Chapter 1 Screening Tenants: Your Most Important Decision

• Library: Every Landlord's Legal Guide (Nolo) (2020 Ed.)

CHAPTER 1 Screening Tenants: Your Most Important Decision

Avoiding Fair Housing Complaints and Lawsuits

How to Advertise Rental Property

Consider Tenants Who Are Advertising Themselves

Renting Property That's Still Occupied

Dealing With Prospective Tenants and Accepting Rental Applications

Tell Prospective Tenants Your Basic Requirements and Rules

Ask Interested Tenants to Complete a Rental Application

Request Proof of Identity and Immigration Status

When and How to Check References, Credit History, and More

Check With Current and Previous Landlords and Other References

Verify Income and Employment

Obtain a Credit Report

Verify Bank Account Information

Review Court Records

Use Megan's Law to Check State Databases of Sexual Offenders

Choosing—And Rejecting—An Applicant

Legal Reasons for Rejecting a Rental Applicant

Poor Credit Record or Income

Negative References From Previous Landlords

Evictions and Civil Lawsuits Involving a Tenant

Criminal Records

Incomplete or Inaccurate Rental Application

Inability to Meet Legal Terms of Lease or Rental Agreement

Pets

What Information Should You Keep on Rejected Applicants?

How to Reject an Applicant

Conditional Acceptances

Finder's Fees and Holding Deposits

Finder's Fees

Holding Deposits

FORMS IN THIS CHAPTER

Chapter 1 includes instructions for and samples of the following forms:

• Rental Application
• Consent to Contact References and Perform Credit Check
• Tenant References
• Notice of Denial Based on Credit Report or Other Information
• Notice of Conditional Acceptance Based on Credit Report or Other Information
• Receipt and Holding Deposit Agreement

The Nolo website includes downloadable copies of these forms. See Appendix B for the link to the forms in this book.

Choosing tenants is the most important decision any landlord makes, and to do it well you need a reliable system. Follow the steps in this chapter to maximize your chances of selecting tenants who will pay their rent on time, keep their units in good condition, and not cause you any legal or practical problems later.

How Landlords' Associations Can Help All the rules and procedures for choosing tenants can seem overwhelming the first time around. This chapter provides all the legal and practical information and forms you need to do the job right. You can also get a lot of advice from talking with other landlords. Also, many local or state rental property associations and landlords' associations provide the following:

• legal information and updates through newsletters, publications, seminars, and blogs
• tenant screening and credit check services
• training and practical advice on compliance with legal responsibilities, and
• a place to meet other rental property owners and exchange information and ideas.

If you can't find an association of rental property owners online, ask other landlords for references. You can also contact the National Apartment Association (NAA), an organization whose members include many individual state associations (NAAHQ. org), and the National Multifamily Housing Council (NMHC.org), which provides useful networking opportunities and research.

RELATED TOPIC

Before you advertise your property for rent, make a number of basic decisions—including how much rent to charge, whether to offer a fixed-term lease or a month-to-month rental agreement, how many tenants can occupy each rental unit, how big a security deposit to require, and whether you'll allow pets. Making these important decisions should dovetail with writing your lease or rental agreement (see Chapter 2).

Avoiding Fair Housing Complaints and Lawsuits

Federal and state antidiscrimination laws limit what you can say and do in the tenant selection process. Because the topic of discrimination is so important, we devote a whole chapter to it later in the book (Chapter 5). You should read Chapter 5 before you run an ad or interview prospective tenants. For now, keep in mind four important points:

