Common Illegal Property Management Practices to Avoid

Property management involves important legal responsibilities, including adhering to fair housing laws and ensuring habitable living conditions.

Landlords or managers who engage in illegal property management practices face serious consequences such as government fines, tenant lawsuits, and damage to their professional reputation.

We understand that going through property laws and regulations can often feel stressful, especially when balancing compliance with day-to-day management tasks.

This guide highlights common violations that property professionals must avoid, not just to stay compliant with regulations, but to build trust with tenants and protect their business.

Fair Housing Violations: Illegal Property Management Practices to Avoid

Property managers and landlords must comply with the Fair Housing Act, which prohibits discrimination based on race, color, religion, sex, national origin, disability, or familial status.

Violating these laws can lead to heavy fines, lawsuits, and reputational damage. Here are illegal property management practices related to fair housing.

1. Discriminatory Advertising

Using language that discourages or excludes protected classes is an illegal property management practice. Examples include:

• Explicit exclusion: Phrases like "No Section 8" or "Ideal for young professionals only" (which may discriminate against families with children).

  Examples:

  • No Section 8” – Discriminates against individuals who use housing vouchers.

  • “Ideal for young professionals only” – May exclude families with children or older adults.

  • “Adults only” – Unlawfully excludes families with children.

• Implied discrimination: Using terms like "Christian neighborhood" or "perfect for singles" can be seen as discouraging other groups.

  Examples:

  • “Christian neighborhood” – Suggests religious preference, discouraging those of other faiths.

  • “Perfect for singles” – Could imply families or couples are not welcome.

  • “Walk to synagogue” – May imply a religious or ethnic preference.

• Steering tenants: Directing certain demographics to specific units (e.g., placing families only in ground-floor units).

  Examples:

  • Placing all families with children on the ground floor only.

  • Showing certain units only to one race or nationality.

  • Telling older tenants that a particular building is "more their speed."

How to Stay Safe:

• To avoid discriminatory practices, follow these guidelines:

   Use Neutral Language

  Use inclusive, descriptive terms that focus on the property, not the people you want to attract.

  Examples:

  • “Spacious 2-bedroom near parks and transit.”

  • “Modern studio in quiet building.”

  • “Pet-friendly home close to schools and shopping.”

  Advertise Broadly

  Promote your listings across a wide variety of platforms and avoid tailoring them to specific demographics.

  Tips:

  • Use mainstream rental websites, community bulletin boards, and housing agencies.

  • Ensure your ad reaches a diverse audience, not just one group.

  • Avoid posting only in affinity groups or areas tied to a specific religion, language, or ethnicity.

Must Read: What High-Performing Property Managers Do Differently During Leasing Season 

2. Unequal Treatment

Applying different rules to different applicants is another illegal property management practice. This includes:

• Inconsistent screening criteria: Running credit checks on some applicants but not others.

• Changing lease terms: Requiring higher deposits from certain groups.

• Selective enforcement: Only enforcing noise rules against specific tenants.

How to Stay Safe:

•  Use a Standardized Screening Checklist

  • Create a clear list of criteria (credit score minimum, income requirements, background checks) that applies equally to everyone.

  • Example language: “All applicants must submit a credit report and proof of income.”

  Apply Lease Terms Uniformly

  • Set consistent security deposits, lease lengths, and pet policies.

  • Example language: “Security deposit: one month’s rent, applies to all tenants regardless of background.”

  Document Every Decision

  • Keep written records of all application decisions and communications.

  • Use standardized forms and note reasons for approval or denial.

  • Example practice: Logging all interactions and screening results in a tenant file.

Avoid accidental bias, RIOO’s tenant screening tools apply the same criteria to every applicant automatically. 

3. Failure to Accommodate Disabilities

Denying reasonable accommodations for disabilities is a violation of federal law. Illegal practices include:

• Rejecting modifications: Refusing to allow wheelchair ramps or grab bars.

• Ignoring assistance animals: Charging pet fees for service dogs or emotional support animals.

• Inaccessible units: Failing to provide accessible parking or entryways.

Legal Requirement: You must allow reasonable modifications at the tenant’s expense (unless it’s an undue burden).

How to Stay Safe:

• Train staff on Fair Housing disability rules.

• Respond promptly to accommodation requests.

• Use RIOO’s maintenance portal to track and approve modification requests fairly.

Fair housing violations are among the costliest illegal property management practices. By avoiding discriminatory advertising, enforcing consistent rules, and accommodating disabilities, you protect your business and your tenants.

