In real estate, LTR stands for long-term rental: a residential property leased to a tenant under a fixed-term agreement of twelve months or longer. It is the most common model for investors who want steady, predictable income, and it sits inside a legal framework that covers federal anti-discrimination rules, mandatory disclosures, tenant-screening obligations, and a distinctive set of tax rules for depreciation and passive income. Treating an LTR as truly passive tends to end badly the first time a dispute reaches court.
How an LTR Differs From Other Rentals
The dividing line is lease duration. An LTR runs at least twelve months, which separates it from short-term vacation rentals measured in days and mid-term corporate housing that typically runs one to six months. Twelve months is the standard, though some agreements stretch to fourteen months or longer.
The properties themselves are ordinary residential housing: single-family homes, condominiums, townhomes, and units inside multi-family buildings. Because the tenant is using the place as a primary residence rather than temporary lodging, the landlord-tenant relationship is regulated far more heavily than a short-stay booking would be. That extra regulation is the reason the rest of this article exists.
What Belongs in a Long-Term Lease
A long-term lease is only as strong as its specifics. At minimum, it needs to name every adult occupant and the property owner, describe the property by street address or legal description, and state the start and end dates. Rent amount, due date, accepted payment methods, late fees, and any grace period all belong in the document.
Beyond the basics, a well-drafted lease closes off the areas that produce most disputes:
- Security deposit amount and the conditions for withholding any of it. Most states cap deposits at one to two months’ rent and require the landlord to return the deposit within a set window after move-out, typically 14 to 45 days depending on the jurisdiction.
- Maintenance responsibilities. Who handles minor repairs, yard work, and appliance replacement. Ambiguity here fuels most landlord-tenant arguments.
- Rules on pets, subletting, and alterations. If the lease is silent on subletting, local law may allow it by default.
- Utility responsibility. Water, electricity, gas, trash, and internet should each be assigned.
- Renewal terms. Whether the lease converts to month-to-month at expiration or requires a new signed agreement.
Fair Housing Rules That Apply the Moment You List
The federal Fair Housing Act reaches virtually every residential rental in the country. It bars landlords from refusing to rent, setting different terms, or advertising preferences based on seven protected characteristics: race, color, religion, sex, national origin, familial status, and disability.1Office of the Law Revision Counsel. 42 U.S. Code 3604 – Discrimination in the Sale or Rental of Housing That list is broader than many owners realize. Familial status means you cannot refuse to rent to someone because they have children under 18, and disability protections carry their own set of accommodation obligations.
Assistance Animals
A tenant with a disability can request a reasonable accommodation to keep an assistance animal, and a no-pets lease policy does not override that right. Assistance animals are not pets under federal law; the category covers trained service animals and emotional support animals that alleviate the effects of a disability.2U.S. Department of Housing and Urban Development (HUD). Assistance Animals Pet deposits and pet rent cannot be charged for these animals. When the disability and the need for the animal are both obvious, no additional documentation may be requested. When one or both are not obvious, the landlord may ask for reliable information linking the disability to the need for the animal, but detailed medical records are not required in most situations.3U.S. Department of Justice. Joint Statement – Reasonable Accommodations Under the Fair Housing Act
Other Accommodation Requests
Accommodation requests reach well past animals. A tenant might ask for a reserved parking space closer to the unit, a grab bar in the bathroom, or an exception to a guest policy. The request does not have to be in writing or use any particular legal language. A landlord who receives one must respond promptly; stalling can itself be treated as a denial. If the specific accommodation seems unreasonable, the landlord still has to discuss alternatives that would meet the tenant’s needs.3U.S. Department of Justice. Joint Statement – Reasonable Accommodations Under the Fair Housing Act
Lead-Based Paint Disclosure
Before signing a lease on any property built before 1978, federal law requires the landlord to give the tenant a copy of the EPA pamphlet “Protect Your Family From Lead in Your Home,” disclose any known lead-based paint or hazards on the property, and provide available inspection reports.4Office of the Law Revision Counsel. 42 U.S. Code 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property The lease must include a Lead Warning Statement signed by the tenant confirming receipt of the pamphlet and the disclosure. Landlords must keep a signed copy for at least three years after the lease begins.5US EPA. Real Estate Disclosures About Potential Lead Hazards
Skipping the disclosure is not a paperwork foot-fault. A landlord who fails to provide it can be liable for triple the tenant’s actual damages in a lawsuit, and the EPA can assess civil penalties of over $22,000 per violation.6Federal Register. Civil Monetary Penalty Inflation Adjustment
Screening Applicants Under Federal Law
Most landlords run credit checks and background reports, and the Fair Credit Reporting Act controls how that information can be used. Any time you reject an applicant, raise the rent, or require a co-signer based even partly on a consumer report, an adverse action notice must go to the applicant. That notice has to name the reporting agency and give its contact information, state that the agency did not make the rental decision, and explain that the applicant has the right to dispute the report’s accuracy and request a free copy within 60 days.7Federal Trade Commission. Using Consumer Reports: What Landlords Need to Know When a credit score factored into the decision, the score itself, its source and date, the scoring range, and the key factors that hurt the score must also appear in the notice. The FTC publishes template language, so the mistake is entirely avoidable.
Duties That Continue Through the Tenancy
Implied Warranty of Habitability
In nearly every state, landlords are bound by an implied warranty of habitability regardless of what the lease says. The property has to be safe and fit for someone to live in: functioning plumbing, reliable heat, hot water, a weather-tight roof, and working electrical systems. A lease clause trying to waive this obligation is generally unenforceable. When a landlord ignores serious habitability problems, tenants in many jurisdictions can withhold rent, make the repair and deduct the cost, or break the lease outright.
