Elijah Grant
Renting out a property is a business, and as such, it often requires a license. The type of license depends on the location and specifics of the rental operations. For example, in Philadelphia, landlords need a Rental License to rent out a property, and they must name a local managing agent when applying for it. In Cook County, Illinois, owners of multi-unit buildings with four or more units are required to obtain a Residential Rental License. In Montgomery County, Maryland, all residential single-family and multifamily property owners must obtain a rental housing license before renting or advertising their property. In addition to business licenses, landlords may also need to obtain Use and Occupancy licenses (U&O), Certificates of Occupancy (CO), and lead safety certifications.
| Characteristics | Values |
|---|---|
| Location | Requirements for renting out buildings vary by location. For example, in Philadelphia, landlords must have a Rental License. In Cook County, Illinois, owners of multi-unit buildings with four or more units are required to obtain a Residential Rental License. In Montgomery County, Maryland, all residential single-family and multi-family property owners must obtain a rental housing license. |
| Type of Building | Some locations have specific requirements for certain types of buildings. For instance, in Philadelphia, high-rise residential buildings require a license, and landlords of buildings with three or more units must provide tenants with a copy of the building's smoking policy. |
| Occupancy | In some cases, the occupancy status of a building may impact licensing requirements. For example, in Philadelphia, if you occupy the property, you need an Activity License Number, whereas if you don't occupy it, you need a Commercial Activity License and must pay the Business Income & Receipts Tax (BIRT). |
| Number of Units | The number of units in a building can also determine licensing requirements. For instance, the Residential Rental License requirement in Cook County, Illinois, applies to buildings with four or more units. |
| Safety and Health Standards | Landlords must often comply with safety and health standards, such as lead safety certifications and pest control requirements. For instance, in Montgomery County, Maryland, properties built before 1978 must comply with lead poisoning prevention standards. |
| Inspections | Many municipalities require property inspections to verify that the property is safe and habitable. For example, a Certificate of Occupancy certifies that a property complies with building codes and is suitable for habitation. |
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What You'll Learn
Business licenses and registrations
The requirements for business licenses and registrations for renting out buildings vary depending on the location and type of rental property. Here are some general guidelines:
Business Licenses
In some jurisdictions, landlords may need to obtain a general business license to rent out properties, especially if they operate multiple rental units or manage their properties as a formal business. Even landlords with a single rental property may need a business license in certain areas. It is important to research the specific requirements of your location to ensure compliance.
Rental Licenses
A rental license is typically required before you can legally rent out a property. This license ensures that the building meets zoning, housing, building, fire, and other applicable safety codes. The requirements for obtaining a rental license can vary, but generally, you must prove that you own the property and comply with all relevant codes and regulations. Some locations may also require a separate license for high-rise residential buildings.
Activity License Number or Commercial Activity License
If you occupy the property you are renting out and it has three or fewer units, you will typically need an Activity License Number. If you don't occupy the property or it has four or more units, you will need a Commercial Activity License and may need to pay the Business Income & Receipts Tax (BIRT). For both types of licenses, you will need a business tax account and must identify a managing agent.
Use and Occupancy Licenses (U&O)
In addition to business licenses, landlords must also navigate requirements for Use and Occupancy licenses (U&O). These licenses typically need to be renewed annually or biennially, depending on the jurisdiction. Inspections are often required to verify that the property is safe and habitable.
Certificates of Occupancy (CO)
A Certificate of Occupancy certifies that a property complies with building codes and is suitable for habitation. Unlike U&O licenses, COs are generally issued once and do not require renewal unless substantial changes are made to the property. However, the need for a CO may vary by location, with some areas requiring them for every rental unit.
Lead Safety Certifications
Properties built before a certain date (usually before 1978) may require lead inspections and certifications to ensure the property is safe for tenants. This includes complying with lead paint and lead-based paint hazards regulations.