Need help staying compliant? RIOO’s property management software includes Fair Housing checklists and documentation tools to reduce risk. [Get a demo]

Lease and Rent-Related Illegal Property Management Practices

Property managers and landlords must navigate lease and rent regulations carefully; violations can lead to costly lawsuits, fines, and damaged reputations.

Below are common illegal property management practices related to leases and rent that every professional should avoid.

1. Illegal Lease Clauses

A lease agreement cannot override tenant rights protected by law. Watch out for these illegal property management practices:

Waiving Tenant Rights (e.g., Habitability)

• What’s Illegal:

  • Clauses that make tenants waive their right to a habitable living space (e.g., no heat, plumbing issues).

  • Attempts to avoid responsibility for essential repairs.

• Why It’s a Problem:

  • Landlords cannot bypass state implied warranty of habitability laws.

Unenforceable Fees/Penalties

• What’s Illegal:

  • Charging excessive late fees beyond state limits (e.g., California caps at 5-10% of rent).

  • "Liquidated damages" clauses that penalize tenants unfairly for breaking leases.

• Why It’s a Problem:

  • Courts may rule these fees unreasonable and order refunds.

How to Stay Safe:

Review Leases with a Real Estate Attorney

• Have legal professionals ensure lease clauses comply with local and state laws.

• Regularly update lease templates as laws change.

Follow State-Specific Guidelines on Fees and Tenant Rights

• Research your state’s limits on late fees, security deposits, and tenant protections.

• Use clear, fair language reflecting legal requirements.

Beyond lease terms, rent increases must also follow strict rules.

2. Rent Control Violations

In rent-controlled cities (e.g., New York, San Francisco), improper rent hikes are a major illegal property management practice.

Improper Increases in Regulated Areas

• What’s Illegal:

  • Raising rent beyond local caps (e.g., 3% annually in some areas).

  • Attempting to bypass laws by reclassifying units.

• Penalties:

  • Tenants can sue for overpaid rent + penalties.

Retaliatory Rent Hikes

• What’s Illegal:

  • Raising rent to punish tenants for complaints or repair requests.

• Red Flags:

  • Sudden increases shortly after a tenant reports code violations.

• Why It’s a Problem:

  • Courts frequently rule in favor of tenants in cases of retaliatory rent hikes.

  • Courts often order landlords to roll back rent increases and pay damages.

How to Stay Safe:

• Document valid reasons for increases (e.g., property upgrades).

• Check local rent control ordinances before adjusting prices.

Beyond this point, Security deposits are another legal minefield that should be considered of utmost importance.

3. Security Deposit Mishandling

Tenant security deposits are heavily regulated, and mistakes can lead to 2-3x penalties in some states.

Excessive Deductions Without Documentation

• What’s Illegal:

  • Charging for normal wear and tear (e.g., faded paint, minor carpet wear).

  • Failing to provide itemized receipts for repairs.

• Example Violation:

  • Keeping a deposit for "cleaning" without proof of costs.

Failure to Return Deposits on Time

• State Laws Vary:

  • California: 21 days to return deposit + deductions.

  • Florida: 15–60 days, depending on lease terms.

• Penalties:

  • Tenant can sue for a full refund + punitive damages.

How to Stay Safe:

• Take move-in/move-out photos as evidence.

Maintenance And Habitability Issues: Common Problems That Can Harm Tenants

One of the most common illegal property management practices involves failing to maintain safe, habitable living conditions.

Landlords and property managers have a legal duty to provide functional heating, plumbing, and structurally sound units, yet many cut corners, risking tenant health and legal consequences.

1. Neglecting Repairs (A Fast Track to Lawsuits)

Illegal Practices to Avoid:

• Ignoring Health/Safety Hazards

  • Letting mold infestations spread (especially toxic black mold)

  • Failing to address pest problems (rodents, bed bugs, cockroaches)

  • Not fixing broken smoke detectors or carbon monoxide alarms

• "Constructive Eviction" Through Neglect

  • Deliberately leaving severe issues unresolved (e.g., no heat in winter, leaking sewage) to force tenants out.

  • Legal Risk: Tenants can sue for relocation costs + penalties.

Also Read: How Digital Leasing Tools Are Quietly Saving Property Managers Hours Each Week 

2. Illegal Entry & Harassment (Privacy Violations)

Even as the property owner, you can’t enter a tenant’s home whenever you want. Common illegal property management practices include:

• Entering Without Proper Notice

  • Most states require 24-48 hours’ notice (except emergencies like fires).

• Harassment Through Excessive Inspections

  • Scheduling weekly "inspections" to pressure tenants.

