eviction unless the property is legally licensed. From what I’ve observed, the court is mostly concerned with making sure your property is legally compliant before moving forward, and they seem less focused on penalizing you for the past. That’s not to say it couldn’t happen — I’m just sharing what I’ve seen.
So, if you ask me whether you should be concerned about not having your property legalized, our answer is both yes and no. From Grow Property's perspective, managing rental properties at Grow Property Management, we don’t face many issues because we have strong screening processes in place and avoid problem tenants. But most landlords don’t have the same experience and systems we do, so they’re much more likely to run into tenant issues. If you find yourself dealing with a problem tenant and you’re not compliant with the city’s regulations, that’s when you’ll really have a problem.
That’s why our advice is to get your rental property legalized. At Grow Property Management, we make sure all properties we manage are fully compliant with city regulations, and we encourage landlords to do the same. While the city isn’t perfect at catching every unlicensed rental right now, I believe that over time, they will become more sophisticated in tracking down non-compliant properties. Eventually, more and more landlords will face fines and other penalties for not following the rules.
In conclusion, the best way to protect yourself and your investment is to ensure your property is fully legalized. It’s not worth the risk of facing hefty fines or losing a significant amount of money in court. Legalizing your property now will save you from serious repercussions down the line. As a Philadelphia property management company owner, I’m here to help with any questions you have about rental property investing and compliance.
Happy investing!
