Am I liable to my tenants illegal act?

I'm engaged in a rental business. I've read an online article about a tenant background check and made me realized what the tenants can possibly do to my properties. If the tenants will use it for their illegal transactions will I be held liable as an accomplice for their unlawful act even without my knowledge? Aside from conducting a background check what else can I possibly do to prevent such incident from happening? Need some advice and suggestions.

There is no way for you to predict someone else's bad behavior. Even a conviction in the past is not grounds for discrimination against someone you believe MIGHT commit a crime. You are no more responisble for someone else's crime than am I. However if you are aware of a tenant who is breaking the law, your duty is the same as any public citizen--to report it.

I'd suggest you check those previous landlord references very thoroughly. (Hopefully, you already have this question on your lrental applications.) If it's all possible, I'd also look into private night-time security companies .. check around: there are some cities with retired police officers who have opened their own privately owned companies for just this purpose. (I still think that one's a terrific idea.) I'd also make myself visible as the landlord (without violating tenant rights) by checking the grounds and any common elements (laundry room, etc.) on a regular basis during the day if at all possible. It's a given your insurance is already sufficient to replace any damages not covered by the amount of the security deposits that you collect, but you might also investigate increasing your coverage for any possible civil litigation purposes. A call to your insurance agent can help determine if that would help.

There's no way to guarantee a peaceful co-existence with your tenants, but should the scenario you posted above ever occur, unless you're actively participating in any illegal activities, you wouldn't be held "guilty by association" in my opinion.

Good luck.

Novel idea---getting insurance to PAY for your attorney and court costs when your tenant damages your property. Unfortunately, that isn't the function of homeowners insurance.

If homeowners insurance companies footed the bill for civil action against bad tenants, every landlord in the country would rent their hovels to hoodlums, file insurance, get the hovel renovated, and (wallah!) make a handsome profit renting their newly appointed palace.

This simply is not the purpose or function of homeowners insurance. Now, representing me as the landlord if I AM SUED, sure, but to pay for ME to sue someone who trashed my property?

Never.

However, the landlord CAN require the tenant to purchase liability renters insurance which covers acts of the TENANT. Of course, with the additional costs of doing so ( add that to deposits, first and last months rent, utility costs, etc.) and it may be very difficult to rent the property. Lets face it--many people who rent in todays market do so NOT because they cannot afford a house. Interest rates are still low. Many of those who rent do so because they cannot, for credit reasons, purchase a home of their own. This is automatically a red flag that could indicate someone with either an unstable employment history, or someone who cannot handle money properly. Either way, its a gamble for the landlord.