  • Red Flag: More than 2-3 visits/month without cause may be deemed harassment.

Financial and Ethical Violations: When Property Management Crosses the Line

Mismanaging money is not only unethical but can also be a criminal offense. The following are illegal property management practices that may result in legal charges.

1. Fraudulent Accounting (A One-Way Ticket to Court)

• Misusing Tenant Payments

  • Applying rent money to personal expenses instead of mortgages/taxes.

  • Legal Risk: Embezzlement charges (a felony in most states). Misusing tenant funds under criminal law, leads to felony charges.

• Hiding Income from Property Owners

  • Pocketing cash rents or falsifying expense reports.

2. Kickbacks and Self-Dealing (The Dirty Secret of Some PM Firms)

• Taking Contractor Bribes

  • Accepting "gifts" from vendors in exchange for inflated contracts.

  • Legal Risk: Violates anti-bribery laws (even small amounts count). It indicates that accepting bribes violates anti-corruption statutes to ensure fair business practices.

• Overcharging for "Preferred Vendor" Services

  • Marking up repair bills secretly.

  • Red Flag: No competitive bidding process.

These illegal property management practices aren’t just "bad habits", they’re offenses that can destroy your business. Stay compliant by:

1. Documenting all repairs and communications (RIOO’s logs help).

2. Using software to prevent financial "gray areas."

3. Training staff on fair housing and landlord-tenant laws.

Need a Compliance Safety Net? RIOO's platform includes lease audit tools, maintenance documentation, and financial transparency features to keep you legal. [See how it works].

Retaliation & Illegal Evictions: Protect Yourself and Your Tenants

One of the most serious illegal property management practices involves retaliating against tenants or attempting illegal evictions. These actions not only violate tenant rights but can also lead to costly lawsuits and damage to your reputation as a landlord or property manager.

1. Punishing Complaints (A Common But Illegal Practice)

Tenants have the legal right to request repairs or voice concerns without fear of retaliation. Some illegal property management practices in this category include:

• Raising Rent After Repair Requests

  • Increasing rent shortly after a tenant complains about habitability issues (e.g., mold, broken heating) is considered retaliatory in most states.

  • Courts often side with tenants if rent hikes follow maintenance complaints.

• Threatening Lease Non-Renewal

  • Telling a tenant their lease won’t be renewed because they reported violations (e.g., safety hazards) is illegal retaliation.

  • Even subtle threats can be legally risky.

2. Self-Help Evictions (A Fast Track to Legal Trouble)

Landlords must follow formal eviction procedures; taking matters into their own hands is illegal. Common violations include:

• Changing Locks or Shutting Off Utilities

  • Locking out a tenant or cutting off water/electricity to force them out is prohibited in all states.

  • Only courts can authorize an eviction after due process.

• Illegal "Cash for Keys" Pressure

  • Offering money for tenants to leave can be legal if voluntary, but coercing them crosses the line.

  • Tenants can later claim they were forced out unfairly.

How to Stay Compliant: Avoid Illegal Property Management Practices

Preventing legal issues starts with education, documentation, and the right tools. Here’s how to protect your business:

1. Education (Know the Law)

• Fair Housing Act Training

  • Understand protected classes (race, disability, family status) to avoid discrimination claims.

• Local Landlord-Tenant Law Updates

  • Eviction rules, security deposit limits, and repair timelines vary by state/city.

2. Documentation (Proof Protects You)

• Consistent Screening Criteria

  • Apply the same income, credit, and background checks to all applicants to avoid discrimination claims.

• Detailed Repair Records

  • Log all tenant requests and completion dates to disprove retaliation allegations.

3. Tools (Automate Compliance)

• Property Management Software (Like RIOO)

  • Track lease terms, maintenance requests, and communications in one system.

  • Automated reminders for legal deadlines (e.g., security deposit returns).

• Legal Review of Lease Agreements

  • Have an attorney review your lease to remove unenforceable clauses.

Avoid costly mistakes. RIOO's compliance tools help you document repairs, track leases, and stay on the right side of landlord-tenant laws. 

Final Thoughts

Property management comes with serious legal responsibilities, and cutting corners can lead to costly fines, lawsuits, and damaged reputations.

From illegal evictions to discriminatory practices, many well-meaning landlords unknowingly violate tenant rights simply by not understanding the law. 

For landlords seeking peace of mind, RIOO's property management software provides the perfect compliance safeguard. RIOO automates lease tracking, maintains organized repair logs, and ensures you never miss critical legal deadlines. 

Discover how RIOO simplifies legal compliance - schedule your free demo today.