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Mind Your Business: The Two Business Records All Landlords Must Have To Win Their Cases In Court

When you are a Landlord, it is an absolute must that you create and maintain good and detailed business records for every tenant. Landlords must be diligent in collecting information about each tenant and any authorized occupants at the start of the tenancy and must also make efforts to periodically check with the tenant to make sure that this information stays updated during the tenancy. A thorough and detailed file should be kept current for every tenant which documents every interaction and transaction involving the tenant.  This not only includes the tenant’s information, but the tenant’s lease agreement, any lease renewals, a rent ledger, and maintenance requests and repairs. This should be done with such regularity that it becomes firmly integrated into the Landlord’s everyday normal course of business. To win cases in Court—and avoid wasting rent profits on legal fees and unnecessary litigation—a landlord must have a detailed and updated tenant file. Aside from the lease agreement, which is arguably the single most important document in the Landlord-Tenant relationship, Landlords and their representatives should pay extra attention to business practices involving the creation and maintenance of two other documents that are essential for winning cases: the rent ledger and maintenance request and repair documents.

1. Rent Ledger.

As simple as it should be to keep a rent ledger, the number of Landlords (both large and small) who fail to properly account for charges and payments is astounding. One mistake on a rental ledger in court can lead to disastrous results for the Landlord. It can impact the Landlord’s credibility entirely and call in to question the entire ledger—or even other issues outside of the payment and collection of rent (e.g., overcharging utilities or late fees which in the eyes of certain Courts is extremely serious). The physical ledger itself does not have to be complicated. It could be as simple as an Excel Spreadsheet so long as it contains the following key elements: (1) the date of the transaction; (2) the type of transaction (charge or payment); (3) the amount of the transaction; and (4) the running balance. This format is designed to provide the reader with an itemized breakdown, line by line, of the rental history for the tenant and help the reader to quickly understand the tenant’s current rent balance. In order for this ledger to be effective in court, however, a ledger should also be complete. A ledger should never pick up in the middle of a tenancy, carry over a balance from another ledger, or leave out any transactions. The reader should be able to review the ledger and follow the transactions back to the commencement of the tenancy, or at the very least, the commencement of the most recent Lease Agreement. The Landlord or the Landlord’s representative, in creating and maintaining the ledger, must additionally have personal knowledge of the transactions contained in the ledger. If the Landlord’s representative doesn’t know or is unable to specifically demonstrate where a balance came from, a court will not hold a tenant responsible for that balance. Although it should go without saying, the transactions in a ledger must be accurate and must be entered at or near the time of the particular transaction. It is imperative that payments be credited when they are received and charges be posted when they are incurred. If a Landlord receives multiple payments at the same time, each payment should be accounted for separately and should contain reference numbers for each payment. Lastly, if for any reason a payment or a charge is unusual or requires additional information, that information should be noted on the ledger and documented—with a separate record—in the file. A reader should never have to ask what a particular charge or credit is, and a ledger should never be left to rely on supplemental information or explanation from a particular person. The information should be available to the reader on the face of the ledger itself, or in the file with reference to it on the ledger.

2. Maintenance requests and repairs.

When it comes to tenant requests for maintenance, Landlords must detail each request and the Landlord’s response in (hopefully) promptly acknowledging the maintenance request, inspecting the item(s) or area(s) in need of maintenance or repair, making any necessary repairs, and following up with the tenant to confirm that the concern has been resolved. Documenting the tenant file in this manner is critical in ensuring that the Landlord is protected from any potential claims should the problem continue or resurface, or should the Landlord be in a situation where the tenant is damaging the property or falsely complaining of issues to avoid paying rent. A Landlord should never have to rely on a property manager’s recollection of the events, or a one-line note in the file. Notes should be detailed and include the date and time that (1) the complaint was made by the tenant, (2) it was received by the Landlord, and (3) when the Landlord contacted the tenant to acknowledge receipt of the request. The Landlord should detail what steps were taken after the request was made, the date and time of the first inspection, the details of that inspection including the name and position of the person who conducted the inspection, what observations were made, and what recommendations were made based upon those observations. Pictures should be taken, dated and put in the file. If contractors were necessary, all invoices and notes from the contractor, pictures, recommendations, and repairs should be documented, along with the contact information for the contractor. If the repairs take longer then a week or two, a timeline should be prepared for the file to summarize notable events. Lastly, the Landlord should communicate with the tenant to keep the tenant informed of the status of the repairs and should document those communications for the tenant’s file. When the repairs are complete, a Landlord should schedule a post-repair inspection with the tenant and have the tenant sign a document indicating that the repairs are complete. That way, should the matter ever require court intervention, the tenant will be faced with his or her own acknowledgment that the Landlord had previously resolved the issues. While maintaining tenant files with such detail can occasionally be difficult and time-consuming, the potential cost to a Landlord for not having the information available or properly documented easily dwarfs the inconvenience of operating the rental property in this way. This is not an attempt to add to the already overwhelming task of being a Landlord, but rather a recommendation that Landlords modify their normal business operations and procedures so that this information is collected and recorded in the regular course of business. This practice protects the Landlord without compromising efficiency. Having a complete and detailed tenant file not only helps the Landlord better manage the property but makes it easier should the need arise to involve a lawyer or the court.




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