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Rental license requirements
To obtain a Rental License in Philadelphia, property owners or their agents must submit an application and provide proof of ownership, such as a recorded deed, settlement sheet, or OPA record if they have owned the property for more than six months. They must also identify a managing agent with a Philadelphia mailing address, who will be responsible for handling maintenance requests, collecting rent, and resolving rental disputes. Additionally, landlords must demonstrate that the building meets zoning and construction and occupancy codes and provide a Certificate of Occupancy or a prior rental license record if available.
For high-rise residential buildings in Philadelphia (buildings with a floor 75 feet or more above the lowest level of fire department vehicle access), additional requirements include providing tenants with a Certificate of Rental Suitability and complying with lead safety rules and smoking policies.
In Maryland, some counties and cities require landlords to have a current rental property license to ensure that rental properties meet building code requirements for habitability. Short-term leasing platforms such as Airbnb or Vrbo may also have specific license requirements in certain localities. Therefore, it is essential to check the local laws and regulations applicable to the specific location of the property.
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Safety and health compliance
In Montgomery County, Maryland, landlords must comply with the State of Maryland's Lead Poisoning Prevention standards for properties constructed before 1978. They must also ensure compliance with fire and safety codes, as well as zoning and building regulations.
In Cook County, the focus is on protecting public health and safety. The county mandates that rental units meet minimum standards for habitation, occupancy, construction maintenance, proper use, and appearance.
To ensure safety and health compliance, landlords should be aware of the specific local laws and regulations. For example, some areas require lead inspections and lead-free certifications to ensure the property is safe, especially for families with young children. Obtaining a Certificate of Occupancy (CO) is essential, certifying that the property meets building codes and is suitable for habitation.
Additionally, landlords should be mindful of business licenses, Use and Occupancy licenses (U&O), and other specific requirements, such as pest control and smoking policies. By staying informed and compliant, landlords can provide a safe and legal living environment for their tenants while also avoiding penalties and protecting their investments.
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Managing agents
The role of a managing agent is complex and requires knowledge of landlord and tenant law, building construction, health and safety regulations, basic accounting, and more. They are also responsible for ensuring that the building complies with health and safety regulations, such as pest control and smoke policies.
When appointing a managing agent, it is important to ask about disclosure of commissions, including insurance, and to agree on the frequency of financial reports. It is also advisable to speak to references or testimonials provided by the agent and to refer to model management contracts/agreements provided by professional bodies such as the Association of Residential Managing Agents (ARMA) and the Royal Institution of Chartered Surveyors (RICS).
Online platforms such as Zillow Rental Manager can also assist landlords in managing their rental properties, from listing to lease management and rent collection. However, these platforms may not offer the same level of personal service and relationship management as a dedicated managing agent.
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Local laws
In Montgomery County, Maryland, all residential single-family and multifamily property owners must obtain a rental housing license from the Montgomery County Department of Housing and Community Affairs before renting or advertising their property for rent. The types of properties covered by this requirement include condominium apartments, single-family homes, accessory dwelling units, and multi-family apartment properties. The application process involves completing a Rental Facility License Application, paying the necessary fees, and submitting the required documents.
It is important to note that the laws and requirements may differ based on the specific city or county. For instance, in Philadelphia, landlords must comply with lead safety laws and ensure that properties built before March 1978 are certified as lead-free or lead-safe. They must also be current on all city taxes and fines, and not have any outstanding L&I violations. Additionally, for high-rise residential buildings, a Certificate of Rental Suitability issued by the L&I is required to be provided to tenants.
Understanding the local rules and regulations is essential for landlords to ensure compliance and minimize risk. Renting out a property without the necessary licenses and approvals can result in various consequences, including heavy fines, difficulty evicting tenants, and a lack of insurance coverage in the event of an accident. Therefore, it is advisable to research the specific requirements applicable to your location and property type, and to register with the local authorities accordingly.
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Frequently asked questions
Yes, you need a Rental License to rent out a building.
You must get a Rental License for each building.
The requirements vary depending on your location, but you will generally need to prove that you own the property and that the building is legally occupied. You may also need to comply with zoning, housing, building, fire, and other safety codes.
You can check with your local government or a rental property investing platform for information on the specific licenses and requirements for your location.