1. You are legally free to choose among prospective tenants as long as your decisions are based on legitimate business criteria. You are entitled to reject applicants with bad credit histories, income that you reasonably regard as insufficient to pay the rent, or past behavior—such as property damage or consistent late rent payments—that makes someone a bad risk. A valid occupancy limit that is clearly tied to health and safety or legitimate business needs can also be a legal basis for refusing tenants. It goes without saying that you may legally refuse to rent to someone who can't come up with the security deposit or meet some other condition of the tenancy.
2. Fair housing laws specify clearly illegal reasons to refuse to rent to a tenant. Federal law prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or physical or mental disability (including recovering alcoholics and people with a past drug addiction). Many states and cities also prohibit discrimination based on marital status or sexual orientation.
3. Anybody who deals with prospective tenants must follow fair housing laws. This includes owners, landlords, managers, and real estate brokers, and all of their employees. As the property owner, you could be held legally responsible for your employees' discriminatory statements or conduct, including sexual harassment. "Your Liability for a Manager's Acts," in Chapter 6, explains how to protect yourself from your employees' illegal acts.
4. Consistency is crucial when dealing with prospective tenants. If you don't treat all tenants more or less equally—for example, if you arbitrarily set tougher standards for renting to a member of a racial minority—you are violating federal laws and opening yourself up to lawsuits.

How to Advertise Rental Property

You can advertise rental property in many ways:

• posting a notice online (see "Craigslist and Online Apartment Listing Services," below, for details)
• putting an "Apartment for Rent" sign in front of the building or in one of the windows
• taking out ads in a local newspaper
• posting flyers on neighborhood bulletin boards, such as the local laundromat or coffee shop
• listing with a local real estate broker that handles rentals
• hiring a property management company that will advertise your rentals as part of the management fee, or
• posting a notice with university, alumni, or corporate housing offices.

The kind of advertising that will work best depends on a number of factors, including the characteristics of the particular property (such as rent, size, amenities), its location, your budget, and how quickly you need to rent. Many smaller landlords find that instead of advertising widely and having to screen many potential tenants in an effort to sort the good from the bad, it makes better sense to market their rentals through word of mouth—telling friends, colleagues, neighbors, and current tenants, and by posting on Facebook and other social media.

Craigslist and Online Apartment Listing Services Online services make it easy to reach potential tenants.
Online community posting boards allow you to list your rentals at no or low charge and are a good place to start. Craigslist (Craigslist.org), the most established community board, has local sites for every major metropolitan area. Many neighborhoods and zip codes also have local groups for posting rentals on Facebook and Nextdoor.
Local online services might also be available, particularly in large urban areas; examples include Apartable (Apartable.com) in New York City and Westside Rentals (WestsideRentals.com) in Southern California.
National apartment listing services are also available, with the largest ones representing millions of apartment units in the United States. Some of the most established are:

• Apartments.com
• Zillow.com
• Rentals.com
• Rent.com
• Apartmentguide.com
• ForRent.com
• Zumper.com, and
• www.onradpad.com.

These national sites offer a wide range of services, from simple ads that provide basic information on your rental (such as the number of bedrooms) to full-scale virtual tours and floor plans of the rental property. Services typically include mobile apps, too. Prices vary widely depending on the type of ad, how long you want it to run, and any services you purchase (some websites provide tenant screening services).
Before you use any online apartment rental service, make sure it's reputable. Find out who owns it, how long the company has been in business and how they handle problems with apartment listings. Check for any consumer complaints, and avoid paying any hefty fee without thoroughly checking out a company and its services.

Avoid getting into legal hot water by following these rules:

Describe the rental unit accurately. Avoid abbreviations and real estate jargon in your ad. Include basic details, such as:

• rent and deposit
• size (particularly number of bedrooms and baths)
• location (either the general neighborhood or street address)
• move-in date and term (lease or month-to-month rental agreement)
• special features (such as fenced-in yard, view, washer/dryer, fireplace, remodeled kitchen, furnished, garage parking, doorman, hardwood floors, or wall-to-wall carpeting)
• pets (whether you allow or not and any restrictions, such as dog breeds your insurance prohibits)
• your nonparticipation in the Section 8 program (assuming you have the choice—see Chapter 5 for details)
• phone number, website, and/or email for more details (unless you're going to show the unit only at an open house and don't want to take calls), and
• date and time of any open house.

So, if you advertise a sunny two-bedroom apartment next to a rose garden for $800 a month, make sure that the second bedroom isn't a closet, the rose garden isn't a beetle-infested bush, and the $800 isn't the first week's rent.

Keep in mind that even if you aren't prosecuted for breaking fraud laws, your advertising promises can still come back to haunt you. A...