Right of Entry
Owning the property does not give you unlimited access once a tenant moves in. For non-emergency situations like inspections or showing the unit to prospective tenants, most states require reasonable advance notice. The standard in a majority of jurisdictions is 24 to 48 hours’ written notice, and entry has to occur at a reasonable time of day. Emergencies like a burst pipe or a gas leak allow immediate entry without notice.
Anti-Retaliation Protections
A landlord who raises rent, cuts services, or files an eviction after a tenant reports code violations or exercises a legal right risks a retaliation claim. Most states have anti-retaliation statutes that protect tenants who complain to building inspectors, report health and safety violations, or organize with other tenants. A court that finds the landlord’s action was retaliatory can dismiss the eviction and award damages. The safe approach is to document a legitimate, non-retaliatory business reason for every decision before acting on it.
When a Tenant Wants Out Early
Military Servicemembers
The Servicemembers Civil Relief Act lets active-duty military members terminate a residential lease early without penalty after receiving permanent change-of-station orders, deployment orders for at least 90 days, or separation or retirement orders. The servicemember has to deliver written notice along with a copy of the orders. For a monthly lease, termination takes effect 30 days after the next rent payment is due following proper notice.8U.S. Department of Justice. Servicemembers and Veterans Initiative – Financial and Housing Rights Landlords cannot charge early termination fees or claw back rent concessions and discounts; the Department of Justice treats those charges as a violation of federal law.
Everyone Else
Tenants who break a lease outside of military orders generally owe rent for the remaining term. A majority of states, though, require landlords to make reasonable efforts to re-rent the property rather than let it sit empty while the meter runs on the departed tenant. This duty to mitigate damages means advertising the unit and accepting qualified applicants. If a new tenant is found quickly, the original tenant’s liability shrinks to whatever gap exists between the old lease and the new one.
How the IRS Treats LTR Income
Reporting
Rental income from long-term properties is reported on Schedule E (Form 1040), which captures total rents received and deductible expenses like insurance, repairs, property taxes, mortgage interest, and management fees.9Internal Revenue Service. Topic No. 414, Rental Income and Expenses If you provide substantial services to tenants beyond basic housing, like daily maid service or meals, the IRS treats the income as business income reportable on Schedule C instead.
Passive Activity Rules and the $25,000 Exception
The IRS classifies rental income as passive regardless of how much time you spend managing the property.10Internal Revenue Service. Topic No. 425, Passive Activities – Losses and Credits Passive losses can normally offset only passive income, so a rental loss cannot reduce W-2 wages or other active income. There is a valuable exception: an owner who actively participates in managing the rental (making decisions about tenants, lease terms, and repairs) can deduct up to $25,000 in rental losses against non-passive income each year. That allowance phases out once adjusted gross income exceeds $100,000 and disappears entirely at $150,000.11Office of the Law Revision Counsel. 26 U.S. Code 469 – Passive Activity Losses and Credits Limited
Depreciation
One of the biggest tax advantages of owning rental property is depreciation. Residential rental buildings are depreciated over 27.5 years under the General Depreciation System, which allows a deduction for a portion of the building’s cost each year even though the property may actually be gaining value.12Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System Only the building qualifies. Land is never depreciable, so the purchase price has to be allocated between the structure and the land before the deduction is claimed.13Internal Revenue Service. Topic No. 704, Depreciation
Qualified Business Income Deduction
Rental real estate income can qualify for the Section 199A qualified business income deduction, which allows a deduction of up to 20% of qualified business income. Originally set to expire after 2025, the deduction was made permanent in mid-2025. The IRS safe harbor that clearly qualifies rental income requires at least 250 hours of rental services per year, separate books and records for each rental enterprise, and contemporaneous time logs documenting the services performed.14Internal Revenue Service. IRS Finalizes Safe Harbor to Allow Rental Real Estate to Qualify as a Business for Qualified Business Income Deduction That 250-hour threshold catches many single-property owners off guard. Owning one rental home and using a property manager makes 250 hours of your own rental services hard to reach without deliberate effort.
Deferring Gains With a 1031 Exchange
When an LTR is sold, capital gains tax can be deferred by reinvesting the proceeds into another investment property through a like-kind exchange under Section 1031. Both properties must be held for investment or business use; a personal residence does not qualify. The timelines are strict and cannot be extended: 45 days from the sale to identify potential replacement properties in writing, and 180 days to close on the replacement, or by the due date of the tax return for that year, whichever comes first.15Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031
A qualified intermediary has to hold the sale proceeds during the exchange. The seller cannot touch the cash, and an agent, broker, or accountant who has worked for the seller in the previous two years cannot serve as the intermediary. Taking control of the proceeds, even briefly, can disqualify the entire exchange and make the full gain taxable.
Security Deposits at Move-Out
Security deposit disputes are the most common source of landlord-tenant litigation. State laws set deadlines for returning deposits after a tenant vacates, typically 14 to 45 days. Missing the deadline or failing to provide an itemized list of deductions can strip the landlord of the right to withhold anything at all, even for legitimate damage. Some states impose penalties of double or triple the deposit amount when a landlord acts in bad faith. Move-in and move-out photos, dated inspection checklists, and receipts for repair work put a landlord in a far stronger position than memory and a handshake.