Landlord has recourse against day care

Some landlords can't stop their tenants from opening a child-care business on their property, but there are steps they can take to limit their liability if something eventually goes wrong.

Q. I own a house in a quiet neighborhood that I rent to a tenant. The tenant recently informed me that she has received a state license to open a day-care center at the home, where she would care for four or five children every day. This scares the heck out of me, in part because I am worried that I might be held financially liable if one of the kids gets injured while on my property. Neighboring owners are upset too, especially about the prospect of noisy kids running around. Can I stop this tenant from opening the day-care operation?

A. You have asked a difficult question. The answer depends largely upon where your rental property is located.

Some states and counties allow landlords to completely bar their tenants from conducting virtually any type of business from their dwelling unit, especially if the apartment or rental house is in a neighborhood zoned only for residential purposes. If such laws didn't exist, tenants would be free to set up a busy at-home store or professional practice that could worsen local traffic and cause parking problems, or even begin a machine shop whose daily noise almost certainly would drive their neighbors crazy.

Several states, however, provide a few exceptions to the general ban on work-at-home businesses. For example, the Health and Safety Code in California -- the state where your letter came from -- specifically says that landlords cannot restrict a tenant from opening a licensed day-care facility.

In passing the exemption, legislators said that the state's booming population has created a shortage in quality care for kids and that enforcing the ban would negatively affect children and working parents alike.

Check with both local and state officials to see which rules apply in your area. If you can't stop the tenant from opening a day-care center in the home that she leases from you, there are a few steps you can take to help protect yourself from lawsuits if one of her "charges" is injured.

One is to demand that she provide a copy of her state-approved license, which likely requires the tenant to purchase liability insurance. Get a copy of her insurance policy and contact information for the company that sold it to her. Also talk to your own insurance agent to see if you should raise your personal liability coverage, the cost of which might be able to be passed along to the tenant.

You should require the tenant to provide a signed waiver of liability from the parents or guardians of each child who will be in her care. Such forms are available from most business-supply stores and easily can be customized to state that you personally will be held harmless in any claims that may arise from your renter's new day-care business.

Q. What is a "facade easement"?

A. It's an easement that's sometimes granted in historic-preservation areas, where the government prohibits or strictly limits alterations to homes that are considered part of a city's, state's or the nation's history.

To illustrate, say you purchased a small but historic home several years ago and now want to add a couple of rooms to accommodate your growing family. Obtaining a facade easement would provide you with an exemption to the ban on alterations and would allow you to go forward with the remodeling job, provided you leave the original face of the building intact.

Q. I have heard that today's housing market is as bad as it was during the Great Depression. Is this true? Are there any statistics to back up this claim?

A. There's no question that today's housing market is tough. But it's nowhere near how awful it was during the Great Depression, which started after the stock market crashed in 1929 and ended about a decade later.

True, about 3 percent of mortgage loans today are in default -- the highest it has been in more than 20 years. But that's nothing compared with 1933, at the depth of the Depression, when nearly half of all homeowners were behind in their payments. Home prices plunged, and the dearth of buyers meant that many properties literally had no value at all.

Although new residential construction today is down about 25 percent from last year's near-record levels, the decline is nothing compared with the 80 percent drop experienced in the early 1930s. And our current unemployment rate is roughly 4.9 percent, close to an all-time low, which augers well for housing's future: Back in the 1930s, unemployment was a staggering 25 percent and rising.

So, while many newspapers and magazines are busy filling their pages with stories about today's so-called "housing meltdown," keep in mind what it must have been like more than 80 years ago: Tens of millions of Americans with no home, no job, no food and little hope for the future.

Statistics don't tell the whole story. If you're fortunate enough to have a relative or friend who made it through the Great Depression -- as I was, until both my mom and dad recently passed away -- ask them what it was like back then. It's a safe bet that they'll tell you that the woes affecting our housing market and overall economy today don't match what it was like during the 1930s.

© 2008, Cowles Syndicate Inc.