How To Deal With Getting Sued As A Landlord
Oh no, I’m 27 and being sued!
In 2007, I made a bold move. After years of following a well-calculated strategy in real estate, I decided to take a leap outside my comfort zone.
I had already built up a small portfolio of homes. These homes were my key to early retirement. I always bought houses I’d be willing to live in if my finances ever took a nosedive. That’s how I built my niche.
But this one was different. The house was a project, a flip. It wasn’t something I’d live in, but it had potential, and I figured it would be a great opportunity to capitalize on the real estate market during the height of the “Flip This House” craze.
After closing the deal, we got to work fixing it up. The house was in rough shape, but nothing a few renovations couldn’t solve. New floors, fresh paint, updated appliances. Iit started to look like a great property. I felt proud of what we’d accomplished.
But right before we listed it for sale, the worst happened: I got a letter saying I was being sued. My stomach dropped. For what?
I’ve always tried to do things the right way. Why would anyone want to sue me? I felt like my world was crumbling.
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The Reality of a Lawsuit
Things escalated quickly. I wasn’t just being sued. I was a co-defendant alongside my mortgage company. And that terrified me.
Here’s why: my mortgage was with a small community bank. The bank’s president had personally underwritten my loans, despite my modest $25,000 annual salary at the time. He believed in me, in my financial plan, in my vision.
But there was a condition. If I ever made a misstep, he had the right to call in all of my loans at once. Essentially, I’d be forced to pay them off within 30 days, or face financial ruin.
This wasn’t just about one house anymore. If things went south, I could lose everything I had built. I was staring down the possibility of bankruptcy at 27.
My plan had seemed bulletproof: buy undervalued properties, rent them out for 15+ years, and be a good landlord. The homes would be paid off in no time, and I’d be financially free. Getting sued was not part of that plan.
The Call That Changed Everything
Terrified, I called the president of the bank. My hands were shaking as I explained what had happened.
What happened next took me by surprise. He laughed.
Confused, I asked why. Then, in a calm, almost fatherly tone, he told me something I’ll never forget:
“Congratulations,” he said. “You’ve made it.”
I was stunned. How could being sued be a sign of success?
He said that as you achieve a certain level of success, you’re more likely to get sued. He told me not to worry about it and it would all work out. He said he knew I was someone that did the right thing, and the lawyers would figure that all out.
I was relieved.
The Messy Legal Situation
It turned out the lawsuit wasn’t your average case. A woman had owned the house before me. Her son got into legal trouble and ended up in jail, so she worked with a bail bondsman, securing his bail against her home.
Unfortunately, she passed away before the matter was settled, and the bondsman took ownership of the property.
He took out a massive mortgage on the house, far more than the house was worth, and then defaulted. The house went into foreclosure, and I unknowingly bought it with all this baggage.
One of the woman’s children thought she was entitled to inherit the house. She filed a claim, dragging me, the mortgage company, and others into a complicated legal battle.
The Title Company’s Failure
Here’s the thing: the title company I used when buying the house should have caught this. Their job is to ensure the title is clean and free from claims. But they missed it. Completely.
Luckily, I had purchased title insurance. I used to think title insurance was a scam, but now I was grateful I had it. The insurance kicked in to cover my legal fees, but what I quickly learned is that title insurance doesn’t always work in your best interest.
A Long Battle
The lawsuit dragged on for over a year. Meanwhile, the housing market crashed. Property values plummeted by 40%, and the house I’d fixed up was now worth much less than when I bought it.
I pleaded with the title company to settle the case quickly. I knew that cutting a check to the claimant would have saved me thousands in lost property value, but the title company wasn’t interested in protecting me. They were focused on minimizing their payout.
I kept urging them to go after the real culprit—the bail bondsman. He’s the one who exploited the situation. But instead, they dragged out the lawsuit, negotiating a settlement far smaller than what I lost due to the market crash.
Turning Lemons into Lemonade
By the time the dust settled, I realized that the lawsuit wasn’t going anywhere fast. So I did what I could: I turned the house into a rental. And strangely enough, it became one of my most profitable properties.
My business model had always been about stability, not profits. I liked having reliable tenants who paid off the house over time. But this property, rented for around $700 a month, brought in steady income during an otherwise chaotic time.
What I Learned From Getting Sued
Looking back, I realize that lawsuits happen, even if you do everything right. You can’t always control the outcome, but you can control how you respond.
My advice? If you find yourself being sued, lawyer up, defend your actions, and trust that things will eventually work themselves out.
And who knows, maybe being sued means you’ve really “made it,” just like the bank president said.
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